-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aOG5HUiD+nUeseoLBniSh2qGON5SbiRfgWA4TKOiUt+jznng0U3an0lJubHXT7Nv rtLo+u8J0PmgCMCQBrZTeQ== 0000935069-95-000003.txt : 19950518 0000935069-95-000003.hdr.sgml : 19950518 ACCESSION NUMBER: 0000935069-95-000003 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950217 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RBB FUND INC CENTRAL INDEX KEY: 0000831114 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-20827 FILM NUMBER: 95512294 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWY STE 100 CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027911791 MAIL ADDRESS: STREET 1: 103 BELLEVUE PKWY STREET 2: SUITE 152 CITY: WILMINGTON STATE: DE ZIP: 19809 FORMER COMPANY: FORMER CONFORMED NAME: FUND INC /DE/ DATE OF NAME CHANGE: 19600201 497 1 THE RBB FAMILY PROSPECTUS SUPPLEMENT Tax Free Portfolio (a series of The RBB Fund, Inc.) As a result of actions taken by the Board of Directors of The RBB Fund, Inc. ("Company") at its meeting held on February 1, 1995, the following proposed changes in the operation of the Tax Free Portfolio ("Portfolio") will take place after a shareholders' meeting scheduled to be held on March 31, 1995. Name Change. The Portfolio shall be known as Warburg Pincus Tax Free Fund. New Advisory Contract. At a shareholders' meeting scheduled to be held on March 31, 1995, shareholders will be asked to approve a new advisory agreement between Warburg, Pincus Counsellors, Inc. ("Warburg Pincus") and the Company relating to the Portfolio; under such advisory contract, the Portfolio will pay an advisory fee to Warburg Pincus of .50% of the Portfolio's average daily net assets. Warburg Pincus will replace the current investment adviser, PIMC. Temporary Borrowing. At the shareholders' meeting, the shareholders will also be asked to approve a change to the Portfolio's temporary borrowing policy to permit the Portfolio to temporarily borrow for the purpose of meeting redemptions up to 30% of the value of the Portfolio's total assets, and to pledge securities in connection with such borrowing in an amount up to 125% of the amount borrowed. Modification of Investment Policy. In the event that shareholders approve the new investment advisory agreement, Warburg Pincus will manage the Portfolio consistent with the investment objective described on page 10 of the Prospectus. Elimination of Sales Charges and Reduction of Distribution Fees. Sales charges are no longer imposed in connection with any purchase of shares of the Portfolio. Thus, the full amount of the purchase price of Portfolio shares will be invested at the time of purchase. In addition, the Portfolio has reduced its distribution fee to an annual rate of .25% of average daily net assets. These changes were instituted effective immediately after the Board meeting on February 1, 1995. Co-Administrative Services Contracts. The Board of Directors approved a fee for co-administrative services to be 2 paid to PFPC, Inc. ("PFPC") at an annual rate of .15% of the Portfolio's average daily net assets with a minimum annual fee of $75,000. The Board also approved a fee for co-administrative services to be paid to Counsellors Funds Service, Inc., an affiliate of Warburg Pincus, at an annual rate of .10% of average daily net assets. These contracts will be effective concurrently with the effectiveness of the proposed advisory agreement with Warburg Pincus. Change in Shareholder Servicing Agent, Sub-Transfer Agent and Dividend Disbursing Agent. The Board of Directors appointed State Street Bank & Trust Company as shareholder servicing agent, sub-transfer agent and dividend disbursing agent for the Portfolio, to become effective concurrently with effectiveness of the prepared advisory agreement with Warburg Pincus. Dividend Declaration Policy. The Portfolio currently declares and pays dividends monthly. If shareholders approve the proposed advisory agreement with Warburg Pincus, the Portfolio will declare dividends daily and pay monthly. Supplement Dated February 17, 1995 To Prospectus Dated December 21, 1994. Rule 497(e) Reg. No. 33-20827 THE RBB FAMILY OF MUTUAL FUNDS TAX-FREE PORTFOLIO, GOVERNMENT SECURITIES PORTFOLIO, MONEY MARKET PORTFOLIO, MUNICIPAL MONEY MARKET PORTFOLIO PROSPECTUS December 21, 1994 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 Page INTRODUCTION ......................................................... 2 FINANCIAL HIGHLIGHTS ................................................. 7 THE FUND ............................................................. 12 INVESTMENT OBJECTIVES AND POLICIES ................................... 12 INVESTMENT LIMITATIONS ............................................... 28 MANAGEMENT ........................................................... 33 DISTRIBUTION OF SHARES ............................................... 37 HOW TO PURCHASE SHARES ............................................... 38 HOW TO REDEEM SHARES ................................................. 44 NET ASSET VALUE ...................................................... 47 DIVIDENDS AND DISTRIBUTIONS .......................................... 48 TAXES ................................................................ 48 DESCRIPTION OF SHARES ................................................ 51 OTHER INFORMATION .................................................... 56 APPENDIX A ........................................................... A-1 ACCOUNT APPLICATION .................................................. App. Investment Adviser PNC Bank Institutional Management Corporation Wilmington, Delaware Distributor Counsellors Securities Inc. New York, New York Custodian PNC Bank, National Association Philadelphia, Pennsylvania Administrator and Transfer Agent PFPC Inc. Wilmington, Delaware Counsel Ballard Spahr Andrews & Ingersoll Philadelphia, Pennsylvania Independent Accountants Coopers & Lybrand L.L.P. Philadelphia, Pennsylvania THE RBB FAMILY of The RBB Fund, Inc. The RBB Family consists of four classes of common stock of The RBB Fund, Inc. (the "Fund"), an open-end management investment company. The shares of such classes (collectively, the "RBB Family Shares" or "Shares") offered by this Prospectus represent interests in one of four investment portfolios of the Fund and are designed to offer a variety of investment opportunities. The investment objectives of each investment portfolio described in this Prospectus are as follows: Tax-Free Portfolio--to maximize current interest income which is exempt from Federal income taxes, consistent with preservation of capital. It seeks to achieve such objective by investing substantially all of its assets in a diversified portfolio of 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 ("Municipal Obligations"). 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 and does not constitute an item of tax preference for purposes of the Federal alternative minimum tax ("Tax-Exempt Interest"). 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 United States Government. Money Market Portfolio--to provide as high a level of current interest income as is consistent with maintaining liquidity and relative 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 relative 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. 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 regular Federal income tax, but which may constitute an item of tax preference for purposes of the Federal alternative minimum tax. Unlike the net asset value of shares of the Tax-Free Portfolio, which will fluctuate, the Fund seeks to maintain a constant net asset value for shares of the Municipal Money Market 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. 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 21, 1994, has been filed with the Securities and Exchange Commission and is incorporated by reference in this Prospectus. It may be obtained free of charge from the Fund's distributor by calling (800) 888-9723. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PROSPECTUS December 21, 1994 2 INTRODUCTION The RBB Fund, Inc. (the "Fund") is an open-end management investment company incorporated under the laws of the State of Maryland currently operating or proposing to operate nineteen separate investment portfolios. Each of the four classes of shares offered by this Prospectus (collectively, the "RBB Family Classes" or the "Classes") represents interests in one of the following four investment portfolios (collectively, the "Portfolios"): Tax-Free Portfolio; Government Securities Portfolio; Money Market Portfolio; and Municipal Money Market Portfolio (formerly, the Tax-Free Money Market Portfolio). The Fund was incorporated in Maryland on February 29, 1988. Fund Management PNC Institutional Management Corporation ("PIMC"), a wholly owned subsidiary of PNC Bank, National Association ("PNC Bank"), serves as the investment adviser to the Portfolios. PNC Bank serves as the custodian to the Fund and the sub-advisor to all Portfolios other than the Government Securities Portfolio, which has no sub-adviser. PNC Bank and its predecessors have been in the business of managing the investments of fiduciary and other accounts since 1847 and with its subsidiaries currently manages over $30 billion of assets, of which approximately $28 billion are mutual funds. PFPC Inc. ("PFPC") serves as the administrator to the Government Securities Portfolio, and the Municipal Money Market Portfolio and as the transfer and dividend disbursing agent to the Fund. The Distributor Counsellors Securities Inc. (the "Distributor"), a wholly owned subsidiary of Warburg, Pincus Counsellors, Inc. ("Warburg"), serves as the Fund's distributor. Investment Portfolios The investment objective of the Tax-Free Portfolio is to maximize current interest income which is exempt from Federal income taxes, consistent with preservation of capital. The Tax-Free Portfolio seeks to achieve its objective by investing substantially all of its assets in a diversified portfolio of Municipal Obligations. 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 Tax-Exempt Interest. 3 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. The Government Securities Portfolio seeks to achieve this objective by investing in obligations issued or guaranteed by the United States Treasury or other agencies and instrumentalities of the United States Government. 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. 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 and that meet certain ratings criteria and present minimal credit risks to the 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 relative 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 that meet certain ratings criteria and present minimal credit risks to the Municipal Money Market 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 regular Federal income tax but which may be an item of tax preference for the purposes of the Federal alternative minimum tax. The net asset values per share of shares representing interests in the Tax-Free and Government Securities Portfolios will fluctuate as the values of their portfolios change in response to changing market rates of interest and other factors. Each of the Money Market and Municipal Money Market Portfolios seeks to maintain a net asset value of $1.00 per share; however, there can be no assurance that the Money Market and Municipal Money Market Portfolios will be able to maintain a stable net asset value of $1.00 per share. 4 Fee Table Shareholder Transaction Expenses Maximum Sales Charge Imposed on Purchases 4.75%* (as percentage of offering price) Annual Fund Operating Expenses (RBB Family Classes) After Expense Reimbursements and Waivers
Municipal Government Money Money Tax-Free Securities Market Market Portfolio Portfolio Portfolio Portfolio Management fees (after waivers)**.............. 0% 0% .13% 0% 12b-1 fees (after waivers)**..... .40 .40 .40 .40 Other Expenses (after waivers and reimbursements)............... (.25) .24 .47 .60 ----- --- --- --- Total Fund Operating Expenses (RBB Family Classes) (after waivers and reimbursements) .15% .64% 1.00% 1.00% ==== ==== ===== ===== * No Sales Charge is imposed upon the acquisition of Shares representing interests in the Money Market Portfolio or Municipal Money Market Portfolio or upon any other exchange of Shares of one Portfolio for Shares in another Portfolio if a Sales Charge was previously imposed with respect to the Shares to be exchanged. ** Management fees and 12b-1 fees are each based on average daily net assets and are calculated daily and paid monthly.
The caption "Other Expenses" does not include extraordinary expenses as determined by use of generally accepted accounting principles. 5 Example An investor would pay the following expenses on a $1,000 investment in each of the Portfolios, assuming (1) a 5% annual return, and (2) redemption at the end of each time period:
One Three Five Ten Year Years Years Years Tax-Free..................... $49* $52* $56* $66* Government Securities........ $54* $67* $81* $124* Money Market**............... $10 $32 $55 $122 Municipal Money Market**..... $10 $32 $55 $122 * Reflects the imposition of the maximum sales charge at the beginning of the period. ** Other classes of these portfolios are sold with different fees and expenses.
The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in any of the RBB Family Classes of 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 each Portfolio. However, there can be no assurance that any future waivers of Management fees (if any) will not vary from the figures reflected in the Fee Table. In addition, the investment adviser is currently voluntarily assuming additional expenses of some 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. Expenses for some of the Portfolios have been restated from actual expenses paid by such Portfolios during the year ended August 31, 1994, to reflect current expense levels. Absent fee waivers or reimbursements, actual expenses paid by each Portfolio for the year ended August 31, 1994 were as follows for the Tax-Free, Government Securities, Money Market and Municipal Money Market Portfolios: Annual Fund Operating Expenses (RBB Family Classes) Before Expense Reimbursements and Waivers
Municipal Government Money Money Tax-Free Securities Market Market Portfolio Portfolio Portfolio Portfolio Management fees.................. .50% .40% .38% .34% 12b-1 fees....................... .40% .40% .40% .40% Other Expenses................... .94% .30% 13.84% 153.48%
6 The caption "Other Expenses" does not include extraordinary expenses as determined by use of generally accepted accounting principles. The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under "Annual Fund Operating Expenses (RBB Family Classes) After Expense Reimbursements and Waivers" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Offering Prices Shares that represent interests in the Tax-Free Portfolio, and the Government Securities Portfolio (collectively, the "Non-Money Market Portfolios") will be offered to the public at the next determined net asset value after receipt by PFPC Inc. ("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. Shares that represent interests in the Money Market Portfolio and the Municipal Money Market Portfolio (collectively, the "Money Market Portfolios") are offered to the public at their net asset value of $1.00 per share with no sales charge. There can be no assurance that the net asset value per share of each of the Money Market Portfolios will always be maintained at $1.00. Minimum Initial and Subsequent Investments The minimum initial investment for each Portfolio is $1,000. Subsequent investments must be $100 or more. See "How to Purchase Shares." Exchanges Shares of one RBB Family Class may be exchanged for Shares of any other RBB Family Class at their net asset value (plus any applicable sales charges in the case of exchanges for Shares of the Non-Money Market Portfolios unless a sales charge has already been paid with respect to such shares) next determined after receipt by PFPC of an exchange request. No exchange fee is currently charged for exchanges; however, the Fund reserves the right to impose a $5 administrative charge for each exchange. See "How to Purchase Shares--Exchange Privilege." 7 Redemption Price 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 in any of the Classes 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 any of the Classes is subject to certain risks, as set forth in detail under "Investment Objectives and Policies." As with other mutual funds, there can be no assurance that any Portfolio will achieve its objective. 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, the lending of portfolio securities and engaging in options and futures transactions. All of these transactions involve certain special risks, as set forth under "Investment Objectives and Policies." 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) 447-1139 (in Delaware call collect (302) 791-1149). FINANCIAL HIGHLIGHTS The table below sets forth certain information concerning the investment results of the RBB Family Classes representing interests in the Tax-Free, Government Securities, 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, 1990 through August 31, 1994, are a part of the Funds's financial statements for each of the above Portfolios which have been audited by Coopers & Lybrand L.L.P., the Fund's independent accountants, whose current report thereon appears in the Statement of Additional Information along with the financial statements. The financial data for each such Portfolio for the periods ending August 31, 1989 are a part of previous financial statements audited by Coopers & Lybrand L.L.P. The financial data included in this table should be read in conjunction with the financial statements and related notes included in the Statement of Additional Information. 8 RBB Family Classes THE RBB FAMILY THE RBB FUND, INC. Financial Highlights(d) (For a Share Outstanding Throughout each Period)
Tax-Free Portfolio For the Period October 18, 1988 For the For the For the For the For the Commencement of Year Ended Year Ended Year Ended Year Ended Year Ended Operations) to August 31, August 31, August 31, August 31, August 31, August 31, 1994 1993 1992 1991 1990 1989 Net asset Value, beginning of period 11.53 $11.04 $10.46 $10.05 $10.28 $10.00 ----- ------ ------ ------ ------ ------ Income from Investment operations Net investment income .6026 .6385 .6771 .6027 .5940 .5273 Net gains (losses) on Securities (both realized and unrealized) (.6259) .8654 .6145 .4402 (.1741) .2047 ------ ----- ----- ----- ------ ----- Total from investment operations (.0233) 1.5039 1.2916 1.0429 .4199 .7320 ------ ------ ------ ------ ----- ----- Less distributions Dividends (from net investment income) (.6092) (.6725) (.6345) (.6212) (.6499) (.4549) ------ Distributions (in excess of net investment income) (.0135) -- -- -- -- -- Distributions (from capital gains) (.4886) (.3414) (.0771) (.0117) -- -- ------ ------ ------ ------ Total distributions (1.1113) (1.0139) (.7116) (.6329) (.6499) (.4549) ------- ------- ------ ------ ------ ------ Net asset value, end of period $10.40 $11.53 $11.04 $10.46 $10.05 $10.28 ====== ====== ====== ====== ====== ====== Total Return (0.30%)(b) 14.45%(e) 12.77%(e) 10.66%(e) 4.00%(e) 7.49%(c)(e) Ratios/Supplemental Data Net assets, end of period $5,464,959 $6,631,085 $6,490,832 $8,839,913 $1,187,045 $1,095,434 Ratios of expenses to average net assets .15%(a) .17%(a) .33%(a) .83%(a) 1.25%(a) 1.25%(a)(b) Ratios of net investment income to average net assets 5.51% 5.71% 6.21% 6.02% 5.74% 6.01%(b) Portfolio Turnover Rate 20% 70% 78% 63% 10% 175%(c) (a) Without the waiver of advisory and custody fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Tax-Free Portfolio would have been 1.84%, 1.76%, 1.61%, 3.06% and 3.75% for the years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively, and 2.48% annualized for the period ended August 31, 1989. (b) Annualized. (c) Not Annualized. (d) Financial Highlights relate solely to the RBB Class of Shares within each portfolio. (e) Sales Load not reflected in total return.
9 RBB Family Classes THE RBB FAMILY THE RBB FUND, INC. Financial Highlights(d) (For a Share Outstanding Throughout each Period)
Government Securities Portfolio For the Period August 1, 1991 For the For the For the (Commencement of Year Ended Year Ended Year Ended Operations) to August 31, 1994 August 31, 1993 August 31, 1992 August 31, 1991 --------------- --------------- --------------- --------------- Net asset value, beginning of Period $10.73 $10.46 $10.12 $10.00 ------ ------ ------ ------ Income from investment operations Net investment income .5931 .7080 .8002 .0737 Net gains (losses) on Securities (both realized and unrealized) (.8651) .3300 .3408 .1213 ------ ----- ----- ----- Total from investment operations (.2720) 1.0380 1.1410 .1950 ------ ------ ------ ----- Less distributions Dividends (from net investment income) (.5901) (.7080) (.8010) (.0750) ------ Distribution (in excess of net investment income) (.0235) -- -- -- ------ Return of Capital (.1544) (.0600) -- -- ------ ------ Total distributions (.7680) (.7680) (.8010) (.0750) ------ ------ ------ ------ Net asset value, end of period $9.69 $10.73 $10.46 $10.12 ===== ====== ====== ====== Total Return (2.60%)(e) 10.36%(e) 11.73%(e) 1.95%(c)(e) Ratios/Supplemental Data Net assets, end of period $54,938,277 $36,295,834 $25,603,528 $28,225,227 Ratios of expenses to average net assets .64%(a) .66%(a) .83%(a) 1.10%(a)(b) Ratios of net investment income to average net Assets 5.86% 6.70% 7.81% 8.50%(b) Portfolio Turnover Rate 65% 47% 21% 3%(c) (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 Government Securities Portfolio would have been 1.10%, 1.22% and 1.22%, for the years ended August 31, 1994, 1993 and 1992, respectively, and 1.28% annualized for the period ended August 31, 1991. (b) Annualized. (c) Not Annualized. (d) Financial Highlights relate solely to the RBB Class of Shares within each portfolio. (e) Sales load not reflected in total return.
10 RBB Family Classes THE RBB FAMILY THE RBB FUND, INC. Financial Highlights(c) (For a Share Outstanding Throughout each Period)
Money Market Portfolio For the Period Sept. 30, 1988 Commencement of For the For the For the For the For the (Operations) Year Ended Year Ended Year Ended Year Ended Year Ended to August 31, August 31, August 31, August 31, August 31, August 31, 1994 1993 1992 1991 1990 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 .0273 .0238 .0370 .0621 .0757 .0775 Net gains (losses) on securities (both realized and unrealized) -- -- .0007 -- -- -- ----- Total from investment operations .0273 .0238 .0377 .0621 .0757 .0775 ----- ----- ----- ----- ----- ----- Less distributions Dividends (from net investment income) (.0273) (.0238) (.0370) (.0621) (.0757) (.0775) ------ ------ ------ ------ ------ ------ Distributions (from capital gains) -- -- (.0007) -- -- -- ------ Total distributions..... (.0273) (.0238) (.0377) (.0621) (.0757) (.0775) ------ ---------- ---------- --------- ---------- ------ Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== ===== ===== Total Return 2.76% 2.41% 3.84% 6.40% 7.84% 8.74%(b) Ratios/Supplemental Data Net assets, end of period $45,314 $57,866 $74,176 $108,525 $436,959 $39,347 Ratios of expenses to average net assets 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) .98%(a)(b) Ratios of net investment income to average net assets 2.73% 2.38% 3.70% 6.21% 7.57% 8.57%(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 14.62%, 10.62%, 4.81%, 6.48% and 4.13% for the years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively and 52.80% annualized for the period ended August 31, 1989. (b) Annualized. (c) Financial Highlights relate solely to the RBB Class of Shares within each portfolio.
11 RBB Family Classes THE RBB FAMILY THE RBB FUND, INC. Financial Highlights(c) (For a Share Outstanding Throughout each Period)
Municipal Money Market Portfolio For the Period Sept. 30, 1988 Commencement of For the For the For the For the For the (Operations) Year Ended Year Ended Year Ended Year Ended Year Ended to August 31, August 31, August 31, August 31, August 31, August 31, 1994 1993 1992 1991 1990 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 .0172 .0172 .0264 .0406 .0504 .0603 Net gains (losses) on securities (both realized and unrealized) -- -- -- -- -- -- Total from investment operations .0172 .0172 .0264 .0406 .0504 .0603 ----- ----- ----- ----- ----- ----- Less distributions Dividends (from net investment income) (.0172) (.0172) (.0264) (.0406) (.0504) (.0603) ------ Distributions (from capital gains) -- -- -- -- -- -- Total distributions (.0172) (.0172) (.0264) (.0406) (.0504) (.0603) ------ ------ ------ ------ ------ ------ Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ===== ===== ===== ===== ===== ===== Total Return 1.73% 1.73% 2.67% 4.14% 5.16% 6.74%(b) Ratios/Supplemental Data Net assets, end of period $4,861 $5,273 $4,166 $2,192 $8,745 $106 Ratios of expenses to average net assets 1.00%(a) 1.00%(a) 1.00%(a) .99%(a) 1.00%(a) __%(a)(b) Ratios of net investment income to average net assets 1.72% 1.72% 2.64% 4.06% 5.04% 7.48%(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 154.22%, 191.54%, 250.95%, 131.15% and 509.05%, for the years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively. The ratio of expenses to average net assets for the Municipal Money Market Portfolio was not reported during the fiscal period ended August 31, 1989 as no shares of the RBB Class of that portfolio had been sold to the public. (b) Annualized. (c) Financial Highlights relate solely to the RBB Class of Shares within each portfolio.
12 THE FUND The Fund is an open-end management investment company that currently operates or proposes to operate nineteen separate investment portfolios. Each of the four Classes of Shares offered by this Prospectus represents interests in one of four Portfolios. The Fund was incorporated in Maryland on February 29, 1988. The investment philosophy of the Fund is based on the premise that the long-term goals of most investors can be achieved by having the opportunity to invest in major segments of the securities markets through conservatively managed portfolios. The Government Securities and Money Market Portfolios described in this Prospectus represent major segments of the securities markets. Each of these Portfolios seeks to achieve a reasonable total rate of return consistent with minimal levels of risk. Risk is managed in such Portfolios by careful analysis of economic conditions and of the securities held and through proper diversification within a Portfolio. The Tax-Free and Municipal Money Market Portfolios provide a tax-exempt alternative to the Money Market Portfolio. INVESTMENT OBJECTIVES AND POLICIES Tax-Free Portfolio The Tax-Free Portfolio's investment objective is to maximize current interest income which is exempt from Federal income taxes, consistent with preservation of capital. The Tax-Free Portfolio intends to meet its investment objective by investing substantially all of its assets in a diversified portfolio of 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 Tax-Free Portfolio will be invested in Municipal Obligations, the interest on which is Tax-Exempt Interest. Municipal Obligations. The Portfolio invests in Municipal Obligations which are determined by the Fund's investment adviser to present minimal credit risks pursuant to guidelines established by the Fund's Board of Directors and which at the time of purchase are considered to be "high grade"--e.g., rated "A" or higher by S&P or "A" or higher by Moody's 13 in the case of bonds; rated "SP-1" by S&P or "MIG-1" by Moody's in the case of notes; rated "VMIG-1" by Moody's in the case of variable rate demand notes; or rated "A-1" by S&P or "Prime-1" by Moody's in the case of tax-exempt commercial paper. In addition, the Portfolio may invest in "high quality" notes and tax-exempt commercial paper rated "MIG-2," "VMIG-2," or "Prime-2" by Moody's or "A-2" by S&P if deemed advisable by the Portfolio's investment adviser. The Portfolio may also purchase securities that are unrated at the time of purchase provided that the securities are determined to be of comparable quality by the Portfolio's investment adviser pursuant to guidelines approved by the Fund's Board of Directors. The applicable Municipal Obligations ratings are described in the Appendix to this Prospectus. 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 Municipal Obligations 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. 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 pursuant to guidelines adopted by the Fund's Board of Directors. Where necessary to ensure that a note is of "high quality," the Portfolio will 14 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 one year, 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 certain private activity bonds issued after August 7, 1986 that is received by taxpayers subject to alternative minimum tax is taxable. The Act has generally not changed the tax treatment of bonds issued to finance governmental operations. As used in this Prospectus, the term "private activity bonds" also includes industrial development revenue bonds issued prior to the effective date of the provisions of the Tax Reform Act of 1986. Investors should also be aware of the possibility of state and local alternative minimum or minimum income tax liability on interest from Alternative Minimum Tax Securities (as defined below). Although the Tax-Free 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 Tax-Free 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, such 15 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. "When-Issued" Securities. The Portfolio may purchase 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. 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. Illiquid Securities. The Tax-Free Portfolio will not invest more than 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 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. Tax-Exempt Derivative Securities. The Tax-Free 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 16 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. The Tax-Free Portfolio's investment objective and the 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. Such changes may result in the Portfolio having investment objectives which differ from those an investor may have considered at the time of investment. There is no assurance that the investment objective of the Tax-Free Portfolio will be achieved. 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. To attain its objective, the Portfolio intends to invest in obligations issued or guaranteed by the U.S. Treasury or the agencies or instrumentalities of the U.S. Government. 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. or by U.S. Treasury guarantees, such as 17 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. 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. 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 call option may be sold in a closing sale transaction. Gain or loss from the sale will 18 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 cash, U.S. Treasury bills or other high-grade short-term obligations 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 19 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. Short Sales. The Portfolio may engage in short sales. 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 only 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." The Portfolio will not engage in short sales against the box to enhance the Portfolio's yield or to increase the Portfolio's income. The Portfolio may, however, make a short sale against the box as a hedge. The Portfolio will engage in 20 short sales against the box 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 to defer recognition of gain or loss for Federal income tax purposes and for certain purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. In a short sale, the 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. When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Tax-Free Portfolio." 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 397 calendar days, provided the repurchase agreement itself matures in less than 397 calendar days. The financial institutions with whom the Portfolio may enter into repurchase agreements will be banks which the Portfolio's investment 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 Portfolio's investment adviser will consider the creditworthiness of a seller in determining whether to have the Portfolio 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 Portfolio's investment 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 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 21 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. Federal income tax law may restrict the extent to which the Portfolio may engage in short-term trading activities. See "Taxes" in the Statement of Additional Information for a discussion of such federal income tax law restrictions. 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 Government Securities 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 Objectives and Policies--Illiquid Securities" in the Statement of Additional Information. The Government Securities 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. Such changes may result in the Portfolio having investment objectives which differ from those an investor may have considered at the time of investment. 22 There is no assurance that the investment objective of the Government Securities Portfolio will be achieved. 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 relative stability of principal. Portfolio obligations held by the Money Market Portfolio have remaining maturities of 397 calendar days or less (except that portfolio securities which are subject to repurchase agreements may bear maturities exceeding 397 calendar days). 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 which meet certain ratings criteria and present minimal credit risks as determined by the investment adviser pursuant to guidelines adopted by the Board of Directors. See "Eligible Securities." 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 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 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 ("NRSRO"). These rating categories are described in the Appendix to this Prospectus. 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 issues in which the Portfolio may invest include securities issued by major corporations without registration under the Securities Act of 1933 (the "1933 Act") in reliance on the exemption from such registration afforded by Section 3(a)(3) thereof, and commercial 23 paper issued in reliance on the so-called "private placement" exemption from registration which is afforded by Section 4(2) of the 1933 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. 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 397 calendar days, 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"). For a description of repurchase agreements, see "Investment Objectives and Policies--Government Securities Portfolio." U.S. Government Obligations. The Portfolio may purchase obligations issued or guaranteed by the U.S. Government 24 or its agencies and instrumentalities. Obligations which may be so purchased are described under "Investment Objectives and Policies--Government Securities Portfolio." 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 397 days or less. Asset-backed securities are considered an industry for industry concentration purpose. See "Investment Limitations." Reverse Repurchase Agreements. The Portfolio may enter into reverse repurchase agreements with respect to portfolio securities. At the time the Portfolio enters into a reverse repurchase agreement, it will place in a segregated custodial account with the Fund's custodian or a qualified sub-custodian liquid assets such as U.S. Government securities or other liquid debt securities having a value equal to or greater than the repurchase price (including accrued interest) and will subsequently 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 Portfolio may decline below the price of the securities the Portfolio is obligated to repurchase. 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 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--Tax-Free Portfolio." In addition, the Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held by it. Under a stand-by commitment, a dealer would agree to purchase, at the Portfolio's 25 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. 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. When-Issued Securities. The Portfolio may purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Tax-Free Portfolio." Eligible Securities. The Portfolio will only purchase "eligible securities" that present minimal credit risks as determined by the Portfolios' 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 nationally recognized statistical rating organizations ("NRSROs") (e.g., commercial paper rated "A-1" or "A-2" by S&P, (3) securities that are rated at the time of purchase by the only NRSRO 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 an NRSRO ("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, 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 26 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 objectives 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 the Portfolio's outstanding Shares. Such changes may result in the Portfolio having investment objectives which differ from those an investor may have considered at the time of investment. There is no assurance that the investment objective of the Money Market Portfolio will be achieved. 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 relative 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"). Municipal Obligations. The Portfolio invests in short-term Municipal Obligations which meet certain ratings criteria and are determined by the Portfolio's investment adviser to present minimal credit risks 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 27 securities. The applicable Municipal Obligation ratings are described in the Appendix to this Prospectus. For a more complete discussion of Municipal Obligations, see "Investment Objectives and Policies--Tax-Free Portfolio." 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. 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, such 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. When-Issued Securities. The Portfolio may also purchase portfolio securities on a "when-issued" basis such as described under "Investment Objectives and Policies--Tax-Free Portfolio." Stand-by Commitments. The Portfolio may acquire "stand-by commitments" with respect to Municipal Obligations held in its portfolio. For a description of stand-by commitments, see "Investment Objectives and Policies--Tax-Free Portfolio." 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. For a more complete description of tax-exempt derivative securities, see "Investment Objectives and Policies -- Tax-Free Portfolio". 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 28 "Investment Objectives and Policies -- Money Market Portfolio -- Eligible Securities". Illiquid Securities. The Municipal Money Market Portfolio will 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 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 the affirmative vote of the holders of a majority of the Portfolio's outstanding Shares. Such changes may result in the Portfolio having investment objectives which differ from those an investor may have considered at the time of investment. There is no assurance that the investment objective of the Municipal Money Market Portfolio will be achieved. INVESTMENT LIMITATIONS No Portfolio may change the following investment limitations (with certain exceptions, as noted below) without the affirmative vote of the holders of a majority of a Portfolio's outstanding Shares. (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.") Government Securities Portfolio. 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 29 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 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, 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. 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. In determining whether the Government Securities Portfolio has complied with limitation 3 above, such Portfolio will not take into account the value of options and futures. 30 Money Market Portfolio. The Money Market 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 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 limitations. 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 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. 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 31 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 NRSRO, are rated (at the time of purchase) by two or more NRSROs in the highest rating category for such securities, (ii) if rated by only one NRSRO, are rated by such NRSRO 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. Tax-Free Portfolio and the Municipal Money Market Portfolio. Neither the Tax-Free Portfolio nor the Municipal Money Market Portfolio may: 1. Purchase the securities of any 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 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 such limitations. 32 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 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 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, 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. 4. In addition, without the affirmative vote of the holders of a majority of the affected Portfolio's outstanding Shares, neither the Tax-Free Portfolio nor the Municipal Money Market Portfolio may 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. 33 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 nineteen separate investment portfolios. Each of the RBB Family classes represents interests in one of the following such investment portfolios: the Tax-Free Portfolio, the Government Securities Portfolio, the Money Market Portfolio and the Municipal Money Market Portfolio. Investment Adviser and Sub-Adviser PIMC, a wholly owned subsidiary of PNC Bank, serves as the investment adviser for each of the Portfolios. PIMC was organized in 1977 by PNC Bank to perform advisory services for investment companies, and has its principal offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809. PNC Bank serves as the sub-adviser for all Portfolios other than the Government Securities Portfolio, which has no sub-adviser. PNC Bank and its predecessors have been in the business of managing the investments of fiduciary and other accounts in the Philadelphia area since 1847. PNC Bank and its subsidiaries currently manage over $30 billion of assets, of which approximately $28 billion are mutual funds. PNC Bank, a national bank whose principal business address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101, 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 Portfolios, PIMC is responsible for overall management of the Portfolios, and is responsible for all purchases and sales of portfolio securities for all Portfolios other than the High Yield Portfolio. PIMC also assists generally in supervising the operations of the Portfolios, maintains the Portfolios' financial accounts and records, and computes the Portfolios' net asset values and net income. PNC Bank, as sub-adviser for all Portfolios other than the Government Securities Portfolio, provides research and credit analysis and provides PIMC with certain other services. W. Don Simmons is responsible for the day-to-day portfolio management of the Tax Free Portfolio. Mr. Simmons is a Vice President and Senior Portfolio Manager with PIMC, where he has been employed for more than five years. 34 Robert J. Morgan is responsible for the day-to-day portfolio management of the Government Securities Portfolio. Mr. Morgan is Assistant Vice President with PIMC, where he has been employed since 1988. Previously, he was a Portfolio Manager with Core States. For the services provided and expenses assumed by it, PIMC is entitled to receive the following fees, computed daily and payable monthly based on a Portfolio's average daily net assets: Portfolio Annual Rate Tax-Free.................... .50% of first $250 million of net assets; .45% of next $250 million of net assets; and .40% of net assets in excess of $500 million Money Market................ .45% of first $250 million of net assets; .40% of next $250 million of net assets; and .35% of net assets in excess of $500 million Municipal Money Market...... .35% of first $250 million of net assets; .30% of next $250 million of net assets; and .25% of net assets in excess of $500 million. Government Securities....... .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 PIMC may in its discretion from time to time agree to waive voluntarily all or any portion of its advisory fee for any Portfolio. For its sub-advisory services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of the advisory fees paid by the Fund to PIMC with respect to a Portfolio. Such sub-advisory fees have no effect on the advisory fees payable by a Portfolio to PIMC. In addition, PIMC 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 any Portfolio. Any such arrangement would have no effect on the advisory fees payable by each Portfolio to PIMC. For the Fund's fiscal year ended August 31, 1994, PIMC waived all investment advisory fees payable to it with respect to the Tax-Free, Government Securities and Municipal Money Market 35 Portfolios. For the same year ended August 31, 1994, the Fund paid PIMC investment advisory fees with respect to the Money Market Portfolio aggregating .18% of the average net assets of the Portfolio, and PIMC waived approximately .20% of the average net assets of such Portfolio. Administrator PFPC serves as administrator to the Government Securities Portfolio, and the Municipal Money Market Portfolio. PFPC is an indirect, wholly owned subsidiary of PNC Bank Corp. PFPC generally assists each of the Government Securities and Municipal Money Market 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 an annual rate of .10% of each such Portfolio's average daily net assets. Transfer Agent, Dividend Disbursing Agent, and Custodian PNC Bank also 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 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." Expenses The expenses of each Portfolio are deducted from their total income before dividends are paid. These expenses include, but are not limited to, fees paid to the investment adviser, fees and expenses of officers and directors who are not affiliated with the Portfolio's investment adviser or Distributor, taxes, interest, legal fees, custodian fees, auditing fees, brokerage fees and commissions, certain of the fees and expenses of registering and qualifying the Portfolios and their shares for distribution under Federal and state securities laws, expenses of preparing prospectuses and statements of additional information and of printing and distributing prospectuses and statements of additional information annually to existing shareholders that are not attributable to a particular 36 class of shares of the Fund, the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of the Fund, fidelity bond and directors and officers liability insurance premiums, the expense of using independent pricing services and other expenses which are not expressly assumed by the adviser under its investment advisory agreement with respect to a Portfolio. Any general expenses of the Fund that are not readily identifiable as belonging to a particular investment portfolio of the Fund will be allocated among all investment portfolios of the Fund based upon the relative net assets of the investment portfolios at the time such expenses are cited. 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 investment adviser has agreed to reimburse each Portfolio for the amount, if any, by which the total operating and management expenses of such Portfolio for any fiscal year exceed the most restrictive state blue sky expense limitation in effect from time to time, to the extent required by such limitation. 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 decreasing yield to investors. For the Fund's fiscal year ended August 31, 1994, the Fund's total expenses were 1.84% of the average net assets of the RBB Family Class of the Tax-Free Portfolio (not taking into account waivers and reimbursements of 1.69%), were 1.10% of the average net assets of the RBB Family Class of the Government Securities Portfolio (not taking into account waivers and reimbursements of .46%), were 14.62% of the average net assets of the RBB Family Class of the Money Market Portfolio (not taking into account waivers and reimbursements of 13.62%) and were 154.22% of the average net assets of the RBB Family Class of the Municipal Money Market Portfolio (not taking into account waivers and reimbursements of 153.22%). Portfolio Transactions A Portfolio's adviser may consider a number of factors in determining which brokers to use in purchasing or selling a Portfolio's securities. These factors, which are more fully discussed in the Statement of Additional Information, include, 37 but are not limited to, research services, the reasonableness of commissions and quality of services and execution. Transactions for the Portfolios may be effected through Authorized Dealers, subject to the requirements of best execution. A higher rate of turnover of a Portfolio's securities may involve correspondingly higher transaction costs, which will be borne directly by the Portfolio. A 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. DISTRIBUTION OF SHARES Counsellors Securities Inc. (the "Distributor"), a wholly owned subsidiary of Warburg, with offices at 466 Lexington Avenue, New York, New York, acts as distributor for each of the Classes pursuant to separate distribution contracts (collectively, the "Distribution Contracts") with the Fund on behalf of each of the Classes. The Board of Directors of the Fund approved and adopted the Distribution Contracts and separate Plans of Distributions 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 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 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 Contracts, the Distributor has agreed to accept compensation for its services thereunder and under the relevant Plan in the amount of .40% of the average daily net assets of the relevant 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 a Class covered by such order on any day to the extent necessary to ensure that the fee required to be accrued by such Class does not exceed the income of such 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 Classes, the Distributor may reallocate up to all of the 38 compensation it receives for its services under the Distribution Contracts and the Plans to Authorized Dealers, based upon the aggregate investment amounts maintained by customers of such Authorized Dealers in each of the Portfolios. 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 Portfolios of 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 Class the fee agreed to under the relevant Distribution Contracts. None of the Plans obligates the Fund to reimburse the Distributor for the actual expenses the Distributor may incur in fulfilling its obligations under a Plan on behalf of the relevant Class. Thus, under each of the Plans, even if the Distributor's actual expenses exceed the fee payable to the Distributor thereunder at any given time, the Fund will not be obligated to pay more than that fee. If the Distributor's expenses are less than the fee it receives, the Distributor will retain the full amount of the fee. The Plans in effect with respect to the Classes have been approved by shareholders of the relevant Class. Under the terms of Rule 12b-1, each will remain in effect only if approved at least annually by the Fund's Board of Directors, including those directors who are not "interested persons" of the Fund as that term is defined in the 1940 Act and who have no direct or indirect financial interest in the operation of the Plan or in any agreements related thereto ("12b-1 Directors"). Each of the Plans may be terminated at any time by vote of a majority of the 12b-1 Directors or by vote of a majority of the Fund's outstanding voting securities of the relevant Class. The fee set forth above will be paid by the Fund on behalf of the relevant Class to the Distributor unless and until the relevant Plan is terminated or not renewed. HOW TO PURCHASE SHARES General Shares representing interests in the Non-Money Market Portfolios (collectively, "Non-Money Market Shares") and Shares representing interests in the Money Market Portfolios (collectively, "Money Market Shares") are offered continuously for sale by the Distributor and may be purchased through 39 Authorized Dealers. Both Non-Money Market Shares and Money Market Shares 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 Non-Money Market Shares and Money Market Shares may be effected through an Authorized Dealer or by mailing a check or Federal Reserve Draft, payable to the order of "The RBB Family" c/o PFPC, P.0. Box 8950, Wilmington, Delaware 19899. The name of the Portfolio for which Shares are being purchased must also appear on the check or Federal Reserve Draft. Federal Reserve Drafts are available at national banks or any state bank which is a member of the Federal Reserve System. Initial investments in any Portfolio must be at least $1,000 and subsequent investments must be at least $100. The Fund reserves the right to reject any purchase order. Non-Money Market Shares may be purchased on any Business Day. A "Business Day" is any day that the New York Stock Exchange (the "NYSE") is open for business. Currently, the NYSE is closed on weekends and New Year's Day, President's Day, Good Friday, Memorial Day, Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day (observed). Non-Money Market Shares are offered at the next determined net asset value per share, plus a sales load as described below. Money Market Shares may be purchased on any Money Market Business Day. A "Money Market Business Day" is any day that both the NYSE and the Federal Reserve Bank of Philadelphia (the "FRB") are open. The FRB is currently closed on weekends and the same holidays on which the NYSE is closed (except Christmas Day (observed)), as well as Martin Luther King's Birthday, Veterans Day and Columbus Day. Money Market Shares are offered at the net asset value per Share next determined after the transfer agent's receipt of a purchase order, without the imposition of a sales charge. The price paid for Non-Money Market Shares purchased initially or acquired through the exercise of an exchange privilege 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 an order is received by the Fund's transfer agent. See "Exchange Privilege." 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. 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. 40 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 Non-Money Market Shares at various investment levels. Sales charges are reduced on a graduated scale on single purchases of Non-Money Market Shares of $100,000 or more. Sales charges are imposed regardless of whether Non-Money Market 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 Amount Percentage Percentage Dealers (as of Transaction of Net of Offering % of Offering 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-
The foregoing schedule of sales charges applies to purchases of Non-Money Market 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 41 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, concurrent purchases of Non-Money Market Shares of two or more of the RBB Family Classes, and to purchases made under a Letter of Intent or pursuant to the Right of Accumulation, both of which plans are described below. Right of Accumulation. Under the Right of Accumulation, the current value of an investor's existing Non- Money Market Shares may be combined with the amount of the investor's current purchase of Non-Money Market Shares in determining the sales charge. In order to receive the cumulative quantity reduction, previous purchases of Non-Money Market 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 Non-Money Market Shares immediately by signing a nonbinding Letter of Intent stating the investor's intention to invest in Non-Money Market 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 Non-Money Market 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 Non-Money Market 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, Warburg, or PIMC, PNC Bank or PFPC may buy Non-Money Market 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) 42 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 Non-Money Market 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). In addition, Warburg may purchase Non-Money Market Shares on behalf of the investment companies, employee benefit plans, endowment funds, foundations and other institutions and individuals for which it provides investment services without paying a sales charge. Automatic Investing Additional investments in Non-Money Market 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)447-1139 (in Delaware call collect (302)791-1149) to obtain the appropriate forms. Exchange Privilege A shareholder may exchange Shares of any one of the RBB Family Classes for Shares of any other of the RBB Family Classes. Such exchange will be effected at the net asset value of the exchanged Class and the net asset value (plus any applicable sales charges in the case of exchanges for Non-Money Market Shares for which a sales charge has not previously been paid) of the Class to be acquired next determined after the transfer agent's receipt of a request for an exchange. Requests for exchanges between Non-Money Market Classes and Money Market Classes will be honored only on Money Market Business Days. No exchange fee is currently imposed on exchanges, although the Fund reserves the right to impose a $5.00 administrative fee for each exchange. However, a sales charge is currently imposed on exchanges of Money Market Shares for Non-Money Market Shares when no sales charge has been previously imposed with respect to such 43 Shares. 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 the Fund's transfer agent. In the case of shareholders holding share certificates, the certificates must accompany the request for an exchange. Shareholders are automatically provided with telephone exchange privileges when opening an account, unless they indicate on the Application that they do not wish to use this privilege. Shareholders holding share certificates are not eligible to exchange Shares by telephone because share certificates must accompany all exchange requests. To add a telephone exchange feature to an existing account that previously did not provide for this option, a Telephone Exchange Authorization Form must be filed with PFPC. This form is available from PFPC. Once this election has been made, the shareholder may simply contact PFPC by telephone to request the exchange (800) 447-1139 (in Delaware call collect (302) 791-1149). The Fund will employ reasonable procedures to confirm that instructions communicated by telephone are genuine, and if the Fund does not employ such procedures, it may be liable for any losses due to unauthorized or fraudulent telephone instructions. Neither the Fund nor PFPC 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 it reasonably believes 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 fund, 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 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, 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 44 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. If the exchanging shareholder does not currently own Shares of the Class whose Shares are being acquired, a new account will be established with the same registration, dividend and capital gain options and Authorized Dealer of record as the account from which shares are exchanged, unless otherwise specified in writing by the shareholder with all signatures guaranteed by a commercial bank or trust company or a member firm of a national securities exchange. In order to establish a systematic withdrawal plan 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, upon 60 days written notice to shareholders. If an exchange is to a new RBB Family Class, the dollar value of Shares acquired must equal or exceed the Fund's minimum for a new account; if to an existing account, the dollar value must equal or exceed the Fund's minimum for subsequent investments. If any amount remains in the RBB Class from which the exchange is being made, such amount must not drop below the minimum account value required by the Fund. Retirement Plans RBB Family 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. HOW TO REDEEM SHARES Normal Redemption 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 The RBB Family c/o PFPC, P.O. Box 8950, 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. 45 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 verifies the authenticity of your signature and the guarantor must be an eligible guarantor. In order to be eligible, the guarantor must be a participant in a STAMP program (a Securities Transfer Agents Medallion Program). You may call the Transfer Agent at (800) 447-1139 to determine whether the entity that will guarantee the signature is an eligible guarantor. 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 any of the Classes 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. Redemption by Check An investor holding Shares of a Money Market Class may request that the Fund provide redemption checks drawn on such Money Market Class. Shareholders holding share certificates for Money Market Shares are not eligible for check redemption privileges 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 redemption privileges exchanges funds from one Money Market Class into another Money Market 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. 46 This check redemption privilege applies only to Shares of the Money Market Portfolios. Systematic Withdrawal Plan If your account has a value of at least $10,000, you may establish a Systematic Withdrawal Plan for any of the RBB Family Classes 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 8950, 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 appropriate Class 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 of that Class 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 applicable Class 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 47 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 any Class at any time the net asset value of the account in such Class 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 in a Class 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. NET ASSET VALUE The net asset value for each Portfolio 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 each Non-Money Market Portfolio is calculated as of 4:00 p.m. Eastern Time on each Business Day. The net asset value of each Money Market Portfolio is determined twice each Money Market Business Day, once as of 12:00 noon Eastern Time and once as of 4:00 p.m. Eastern Time. Valuation of securities held by each of the Non-Money Market Portfolios 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 48 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 Fund seeks to maintain for each of the Money Market Portfolios a net asset value of $1.00 per Share for purpose 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 of the Money Market Portfolios 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. 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 Class unless a shareholder elects otherwise. The net investment income (not including any net short-term capital gains) earned by each of the Money Market Portfolios will be declared as a dividend on a daily basis and paid monthly, and are payable to shareholders of record immediately prior to the determination of net asset value made as of 4:00 p.m. Eastern Time. Each of the Tax-Free and Government Securities Portfolios 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. TAXES The following discussion is only a brief summary of some of the important tax considerations generally affecting the Portfolios and their shareholders and is not intended as a substitute for careful tax planning. Accordingly, investors in the Portfolios should consult their tax advisers with specific reference to their own tax situation. 49 Each 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 a Portfolio qualifies for this tax treatment, such Portfolio will be relieved of Federal income tax on amounts distributed to shareholders, but shareholders, unless otherwise exempt, will pay income or capital gains taxes on amounts so distributed (except distributions that 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 any Portfolio 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 maximum marginal rate on ordinary income for individuals, trusts and estates is generally 31% while the maximum rate imposed on net capital gain of such taxpayers is 28%. Corporate taxpayers are taxed at the same rates on both ordinary income and capital gains. The Tax-Free Portfolio and Municipal Money Market Portfolio intend to pay substantially all of their dividends as "exempt interest dividends." Investors in these Portfolios should note, however, that taxpayers are required to report the receipt of tax-exempt interest and "exempt interest dividends" in their Federal income tax returns and that in two circumstances such amounts, while exempt from regular Federal income tax, are subject to alternative minimum tax at a rate of 24% in the case of individuals, trusts and estates, and 20% in the case of corporate taxpayers. First, tax-exempt interest and "exempt interest dividends" derived from certain private activity bonds issued after August 7, 1986, will generally constitute an item of tax preference for corporate and noncorporate taxpayers in determining alternative minimum tax liability. Depending upon market conditions, the Tax-Free Portfolio may invest up to 20% of its net assets and the Municipal Money Market Portfolio may invest up to 100% of its net assets in such private activity bonds. Secondly, tax-exempt interest and "exempt interest dividends" derived from all Municipal Obligations must be taken into account by corporate taxpayers in determining their adjusted current earnings adjustment for alternative minimum tax purposes. Shareholders who are recipients of Social Security Act or Railroad Retirement Act benefits should further note that tax-exempt interest and "exempt interest dividends" will be taken 50 into account in determining the taxability of their benefit payments. The Tax-Free Portfolio and Municipal Money Market Portfolio will determine annually the percentages of their respective net investment income which are fully tax-exempt, which constitute an item of tax preference for alternative minimum tax purposes, and which are fully taxable and will apply such percentages uniformly to all distributions declared from net investment income during that year. These percentages may differ significantly from the actual percentages for any particular day. The Fund will send written notices to shareholders annually regarding the tax status of distributions made by each Portfolio. Dividends declared in October, November or December of any year payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders on December 31, provided such dividends are paid during January of the following year. Each Portfolio intends to make sufficient actual or deemed distributions prior to the end of each calendar year to avoid liability for Federal excise tax. Investors should be careful to consider the tax implications of buying Shares just prior to a distribution. The price of shares purchased at that time will reflect the amount of the forthcoming distribution. Those investors purchasing just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received. The foregoing considerations do not apply to the purchase of Shares of the Money Market Portfolios that are offered at a constant net asset value of $1.00 per share. 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. Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. Federal income tax treatment. An investment in any one Portfolio is not intended to constitute a balanced investment program. Shares of the Tax-Free Portfolio and Municipal Money Market Portfolio would not be suitable for tax-exempt institutions and may not be suitable for retirement plans qualified under Section 401 of the Internal Revenue Code, H.R. 10 plans and individual retirement accounts since such plans and accounts are generally tax-exempt and, therefore, not only would not gain any additional benefit from 51 the Portfolios' dividends being tax-exempt but also such dividends would be taxable when distributed to the beneficiary. Future legislative or administrative changes or court decisions may materially affect the tax consequences of investing in one or more Portfolios of the Fund. Shareholders are also urged to consult their tax advisers concerning the application of state and local income taxes to investments in the Fund which may differ from the Federal income tax consequences described above. DESCRIPTION OF SHARES The Fund has authorized capital of thirty billion shares of Common Stock, $.001 par value per share, of which 10.7 billion shares are currently classified as follows: 100 million shares are classified as Class A Common Stock (Growth & Income), 100 million shares are classified as Class B Common Stock, 100 million shares are classified as Class C Common Stock (Balanced), 100 million shares are classified as Class D Common Stock (Tax-Free), 500 million shares are classified as Class E Common Stock (Money), 500 million shares are classified as Class F Common Stock (Municipal Money), 500 million shares are classified as Class G Common Stock (Money), 500 million shares are classified as Class H Common Stock (Municipal Money), 1 billion shares are classified as Class I Common Stock (Money), 500 million shares are classified as Class J Common Stock (Municipal Money), 500 million shares are classified as Class K Common Stock (U.S. Government Money), 1,500 million shares are classified as Class L Common Stock (Money), 500 million shares are classified as Class M Common Stock (Municipal Money), 500 million shares are classified as Class N Common Stock (U.S. Government Money), 500 million shares are classified as Class O Common Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock (Government), 100 million shares are classified as Class Q Common Stock, 500 million shares are classified as Class R Common Stock (Municipal Money), 500 million shares are classified as Class S Common Stock (U.S. Government Money), 500 million shares are classified as Class T Common Stock (International), 500 million shares are classified as Class U Common Stock (Strategic), 500 million shares are classified as Class V Common Stock (Emerging), 100 million shares are classified as Class W Common Stock (Laffer/Canto Equity), 50 million shares are classified as Class X Common Stock (U.S. Core Equity), 50 million shares are classified as Class Y Common Stock (U.S. Core Fixed Income), 50 million shares are classified as Class Z Common Stock (Global Fixed Income), 50 million shares are classified as Class AA Common Stock (Municipal Bond), 50 million shares are classified as Class BB Common Stock (BEA Balanced), 50 million shares are classified as Class CC Common Stock (Short 52 Duration), 100 million shares are classified as Class DD (Growth & Income Series 2), 100 million shares are classified as Class EE Balanced Series 2), 1 million shares are classified as Class Alpha 1 Common Stock (Money), 1 million shares are classified as Class Alpha 2 Common Stock (Municipal Money), 1 million shares are classified as Class Alpha 3 Common Stock (U.S. Government Money), 1 million shares are classified as Class Alpha 4 Common Stock (N.Y. Money), 1 million shares are classified as Class Beta 1 Common Stock (Money), 1 million shares are classified as Class Beta 2 Common Stock (Municipal Money), 1 million shares are classified as Class Beta 3 Common Stock (U.S. Government Money), 1 million shares are classified as Class Beta 4 Common Stock (N.Y. Money), 1 million shares are classified as Gamma 1 Common Stock (Money), 1 million shares are classified as Gamma 2 Common Stock (Municipal Money), 1 million shares are classified as Gamma 3 Common Stock (U.S. Government Money), 1 million shares are classified as Gamma 4 Common Stock (N.Y. Money), 1 million shares are classified as Delta 1 Common Stock (Money), 1 million shares are classified as Delta 2 Common Stock (Municipal Money), 1 million shares are classified as Delta 3 Common Stock (U.S. Government Money), 1 million shares are classified as Delta 4 Common Stock (N.Y. Money), 1 million shares are classified as Epsilon 1 Common Stock (Money), 1 million shares are classified as Epsilon 2 Common Stock (Municipal Money), 1 million shares are classified as Epsilon 3 Common Stock (U.S. Government Money), 1 million shares are classified as Epsilon 4 Common Stock (N.Y. Money), 1 million shares are classified as Zeta 1 Common Stock (Money), 1 million shares are classified as Zeta 2 Common Stock (Municipal Money), 1 million shares are classified as Zeta 3 Common Stock (U.S. Government Money), 1 million shares are classified as Zeta 4 Common Stock (N.Y. Money), 1 million shares are classified as Eta 1 Common Stock (Money), 1 million shares are classified as Eta 2 Common Stock (Municipal Money), 1 million shares are classified as Eta 3 Common Stock (U.S. Government Money), 1 million shares are classified as Eta 4 Common Stock (N.Y. Money), 1 million shares are classified as Theta 1 Common Stock (Money), 1 million shares are classified as Theta 2 Common Stock (Municipal Money), 1 million shares are classified as Theta 3 Common Stock (U.S. Government Money), and 1 million shares are classified as Theta 4 Common Stock (N.Y. Money). Shares of Class D Common Stock, Class E Common Stock, Class F Common Stock and Class P Common Stock constitute the RBB Family Classes. Under the Fund's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time. The classes of Common Stock have been grouped into sixteen separate "families": the RBB Family, the Warburg Pincus Family, the Cash Preservation Family, the Sansom Street Family, the Bedford Family, the Bradford Family, the BEA Family, 53 Laffer/Canto Family, the Alpha Family, the Beta Family, the Gamma Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The Warburg Pincus Family represents interests in the Growth & Income Fund and Balanced Fund Portfolios; the Cash Preservation Family represents interests in the Money Market and Municipal Money Market Portfolios; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Portfolios; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios; the Bradford Family represents interests in the Municipal Money Market and Government Obligations Money Market Portfolios; the BEA Family represents interests in nine non-money market portfolios; the Laffer/Canto Family represents interests in Laffer/Canto Equity Fund Portfolio; and the Alpha, Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta Families (collectively, the "Additional Families") represent interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Portfolios. 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. For example, shareholders in the Sansom Street Family bear non-12b-1 shareholder servicing fees in the amount of .10% of the daily net asset value of their shares. Each class of Common Stock of the Fund has a separate Rule 12b-1 distribution plan. Under the Distribution Contracts entered into with the Distributor and pursuant to each of the distribution plans, the Distributor is entitled to receive from the relevant Class as compensation for distribution services provided to the various families a distribution fee based on average daily net assets in the following amounts: Cash Preservation Family: .40%, Sansom Street Family: Municipal Money Market and Government Obligations Money Market Portfolios .05% and Money Market up to .20%, Bedford Family: .60%, Bradford Family: .60% and Additional Families: .60%. 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. For the year ended August 31, 1994, the expense ratio of each of the Cash Preservation Class, the Sansom Street Class and the Bedford Class of the Money Market Portfolio, taking into account fee waivers and reimbursement of expenses, was as follows: Cash Preservation: .95% (reflecting waivers of 1.57%), Sansom Street: .39% (reflecting waivers of .21%), and Bedford: 54 .95% (reflecting waivers of .21%); and for each of the Cash Preservation, Sansom Street, Bedford and Bradford Classes of the Municipal Money Market Portfolio, taking into account fee waivers and reimbursement of expenses, was as follows: Cash Preservation: .98% (reflecting waivers of 10.54%), Bedford: .77% (reflecting waivers of .35%) and Bradford: .77% (reflecting waivers of .34%), Sansom Street: no expense ratio is given for the Sansom Street Class of the Municipal Money Market Portfolio as no shares of such class had been sold to the public during the fiscal period ended August 31, 1994. The ratio of net investment income to average net assets for each of the Cash Preservation Class, the Sansom Street Class and the Bedford Class in the Money Market Portfolio, was as follows: Cash Preservation: 2.78%, Sansom Street: 3.34% and Bedford: 2.78%; for the Municipal Money Market Portfolio, was as follows: Cash Preservation: 1.74%, Bedford: 1.95% and Bradford: 1.95%, Sansom Street: no ratio of net investment income to average net assets is given for the Sansom Street Class of the Municipal Money Market Portfolio as no shares of such class had been sold to the public during the fiscal period ended August 31, 1994. No expense ratio is given for the Alpha, Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta Classes of the Money Market and Municipal Money Market Portfolios as no shares of such classes had been sold to the public during the year ended August 31, 1994. 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 Non-Money Market Classes of Common Stock of the RBB Family. Otherwise, no exchanges between Families are permitted. THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE RBB FAMILY CLASSES AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE RBB FAMILY CLASSES. 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 55 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 September 30, 1994, to the Fund's knowledge, no person held of record or beneficially 25% or more of the outstanding shares of all classes of the Fund, although as of such date, Boston Financial Data Services owned more than 24% of the outstanding shares of the Warburg Pincus Family Class representing an interest in the Growth & Income Fund, Warburg, Pincus Counsellors, Inc. owned more than 25% of the outstanding shares of the Warburg Pincus Family Class representing an interest in the Balanced Fund; Seymour Fein owned more than 25% of the outstanding shares of the RBB Family Class representing an interest in the Municipal Money Market Portfolio; Jewish Family and Childrens Agency of Philadelphia Capital Campaign owned more than 25% of the outstanding shares of the Cash Preservation Family Class representing an interest in the Money Market Portfolio; Deborah C. Brown Trustee/Barbara J.C. Curtis, Trustee, the Crowe Trust owned more than 25% of the outstanding shares of the Cash Preservation Family Class representing an interest in the Municipal Money Market Portfolio; Wasner & Co. for the account of Paine Webber Managed Assets - Sundry Holdings owned more than 25% of the outstanding shares of the Sansom Street Class representing an interest in the Money Market Portfolio; John Hancock Clearing Corporation owned more than 25% of the outstanding shares of the Laffer/Canto Family Class representing an interest in the Laffer/Canto Equity Fund Portfolio; Home Insurance Company owned more than 25% of the outstanding shares of the RBB Family Class representing an interest in the Government Securities Portfolio; State of Oregon owned more than 25% of the outstanding shares of the BEA Family class representing an interest in the BEA Strategic Fixed Income Portfolio; Bank of New York, Trust APU Buckeye Pipeline owned more than 25% of the outstanding shares of the BEA Family class 56 representing an interest in the BEA U.S. Core Equity Portfolio; New England UFCW & Employer's Pension Fund Board of Trustees and Bankers Trust Peckiney Corporation Pension Master Trust each owned more than 25% of the outstanding shares of the BEA Family class representing an interest in the BEA U.S. Core Fixed Income Portfolio and Bank of New York Eastern Enterprises Retirement Plan Trust owned more than 25% of the outstanding shares of the BEA Family class representing an interest in the BEA Global Fixed Income Portfolio. 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) 447-1139 (in Delaware call collect (302) 791-1149). Share Certificates The Fund will issue share certificates for any of the Classes only upon the written request of a shareholder sent to PFPC. Performance Information From time to time, each of the Non-Money Market Portfolios may advertise its performance, including comparisons to other mutual funds with similar investment objectives and to stock or other relevant indices. All such advertisements will show the average annual total return, net of a Non-Money Market 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 a Non-Money Market 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 Non-Money Market Portfolios may also from time to time 57 include in such advertising an aggregate total return figure or a total return figure that is not calculated according to the standardized formula in order to compare more accurately a Portfolio's performance with other measures of investment return. For example, a Portfolio's total return may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. 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 a 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, each of the Non-Money Market Portfolios may also advertise its "30-day yield." The yield of a Non-Money Market Portfolio refers to the income generated by an investment in the Fund over the 30-day period identified in the advertisement, and is computed by dividing the net investment income per share earned by a Non-Money Market 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 Tax-Free 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. From time to time each of the Money Market Portfolios may advertise its "yield" and "effective yield." Both yield figures are based on historical earnings and are not intended to indicate future performance. The "yield" of either of the Money Market Portfolios refers to the income generated by an investment in such 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 58 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 such 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 yield on Shares of any of the Portfolios will fluctuate and is not necessarily representative of future results. Shareholders should remember that yield is generally a function of portfolio quality and maturity, type of instrument, operating expenses and market conditions. Any fees charged by broker/dealers directly to their customers in connection with investments in a Portfolio are not reflected in the yields on a Portfolio's Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. The yield on Shares of the RBB Family Classes 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." A-1 APPENDIX A RATINGS OF DEBT SECURITIES STANDARD & POOR'S CORPORATION AAA Debt rated 'AAA' has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA Debt rated 'AA' has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in a small degree. A Debt rated 'A' has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB Debt rated 'BB', 'B', 'CCC', or 'CC' is regarded, on balance, as B predominantly speculative with respect to capacity to pay interest and CCC repay principal in accordance with the terms of the obligation. 'BB' CC indicates the lowest degree of speculation and 'CC' the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions. C This rating is reserved for income bonds on which no interest is being paid. D Debt rated "D" is in default, and payment of interest and/or repayment of principal is in arrears. A-2 (+) The ratings from 'AAA' or 'CCC' may be modified by the addition of a or plus or minus sign to show relative standing or within the major (-) rating categories. * Continuance of the rating is contingent upon S&P's receipt of an executed copy of the escrow agreement or closing documentation confirming investments and cash flows. NR Indicates no rating has been requested, that there is insufficient information on which to base a rating, or that S&P does not rate a particular type of obligation as a matter of policy. Debt obligations of issuers outside the United States and its territories are rated on the same basis as domestic corporate and municipal issues. The ratings measure the creditworthiness of the obligor but do not take into account currency exchange and related uncertainties. p Provisional Ratings: The letter "p" indicates that the rating is provisional. A provisional rating assumes the successful completion of the project being financed by the debt being rated and indicates that payment of debt service requirements is largely or entirely dependent upon the successful and timely completion of the project. This rating, however, while addressing credit quality subsequent to completion of the project, makes no comment on the likelihood of. or the risk of default upon failure of, such completion. The investor should exercise judgment with respect to such likelihood and risk. Notes Note rating symbols are as follows: SP-1 Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2 Satisfactory capacity to pay principal and interest. SP-3 Speculative capacity to pay principal and interest. A-3 Commercial paper A Standard & Poor's 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. Ratings are graded into four categories, ranging from 'A' for the highest quality obligations to 'D' for the lowest. The four categories are as follows: A Issues assigned this highest rating are regarded as having the greatest capacity for timely payment. Issues in this category are delineated with the numbers 1, 2, and 3 to indicate the relative degree of safety. A-1 This designation indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics are denoted with a plus (+) sign designation. A-2 Capacity for timely payment on issues with this designation is strong. However, the relative degree of safety is not as high as for issues designated 'A-1'. A-3 Issues carrying this designation have a satisfactory capacity for timely payment. They are, however, somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations. B Issues rated 'B' are regarded as having only an adequate capacity for timely payment. However, such capacity may be damaged by changing conditions or short-term adversities. C This rating is assigned to short-term debt obligations with a doubtful capacity for payment. D This rating indicates that the issue is either in default or is expected to be in default upon maturity. A-4 Variable rate demand bonds Standard & Poor's assigns "dual" ratings to all long-term debt issues that have as part of their provisions a long-term rating and a variable rate demand rating. The first rating addresses the likelihood of repayment of principal and interest due and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols are used to denote the put option (for example, 'AAA/A-1 +'). If the nominal maturity is short (three years or less), a note rating is assigned. MOODY'S INVESTORS SERVICE, INC. RATINGS Corporate Bonds Aaa Bonds which are rated Aaa are judged to be the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa Bonds which are rated Aa 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 which are rated A 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. A-5 Baa Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payment 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 Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Moody's bond ratings, where specified, are also applied to senior bank obligations with an original maturity in excess of one year. Among the bank obligations covered are bank deposits, bankers acceptance and obligations to deliver foreign exchange. A-6 Obligations relying upon support mechanisms such as letters-of-credit are excluded unless explicitly rated. Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category. Short-term Notes and Variable Rate Demand Obligations The following summarizes the ratings used by Moody's for short-term notes and variable rate demand obligations: MIG-1/VMIG-1. Obligations bearing these designations are of the best quality, enjoying strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. MIG-2/VMIG-2. Obligations bearing these designations are of high quality with margins of protection ample although not as large as in the preceding group. MIG-3/VMIG-3. Obligations bearing these designations are of favorable quality. All security elements are accounted for but there is a lacking the undeniable strength of the preceding grades. Liquidity and cash flow protection may be narrow and market access for refinancing is hereby to be less well established. Commercial Paper Ratings The rating Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers rated Prime-1 (or related supporting institutions) are considered to have a superior capacity for repayment of senior short-term debt obligations. Issuers rated Prime-2 (or related supporting institutions) are considered to have strong capacity for repayment of senior short-term debt obligations. This will normally be evidenced by many of the characteristics of issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. Issuers Prime-3 (or supporting institutions) have an acceptable capacity rated for repayment of senior short-term debt obligations. The effect of industry characteristics and market composition may be more pronounced. Variability in earnings and A-7 profitability may result in changes in the level of debt protection measurements and may require relatively high financial leverage. Adequate alternate liquidity is maintained. Issuers rated Not Prime do not fall within any of the Prime rating categories. THE RBB FAMILY NEW ACCOUNT APPLICATION Mail completed application to: PFPC - Attention: The RBB Family, P.O. Box 8950, Wilmington, DE 19899 1. REGISTRATION. Please Print __________________________________________________ __Individual __Trust Owner __________________________________________________ __Joint Tenant __Corporation Co-Owner*, minor, trust __________________________________________________ __Custodian __Other _____ Street Address __________________________________________________ __UGMA __(State) City State Zip Code * For joint registration, both must sign. The registration will be as joint tenants with the right of survivorship and not as tenants in common, unless otherwise stated. - ------------------------------------------------------------------------------- 2. INVESTMENTS. Enclosed is my check for $ ____ (minimum of $1,000 per portfolio) made payable to "The RBB Family" Government Securities Portfolio $ __________ Money Market Portfolio $ __________ Tax-Free Portfolio $ __________ Municipal Money Market 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 Right of Accumulation reduced sales charges based on the following accounts in the RBB Family Classes ---------- ---------- ---------- ---------- Portfolio Account No. 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) - -------------------------------------------------------------------------------- 3. TAX IDENTIFICATION Under penalties of perjury, I certify with my signature below that the number shown in this section of the application is my correct taxpayer identification number and that I am not subject to backup 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 #) - -------------------------------------------------------------------------------- 4. OPTIONS A. DIVIDEND ELECTION. 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. 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 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________ C. TELEPHONE EXCHANGE Your account will automatically provide for telephone exchange of one RBB Family Class for shares of another RBB Family Class. Then, when you wish to exchange shares, all you need to do is call PFPC Inc. ("PFPC"), toll-free at (800) 447-1139 (in Delaware call collect (302) 791-1149). Shareholders holding share certificates may not exchange shares by telephone because share certificates must accompany all exchange requests. The same registration and address will be used as listed on this form under "Registration." It is understood that neither PFPC nor the Fund will be liable for any loss, liability, cost or expense for following the procedures described below or for following instructions communicated by telephone that it reasonably believes to be genuine. If you do NOT wish this privilege, please check this box. ___ 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 fund, 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 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, 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. D. 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. E. FREE CHECK WRITING PRIVILEGE ___ Check box if you wish to take advantage of the Free Check-Writing Privilege. Shareholders holding share certificates are not eligible for check-writing privileges because share certificates must accompany all transaction requests. This privilege applies only to shares of the Money Market Portfolios. If you have checked the box above, please be sure to complete the signature card below. Your checkbook should arrive within three to four weeks. A separate checkbook is issued for each portfolio. - -------------------------------------------------------------------------------- 5. SIGNATURES Citizenship: ___ U.S. ___ Other ______________ Please provide Phone Number (___) __________ Sign below exactly as printed in Registration. I (we) am (are) of legal age and have read the prospectus. I (we) hereby certify that each of the persons listed below has been duly elected, and is now legally holding the office set below his name and has the authority to make this authorization. Please print titles below if signing on behalf of a business or trust. - ------------------------------------ ------------------------------- (Signature) (Signature) - ---------------------------------------------- -------------------------------- (President, Trustee, General Partner or Agent) (Co-owner, Secretary of Corporation, Co-trustee, etc). Please turn over to complete Application - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - THE RBB FAMILY SIGNATURE CARD Complete only if check-writing privilege is selected. Registration ______________________________________________________________ ______________________________________________________________ Please fill out exactly as in "Registration" in Section 1 of the New Account Application Authorizing signature(s)* Date Signed: _________________________ 1. ___________________________ 2. ___________________________ ___ Check if one signature is required. ___ Check if two signatures are required. * All owners must sign. If a corporation, a corporate resolution naming the individual(s) authorized above must accompany this signature card. For Internal Use of PFPC Inc. only: Act. # _____________ CHECK-WRITING CONDITIONS I/we hereby authorize PNC Bank, N.A. ("PNC Bank") to honor checks drawn by me/us on this (these) account(s). I/we fully understand that: (1) if this card is signed by more than one person, all checks will require all signatures unless indicated to the contrary on the reverse on this card; (2) if any of the shares in this (these) account(s) is (are) represented by share certificates, this privilege does not apply; (3) this privilege applies only to shares of the Money Market Portfolios of the RBB Family: (4) checks must be drawn for $100 or more; (5) this privilege may be terminated at any time by PNC Bank or the Fund, and neither shall incur any liability to me/us for honoring such checks, for effecting redemptions to pay such checks, or for returning checks which have not been accepted; and (6) this privilege is subject to the terms and conditions set forth in the prospectus of the RBB Family. For assistance in completing this Application call COUNSELLORS (800) 888-9723 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -------------------------------------------------------------------------------- 6. INVESTMENT DEALER MUST BE COMPLETED BY DEALER - ----------------------------------- -------------------------------------------- Firm Name Representative's Name (print) - ---------------------------------- -------------------------------------------- Branch Street Address Representative Number - ---------------------------------- -------------------------------------------- Representative's Signature Date For assistance in completing this Application call COUNSELLORS (800) 888-9723 -----END PRIVACY-ENHANCED MESSAGE-----