-----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, luACp0ySWX6uPRYkDDJngQMGtZ85ypLL51p/HFzgmIk88xpm84in9ckdckDxNtq+ wGFG0j7nVpedM2LIuBWeWg== 0000950117-95-000165.txt : 19950516 0000950117-95-000165.hdr.sgml : 19950516 ACCESSION NUMBER: 0000950117-95-000165 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950515 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: 95539851 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 WARBURG PINCUS ADVISOR GROWTH & INCOME PROS(2), SAI & AR [Logo] PROSPECTUS DECEMBER 28, 1994 AS REVISED MAY 10, 1995 [ ] WARBURG PINCUS GROWTH & INCOME FUND [ ] WARBURG PINCUS BALANCED FUND WARBURG PINCUS GROWTH & INCOME FUND WARBURG PINCUS BALANCED FUND PROSPECTUS December 28, 1994 as revised May 10, 1995 The WARBURG PINCUS GROWTH & INCOME FUND (the 'Growth & Income Fund') and the WARBURG PINCUS BALANCED FUND (the 'Balanced Fund') (collectively, the 'Funds') consist of multiple classes of common stock of The RBB Fund, Inc. ('RBB'). RBB is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and currently operating or proposing to operate nineteen separate investment portfolios. The shares ('Shares') offered by this Prospectus represent interests in the Funds. The Growth & Income Fund's investment objective is to provide long-term growth of capital and income and a reasonable current return. The Growth & Income Fund seeks to achieve its objectives by investing primarily in equity securities, and in various income producing securities including, but not limited to dividend paying equity securities, fixed income securities and money market instruments. The Growth & Income Fund may also purchase without limitation dollar-denominated American Depository Receipts ('ADRs'). ADRs are issued by domestic banks and evidence ownership of underlying foreign securities. The Balanced Fund's investment objective is to maximize total return through a combination of long-term growth of capital and current income consistent with preservation of capital. It seeks to achieve this objective by diversified investments in common stocks, preferred stocks, debt securities, preferred stocks and debt securities which are convertible into common stocks and government, corporate, bank and commercial obligations. In implementing this objective, this Balanced Fund will use a multi-manager approach. Each Fund offers a class of common shares that is 'no load' ('No Load Shares'), available (a) directly from the Funds' distributor, Counsellors Securities Inc., ('Counsellors Securities') and (b) through various brokerage firms, including Charles Schwab & Company, Inc. Mutual Fund OneSource'tm' Program and Fidelity Brokerage Services, Inc. FundsNetwork'tm' Program. See 'How to Purchase Shares.' No Load Shares of the Balanced Fund are subject to a 12b-1 fee of .25% per annum. No Load Shares of the Growth & Income Fund are not subject to a 12b-1 fee. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE 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 28, 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 RBB's distributor by calling (800) 257-5614. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- FEE TABLE SHAREHOLDER TRANSACTION EXPENSES* ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE REIMBURSEMENTS AND WAIVERS
GROWTH & INCOME FUND BALANCED FUND --------------- ------------- Management fees**............................................................. .75% .90% 12b-1 fees**.................................................................. -- .25 Other Expenses (after waivers and reimbursements)............................. .53 .45 ----- ----- Total Fund Operating Expenses (after waivers and reimbursements).............. 1.28% 1.60% ----- ----- ----- ----- EXAMPLE An investor would pay the following expenses on a $1,000 investment in each of the Funds, assuming (1) a 5% annual return, and (2) redemption at the end of each time period:
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS ------- -------- ------- -------- Growth & Income Fund.......................................... $ 13 $ 41 $ 70 $155 Balanced Fund................................................. 16 51 87 190
- ------------ * No sales charge is imposed upon the purchase of shares of the Funds. Thus, the full amount of the purchase price of Fund shares will be invested at the time of purchase or upon any other exchange of Shares of other Warburg Pincus Funds without imposition of any sales charge. ** Management fees and 12b-1 fees are 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. The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under 'Annual Fund Operating Expenses After Expense Reimbursements and Waivers' remain the same as the years shown. Certain broker-dealers and financial institutions also may charge their clients fees in connection with investments in a Fund's shares, which fees are not reflected in the table. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term Shareholders of the Balanced Fund may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc. (the 'NASD'). The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Shares of the Funds will bear directly or indirectly. (For more complete descriptions of the various costs and expenses, see 'Management' and 'Distribution of Shares' below.) The expense figures for the Growth & Income Fund are based upon fees and costs as of August 31, 1994. Expenses for the Balanced Fund have been restated from actual expenses paid by such Fund during the year ended August 31, 1994 to reflect current expense levels. In addition, the Fee Table reflects a voluntary assumption of some of the additional expenses of the Balanced Fund by the investment adviser. Assumption of additional expenses will have the effect of lowering the Balanced 2 Fund's overall expense ratios and increasing its yield to investors. There can be no assurance that the investment adviser will continue to assume such expenses. Absent such expense reimbursements, under current expense levels the actual expenses paid by the Balanced Fund for the year ended August 31, 1994 would have been as follows: ANNUAL FUND OPERATING EXPENSES BEFORE EXPENSE REIMBURSEMENTS AND WAIVERS
BALANCED FUND ------------- Management fees............................................................... .90% 12b-1 Fees.................................................................... .25 Other Expenses................................................................ 4.76 ----- Total Fund Operating Expenses................................................. 5.91% ----- -----
The caption 'Other Expenses' does not include extraordinary expenses as determined by use of generally accepted accounting principles. OFFERING PRICES Shares which represent interests in the Funds will be offered to the public at the next determined net asset value after receipt of an order by the Funds. See 'How to Purchase Shares.' MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS The minimum initial investment for the Funds is $1,000. Subsequent investments must be $100 or more. See 'How to Purchase Shares.' EXCHANGES Shares may be exchanged for Shares of other Warburg Pincus Funds at their net asset value next determined after receipt by the Funds of an exchange request. No exchange fee is currently charged for exchanges. See 'How to Redeem and Exchange Shares.' REDEMPTION PRICE Shares may be redeemed at any time at their net asset value next determined after receipt by Warburg Pincus Funds of a redemption request. The Funds reserve the right, upon 30 days written notice, to redeem an account in the Funds if the total 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 and Exchange Shares -- Redemption of Shares.' RISK FACTORS An investment in the Growth & Income or Balanced Funds 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 Fund will achieve its objective. The Funds, to the extent set forth under 'Investment Objectives and Policies,' may engage in the following investment practices: the purchase of mortgage-related securities, the lending of portfolio securities and engaging in options and futures transactions, engaging in secured borrowings and investing in lower rated fixed-income securities. High yield bonds are commonly referred to as 'junk bonds.' 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 Warburg Pincus Funds at 1-800-888-6878 and direct communications to P.O. Box 9030 Boston, Massachusetts 02205-9030. 3 FINANCIAL HIGHLIGHTS The table below sets forth certain information concerning the investment results of the RBB classes representing interests in No Load Shares of the Warburg Pincus Growth & Income and Balanced Funds, for the periods indicated. The financial data included in this table for each of the years or periods ended August 31, 1990 through 1994 are a part of RBB's financial statements for the Funds which have been audited by Coopers & Lybrand L.L.P., RBB's independent accountants, whose current report thereon appears in the Statement of Additional Information along with the financial statements. The financial data for the Funds for the period ended August 31, 1989 is 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. THE RBB FUND, INC. WARBURG PINCUS GROWTH & INCOME FUND(d) (for a share outstanding throughout each period)
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST 31, 1994 31, 1993 31, 1992 31, 1991 --------------- --------------- --------------- --------------- Net asset value, beginning of period............................... $ 16.72 $ 11.99 $ 12.11 $ 11.00 --------------- --------------- --------------- --------------- Income From Investment Operations: Net investment income.............. 0.785 .0464 .1912 .3744 Net gains (losses) on securities (both realized and unrealized)... 1.8151 4.8499 .0402 1.6891 --------------- --------------- --------------- --------------- Total from investment operations... 1.8936 4.8963 .2314 2.0635 --------------- --------------- --------------- --------------- Less Distributions Dividends (from net investment income).......................... (.0785) (.0875) (.1871) (.4043) Distributions (from capital gains)........................... (3.9751) (.0788) (.1643) (.5492) --------------- --------------- --------------- --------------- Total distributions................ (4.0536) (.1663) (.3514) (.9535) --------------- --------------- --------------- --------------- Net asset value, end of period........ $ 14.56 $ 16.72 $ 11.99 $ 12.11 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Returns......................... 14.41% 41.17% 1.99% 19.91% Ratios/Supplemental Data: Net assets, end of period.......... $ 410,657,628 $60,689,379 $28,976,303 $24,725,586 Ratios of expenses to average net assets........................... 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a) Ratios of net investment income to average net assets............... .41% .30% 1.66% 3.42% Portfolio turnover rate............... 150% 344% 175% 41% FOR THE PERIOD OCTOBER 6, 1988 FOR THE YEAR (COMMENCEMENT ENDED AUGUST OF OPERATIONS) TO 31, 1990 AUGUST 31, 1989 --------------- ----------------- Net asset value, beginning of period............................... $ 11.53 $ 10.00 --------------- -------- Income From Investment Operations: Net investment income.............. .3574 .3876 Net gains (losses) on securities (both realized and unrealized)... (.1856) 1.4225 --------------- -------- Total from investment operations... .1718 1.8101 --------------- -------- Less Distributions Dividends (from net investment income).......................... (.3951) (.2833) Distributions (from capital gains)........................... (.3067) -- --------------- -------- Total distributions................ (.7018) (.2833) --------------- -------- Net asset value, end of period........ $ 11.00 $ 11.53 --------------- -------- --------------- -------- Total Returns......................... 1.48% 18.48%(c) Ratios/Supplemental Data: Net assets, end of period.......... $ 1,396,198 $ 1,150,440 Ratios of expenses to average net assets........................... 1.40%(a) 1.40%(a)(b) Ratios of net investment income to average net assets............... 3.32% 4.32%(b) Portfolio turnover rate............... 98% 111%(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 Warburg Pincus Growth & Income Fund would have been 1.28%, 1.14%, 1.28%, 2.17% and 3.81% for the years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively, and 2.82% annualized for the period ended August 31, 1989. (b) Annualized. (c) Not annualized. (d) Formerly the Equity Growth & Income Portfolio. Prior to October 1, 1993, the Fund was advised by PNC Institutional Management Corporation. 4 THE RBB FUND, INC. WARBURG PINCUS BALANCED FUND(e) (for a share outstanding throughout each period)
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST 31, 1994 31, 1993 31, 1992 31, 1991 --------------- --------------- --------------- --------------- Net asset value, beginning of period............................... $ 11.71 $ 12.04 $ 12.05 $ 10.60 ------- ------- --------------- --------------- Income from Investment Operations Net investment income.............. .4132 .5555 .4408 .4213 Net gains (losses) on securities (both realized and unrealized)... .3248 1.1253 .5155 1.7196 ------- ------- --------------- --------------- Total from Investment Operations... .7380 1.6808 .9563 2.1409 ------- ------- --------------- --------------- Less Distributions Dividends (from net investment income).......................... (.4586) (.5412) (.3713) (.4128) Distributions (from capital gains)........................... (.9794) (1.4696) (.5950) (.2781) ------- ------- --------------- --------------- Total Distributions................ (1.4380) (2.0108) (.9663) (.6909) ------- ------- --------------- --------------- Net asset value, end of period........ $ 11.01 $ 11.71 $ 12.04 $ 12.05 ------- ------- --------------- --------------- ------- ------- --------------- --------------- Total Return.......................... 6.86%(b) 15.27%(b) 8.07%(b) 21.18%(b) Ratios/Supplemental Data Net assets, end of period.......... $ 808,028 $ 761,817 $ 1,026,223 $ 1,290,340 Ratios of expenses to average net assets........................... 0%(a) 0%(a) .67%(a) 1.40%(a) Ratios of net investment income to average net assets............... 3.76% 4.13% 3.68% 3.58% Portfolio turnover rate............ 32% 30% 93% 76% FOR THE PERIOD OCTOBER 6, 1988 FOR THE YEAR (COMMENCEMENT ENDED AUGUST OF OPERATIONS) TO 31, 1990 AUGUST 31, 1989 --------------- ----------------- Net asset value, beginning of period............................... $ 11.32 $ 10.00 --------------- -------- Income from Investment Operations Net investment income.............. .4080 .4371 Net gains (losses) on securities (both realized and unrealized)... (.2785) 1.2239 --------------- -------- Total from Investment Operations... .1295 1.6610 --------------- -------- Less Distributions Dividends (from net investment income).......................... (.4296) (.3419) Distributions (from capital gains)........................... (.4199) -- --------------- -------- Total Distributions................ (.8495) (.3419) --------------- -------- Net asset value, end of period........ $ 10.60 $ 11.32 --------------- -------- --------------- -------- Total Return.......................... 1.09%(b) 17.03%(b)(d) Ratios/Supplemental Data Net assets, end of period.......... $ 1,372,774 $ 1,127,714 Ratios of expenses to average net assets........................... 1.40%(a) 1.40%(a)(c) Ratios of net investment income to average net assets............... 3.80% 4.90%(c) Portfolio turnover rate............ 95% 35%(d)
- ------------ (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 Balanced Fund would have been 5.46%, 5.37%, 3.88%, 3.89% and 3.76% for the years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively, and 2.83% annualized for the period ended August 31, 1989. (b) Sales load not reflected in total return. The sales load was eliminated effective August 31, 1994. (c) Annualized. (d) Not Annualized. (e) Formerly the RBB Balanced Portfolio. Prior to October 1, 1994, the Fund was advised by PNC Institutional Management Corporation. 5 INVESTMENT OBJECTIVES AND POLICIES GROWTH & INCOME FUND The Growth & Income Fund's investment objectives are to provide long-term growth of capital and income and a reasonable current return. The Growth & Income Fund seeks to achieve its objectives by investing primarily in equity securities. Equity securities include common stocks, securities which are convertible into common stocks and readily marketable securities, such as rights and warrants, which derive their value from common stock. The Growth & Income Fund seeks to achieve its income objective by investing in various income producing securities including, but not limited to, dividend paying equity securities and fixed income securities. The portion of the Fund invested from time to time in equity securities, fixed income securities and money market securities will vary depending on market conditions and there may be extended periods when the Fund is primarily invested in one of them. In addition, the amount of income generated from the Fund will fluctuate depending, among other things, on the composition of the Fund's holdings and the level of interest and dividend income paid on those holdings. Investments in common stock in general are subject to market risks that may cause their prices to fluctuate over time. Therefore, an investment in the Growth and Income Fund may be more suitable for long-term investors who can bear the risk of these fluctuations. The Growth & Income Fund may also purchase without limitation dollar-denominated American Depository Receipts ('ADRs'). ADRs are issued by domestic banks and evidence ownership of underlying foreign securities. The policy of the Growth & Income Fund is to invest substantially all of its assets in equity securities under normal market conditions. The Growth & Income Fund may invest up to 10% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operated in the U.S. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. The Growth & Income Fund may hold from time to time various foreign currencies pending their investment in foreign securities or their conversion into U.S. dollars. The value of the assets of the Growth & Income Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See 'Investment Objectives and Policies -- Foreign Securities' in the Statement of Additional Information. ILLIQUID SECURITIES. The Growth & Income Fund 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 Growth & Income Fund's adviser will monitor the liquidity of such restricted securities under the supervision of the investment adviser and the Board of Directors. See 'Investment Objectives and Policies -- Illiquid Securities' in the Statement of Additional Information. OPTIONS AND FUTURES CONTRACTS. The Growth & Income Fund may write covered call options, buy put options, buy call options and write put options, without limitation except as noted in this paragraph. Such options may relate to particular securities or to various indexes and may or may not be listed on a national securities 6 exchange and issued by the Options Clearing Corporation. The Growth & Income Fund may also invest in futures contracts and options on futures contracts (index futures contracts or interest rate futures contracts, as applicable) for hedging purposes or for other purposes so long as aggregate initial margins and premiums required for non-hedging positions do not exceed 5% of its net assets, after taking into account any unrealized profits and losses on any such contracts it has entered into. However, the Growth & Income Fund may not write put options or purchase or sell futures contracts or options on futures contracts to hedge more than its total assets unless immediately after any such transaction the aggregate amount of premiums paid for put options and the amount of margin deposits on its existing futures positions do not exceed 5% of its total assets. Options trading is a highly specialized activity which entails greater than ordinary investment risks. A call option for a particular security gives the purchaser of the option the right to buy, and a writer the obligation to sell, the underlying security at the stated exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium paid to the writer is in consideration for undertaking the obligations under the option contract. A put option for a particular security gives the purchaser the right to sell the underlying security at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price of the security. In contrast to an option on a particular security, an option on an index provides the holder with the right to make or receive a cash settlement upon exercise of the option. The amount of this settlement will be equal to the difference between the closing price of the index at the time of exercise and the exercise price of the option expressed in dollars, times a specified multiple. The Growth & Income Fund will engage in unlisted over-the-counter options only with broker/dealers deemed creditworthy by Adviser. Closing transactions in certain options are usually effected directly with the same broker/dealer that effected the original option transaction. The Growth & Income Fund bears the risk that the broker/dealer will fail to meet its obligations. There is no assurance that the Growth & Income Fund will be able to close an unlisted option position. Furthermore, unlisted options are not subject to the protections afforded purchasers of listed options by the Options Clearing Corporation, which performs the obligations of its members who fail to do so in connection with the purchase or sale of options. To enter into a futures contract, the Growth & Income Fund must make a deposit of an initial margin with its custodian in a segregated account in the name of its futures broker. Subsequent payments to or from the broker, called variation margin, will be made on a daily basis as the price of the underlying security or index fluctuates, making the long and short positions in the futures contracts more or less valuable. The risks related to the use of options and futures contracts include: (i) the correlation between movements in the market price of a portfolio's investments (held or intended for purchase) being hedged and in the price of the futures contract or option may be imperfect; (ii) possible lack of a liquid secondary market for closing out options or futures positions; (iii) the need for additional portfolio management skills and techniques; and (iv) losses due to unanticipated market movements. Successful use of options and futures by the Growth & Income Fund is subject to the Adviser's ability to correctly predict movements in the direction of the market. For example, if the Growth & Income Fund uses future contracts as a hedge against the possibility of a decline in the market adversely affecting securities held by it and securities prices increase instead, the Growth & Income Fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have approximately equal offsetting losses in its futures positions. The risk 7 of loss in trading futures contracts in some strategies can be substantial, due both to the low margin deposits required, and the extremely high degree of leverage involved in future pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor. Thus, a purchase or sale of a futures contract may result in losses or gains in excess of the amount invested in the contract. For a further discussion see 'Investment Policies' in the Statement of Additional Information. PORTFOLIO TURNOVER. The Growth & Income Fund will effect portfolio transactions without regard to holding period, if, in its judgment, such transactions are advisable in light of general market, economic or financial conditions. As a result, the Fund may engage in a substantial number of portfolio transactions which could cause the portfolio turnover rate to exceed 100%, although under normal conditions the Growth & Income Fund does not anticipate that its annual portfolio turnover rate will exceed 100%. However, it is impossible to predict portfolio turnover rates. The portfolio turnover rate is calculated by dividing the lesser of the Fund's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the Fund during the year. The anticipated portfolio turnover rate for the Growth & Income Fund is greater than that of many other investment companies. A higher than normal portfolio turnover rate may affect the degree to which the Fund's net value fluctuates. Higher portfolio turnover rates are likely to result in comparatively greater brokerage commissions. In addition, short-term gains realized from portfolio transactions are taxable to shareholders as ordinary income. The amount of portfolio activity will not be a limiting factor when making portfolio decisions. See Statement of Additional Information 'Fund Transactions' and 'Taxes.' TEMPORARY DEFENSIVE MEASURES. The Growth & Income Fund reserves the right to hold, as a temporary defensive measure, cash and eligible, U.S. dollar-denominated money market instruments, as well as securities subject to repurchase agreements. The Growth & Income Fund's adviser will determine when market conditions warrant temporary defensive measures. The Growth & Income Fund's investment objectives and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in The Growth & Income Fund. Such changes may result in the Growth & Income Fund having investment objectives which differ from those an investor may have considered at the time of investment. There is no assurance that the Growth & Income Fund's investment objective will be achieved. BALANCED FUND The Balanced Fund's investment objective is to maximize total return through a combination of long-term growth of capital and current income consistent with preservation of capital. The Balanced Fund seeks to achieve this objective through a policy of diversified investment in common stocks, preferred stocks, debt securities, preferred stocks and debt securities which are convertible into common stocks, and government, corporate, bank and commercial obligations. At all times, the Balanced Fund will have a minimum of 25% of its assets in stocks and minimum of 25% in fixed income securities. Compliance with such percentage requirement may limit the ability of the Balanced Fund to maximize total return. With respect to convertible senior securities, only that portion of the value of such securities attributable to their fixed income characteristics will be used for purposes of determining the percentage of the assets of 8 the Balanced Fund that are invested in fixed-income senior securities. The actual percentage of assets invested in equity and fixed-income securities will vary from time to time, depending on the judgment of the sub- adviser as to general market and economic conditions, trends and yields and interest rates and changes in fiscal and monetary policies. MULTI-MANAGER APPROACH. The Balanced Fund will be managed by a team of senior managers of the investment adviser, Warburg, Pincus Counsellors, Inc. ('WPC'). Six of the managers will be dedicated to managing portions of the Balanced Fund allocated to equities; one manager will select and manage the fixed income securities which comprise the fixed income portion of the Balanced Fund. Dale C. Christensen and Anthony G. Orphanos, Managing Directors of WPC, will be designated overall portfolio strategists and will be responsible for determining the portion of the Balanced Fund to be allocated between equity and fixed income securities, and the allocation among the various equity sectors. Equity Investment. Each of the equity portfolio managers will manage an allocated portion of the equity holdings of the Balanced Fund; each manager will manage his/her portion with a different investment emphasis or approach, but consistent with the overall objective of long-term growth of capital for the Balanced Fund's common stock portion. The four areas represented by the equity portfolio managers are: (1) U.S. Value Sector, managed by Anthony G. Orphanos, will invest primarily in stocks whose acquisition price represents low absolute or relative value, based on historical and financial analysis, and compared to other stocks and sectors of the Standard & Poor's 500 universe of common stocks and other indices. (2) U.S Small Company Sector, managed by Elizabeth B. Dater and Stephen J. Lurito, will invest primarily in common stocks and warrants of small capitalization and emerging growth U.S. companies that represent attractive opportunities for maximum capital appreciation. Emerging growth companies are small and medium-sized companies that have passed their start up phase and that show positive earnings and prospects for achieving significant profit and gain in a relatively short period of time. (3) U.S. Mid-Cap Sector, managed by George U. Wyper and Susan L. Black, will invest primarily in a diversified portfolio of common stocks, warrants and securities convertible into or exchangeable for common stock securities of domestic companies which have market capitalizations in the $660 million to $13.8 billion range, commonly referred to as middle capitalization or 'mid-cap,' and includes a potential universe of companies in such indices as the Russell Midcap Index and Standard & Poor's Midcap 400 Index. The portfolio manager will attempt to identify sectors of the market and companies within market sectors that he believes will outperform the overall market. And, (4) International Equity Sector, managed by Richard H. King and Nicholas P.W. Horsley, will invest primarily in a broadly diversified portfolio of equity securities of companies that, wherever organized, have their principal business activities and interests outside the United States. The international equity managers intend to invest principally in the securities of financially strong companies with opportunities for growth within growing international economies and markets through increased earnings power and improved utilization or recognition of assets. Investments may be made in equity securities of companies of any size, whether traded on or off a national securities exchange. Investments in foreign securities involve risks not otherwise associated with investments in domestic securities, including risks of currency fluctuations, tax or excessive government regulation, and political instability. Fixed Income Investment. The fixed income portion, managed by Mr. Christensen, will invest primarily in debt instruments such as corporate obligations, U.S. Government obligations, municipal obligations and mortgage- related debt securities. 9 CORPORATE OBLIGATIONS. The Balanced Fund may invest in debt obligations of corporations, such as corporate bonds, debentures, debentures convertible into common stocks, and notes, which, at the time of purchase for the Fund, are rated 'AAA,' 'AA' or 'A' by Standard & Poor's Corporation ('S&P') or 'Aaa,' 'Aa' or 'A,' by Moody's Investors Service, Inc. ('Moody's'). These ratings are described in the Appendix to this Prospectus. The Balanced Fund may also purchase debt obligations which are unrated at the time of purchase provided they are determined by the Fund's adviser to be of comparable quality to rated obligations pursuant to guidelines approved by RBB's Board of Directors. Such obligations may include dollar-denominated debt obligations of foreign issuers. In selecting debt securities for the Balanced Fund, the adviser will review and monitor the creditworthiness of each issuer and issue, in addition to relying on ratings assigned by S&P or Moody's as indicators of quality. Interest rate trends and specific developments which may affect individual issuers will also be analyzed. U.S. GOVERNMENT OBLIGATIONS. The Balanced Fund may purchase obligations issued or guaranteed by the U.S. Government or its agencies or instrumentalities. Obligations which may be so purchased include obligations of agencies and instrumentalities of the U.S. Government which are supported by the full faith and credit of the U.S. or by U.S. Treasury guarantees, such as securities of the Government National Mortgage Association and the Federal Housing Authority, or obligations supported by the right of the issuer to borrow from the U.S. Treasury, such as securities of the Federal Home Loan Mortgage Corporation, or obligations supported 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. 'WHEN-ISSUED' SECURITIES. The Balanced Fund 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 Balanced Fund 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 Balanced Fund expects that commitments to purchase when-issued securities will not exceed 25% of the value of its total assets absent unusual market conditions. The Balanced Fund does not intend to purchase when-issued securities for speculative purposes but only in furtherance of its investment objective. MUNICIPAL OBLIGATIONS. When conditions warrant, the Balanced Fund may also invest without limitation in Municipal Obligations, whether or not the income thereon is exempt from regular Federal income tax, provided that the Municipal Obligations are determined by the Fund's adviser to present minimal credit risks and at the time of purchase are rated 'A' or higher by S&P or by Moody's in the case of bonds, 'SP-1' by S&P or 'MIG-2' or higher by Moody's in the case of notes, or 'VMIG-2' or higher by Moody's in the case of variable rate demand notes, or if unrated, are determined by the adviser to be of comparable quality pursuant to guidelines adopted by RBB's Board of Directors. For a more complete discussion of Municipal Obligations, see 'Investment Objectives and Policies -- Municipal Obligations' in the Statement of Additional Information. MORTGAGE-RELATED DEBT SECURITIES. The Balanced Fund may purchase without limitation mortgage-related debt securities. Such securities represent interests in pools of mortgage loans to residential home buyers made by lenders such as savings and loan institutions, mortgage bankers, commercial banks and others. Pools of mortgage loans are assembled for sale to investors (such as the Balanced Fund) by various governmental, 10 government-related and private organizations. Mortgage-related securities may include 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. Purchasable mortgage-related 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 Balanced Fund since the remaining maturity of any asset-backed security acquired will be 397 days or less. Interests in pools of mortgage loans differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities will provide a monthly payment to the Balanced Fund which consists of both interest and principal payments. In effect, these payments are 'pass-throughs' of the monthly payments made by the individual borrowers on their residential mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments to the Fund may be derived from repayments of principal resulting from the sale of the underlying residential property, refinancing or foreclosure, net of fees or costs which may be incurred. Some mortgage-related securities are described as 'modified pass-throughs.' These securities entitle the holder to receive all interest and principal payments owed on the mortgage pool, net of certain fees, regardless of whether or not the mortgagor actually makes the payment. The average life of mortgage-related securities varies with the maturities of the underlying mortgage instruments. In addition, prepayments of the mortgages included in the underlying mortgage pool will usually result in the return of the greatest part of principal invested well before the maturity of the mortgages in the pool. The volume of such prepayments of principal in a given pool will influence the actual yield of mortgage-related securities, and principal returned to the Balanced Fund as a holder of such securities may be reinvested in instruments whose yield may be higher or lower than that which might have been obtained had such prepayments not occurred. When interest rates are decreasing, such prepayments usually increase, thereby reducing the average life of a pool. As a result, the reinvestment of such principal prepayments will be at a lower rate than that on the original mortgage-related security, and thus the Balanced Fund's yield will be lower. In addition, when interest rates are decreasing, the value of mortgage-related securities may not increase as much as the value of other debt securities. In quoting yields for mortgage-related securities, the standard practice is to assume that the securities will have a 12-year life. As previously noted,however, the life of individual pools may differ widely and the actual yield earned on mortgage-related securities may differ significantly from the estimated yield based on the 12-year life assumption. The principal governmental guarantor of mortgage-related securities is the Government National Mortgage Association ('GNMA'). GNMA is a wholly owned U.S. Government corporation within the U.S. Department of Housing and Urban Development. Pass-through securities issued by GNMA are guaranteed by the full faith and credit of the U.S. Government as to the timely payment of principal and interest. The Federal National Mortgage Association ('FNMA') is a government-sponsored corporation owned entirely by private stockholders. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA but are not backed by the full 11 faith and credit of the U.S. Government. The Federal Home Loan Mortgage Corporation ('FHLMC') is a government-sponsored corporation owned entirely by private stockholders. FHLMC issues Participation Certificates ('Pcs') which represent interests in mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal but Pcs are not backed by the full faith and credit of the U.S. Government. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may in addition be the originators of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools created by such non-governmental issuers generally offer a higher rate of interest than government and government-related pools because there are no direct or indirect government guarantees of payments in the former pools. However, timely payment of interest and principal of these pools is supported by various forms of insurance or guarantees, including individual loan and pool insurance. The insurance and guarantees are issued by government entities, private insurers and the mortgage poolers. Such insurance and guarantees and the creditworthiness of the issuers thereof will be considered in determining whether a mortgage-related security meets the Balanced Fund's investment quality standards. Private insurers provide less assurance than government or government-related insurers that they will be able to meet their obligations. The Balanced Fund may buy mortgage-related securities without insurance or guarantees if, through an examination of the financial condition and business history of the pooler, including among other things the pooler's loan experience, profitability, capital adequacy, liquidity, foreign exposure, and management, the Balanced Fund's adviser determines that the pooler is creditworthy. Although the market for such securities is becoming increasingly liquid, securities issued by certain private organizations may not be readily marketable. Corporations that are government owned, government-related or are private mortgage poolers may create mortgage loan pools offering pass-through investments in addition to those described above. The mortgages underlying these securities may be mortgage instruments whose principal or interest payments may vary or whose terms to maturity may differ from customary long-term fixed rate mortgages. As new types of mortgage-related securities are developed and offered to investors, the Balanced Fund's adviser will consider making investments in such new types of securities consistent with the Balanced Fund's investment objectives and policies and with due regard to those quality and credit standards, which, in the adviser's view, are applicable to such investments. WARRANTS. The Balanced Fund may purchase warrants provided that they are attached to securities that may otherwise be purchased by the Fund. ILLIQUID SECURITIES. The Balanced Fund will not invest more than 15% of its net assets in illiquid securities. See 'Investment Objectives and Policies -- Growth & Income Fund -- Illiquid Securities' above, and 'Investment Objectives and Policies -- Illiquid Securities' in the Statement of Additional Information. PORTFOLIO TURNOVER. The Balanced Fund will effect portfolio transactions without regard to holding period, if, in its judgment, such transactions are advisable in light of general market, economic or financial conditions. As a result, the Fund may engage in a substantial number of portfolio transactions. Moreover, due to the reconfiguration of the Balanced Fund's portfolio occasioned by the change in investment advisors in September, 1994, the portfolio turnover rates for both the debt and equity portions of the Balanced Fund are likely to exceed 150% in the current fiscal year. In the absence of these 12 unusual and isolated circumstances, the Balanced Fund anticipates that, under normal conditions, its annual portfolio turnover rate should not exceed 100% for the equity portion and 100% for the fixed income portion. However, it is impossible to predict portfolio turnover rates. The anticipated portfolio turnover rate for the debt and equity portions of the Balanced Fund are greater than that of many other investment companies. For a discussion of the effects of higher portfolio turnover rates, see 'Investment Objectives and Policies -- Growth & Income Fund -- Portfolio Turnover.' TEMPORARY DEFENSIVE MEASURES. The Balanced Fund also reserves the right, as a temporary defensive measure, to purchase eligible, U.S. dollar-denominated money market instruments and securities subject to repurchase agreements. The Fund's adviser will determine when market conditions warrant temporary defensive measures. The investment objective and policies of the Balanced Fund described above may be changed by RBB's Board of Directors without the approval of a majority of the outstanding Shares representing interest in the Fund. Such changes may result in the Fund 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 Balanced Fund will be achieved. INVESTMENT LIMITATIONS The Funds may not change the following investment limitations (with certain exceptions, as noted below) without the affirmative vote of the holders of a majority of a Fund'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.') 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 a Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by a Fund, except that up to 25% of the value of a Fund's total assets may be invested without regard to such limitations. 2. Purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of a Fund to be invested in the obligations of issuers in any industry, provided that there is no limitation with respect to investments in U.S. Government obligations. In addition, the Growth & Income Fund may not borrow money, except from banks or by entering into reverse repurchase agreements for temporary purposes and then in amounts not in excess of 10% of the value of the Fund'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 Fund; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing or reverse repurchase agreement and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Fund's total assets at the time of such borrowing; or purchase portfolio securities while borrowings and reverse repurchase agreements in excess of 5% of the Fund's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Growth & Income Fund's securities by enabling the Growth & Income Fund to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.) Similarly, the Balanced Fund may not borrow money, except from banks or by entering into reverse repurchase agreements for temporary purposes and then in amounts not in excess 13 of 30% of the value of the Fund'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 Fund; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing or reverse repurchase agreement and in amounts not in excess of 125% of the dollar amounts borrowed; or purchase portfolio securities while borrowings and reverse repurchase agreements in excess of 5% of the Fund's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Balanced Fund's securities by enabling the Balanced Fund to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.) MANAGEMENT BOARD OF DIRECTORS. The business and affairs of RBB and the Funds are managed under the direction of RBB's Board of Directors. INVESTMENT ADVISER. Warburg, Pincus Counsellors, Inc. ('WPC'), a wholly owned subsidiary of Warburg, Pincus Counsellors G.P., serves as the investment adviser to the Funds. WPC, organized in 1970, is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowment funds, foundations and other institutions and individuals. WPC currently manages over $9.0 billion in assets, of which approximately $4.0 billion are investment companies. WPC's principal offices are located at 466 Lexington Avenue, New York, New York 10017-3147. As adviser to the Funds, WPC is responsible for overall management of the Funds, and is responsible for all purchases and sales of portfolio securities for the Funds. WPC may, at its own expense, provide promotional incentives to qualified recipients who support the sale of shares of the Funds. Qualified recipients are securities dealers who have sold Fund Shares or others, including banks and other financial institutions, under special arrangements. In some instances, these incentives may be offered only to certain institutions whose representatives provide services in connection with the sale or expected sale of significant amounts of Fund shares. GROWTH & INCOME FUND. Anthony G. Orphanos, a Managing Director of WPC who has been with WPC for the last sixteen years, is Chief Investment Officer and is responsible for the day-to-day management of the Growth & Income Fund's investments. Mr. Orphanos has been the portfolio manager of the Growth & Income Fund since WPC began serving as sub-advisor to the Fund in November 1991. For the services provided and expenses assumed by it, WPC is entitled to receive a fee from RBB, computed daily and payable monthly at an annual rate of .75% of the Growth & Income Fund's average daily net assets. This fee is higher than that paid by most investment companies. BALANCED FUND. Dale C. Christensen, a Managing Director of WPC, has been with WPC since 1989, prior to which he was a Vice President in the International Private Banking division and the domestic pension fund management division at Citicorp, a Fixed Income Portfolio Manager at CIC Asset Management and a Vice President of Investments at First City Trust. Mr. Christensen and Mr. Orphanos are the overall portfolio strategists for the Balanced Fund and are responsible for determining the portion of the Fund to be allocated among the various fixed income and equity sectors. Mr. Christensen also manages the fixed income portion of the Balanced Fund. Mr. Orphanos is responsible for the U.S. Value Sector. Elizabeth B. Dater and Stephen J. Lurito are responsible for the U.S. Small Company Sector. Ms. Dater is a Managing Director of WPC and has been with WPC since 1978. Mr. Lurito is a Managing Director at WPC and has been with WPC since 1987. George U. Wyper and Susan L. Black manage the U.S. Mid-Cap 14 Sector. Mr. Wyper is a Managing Director and joined WPC in August 1994, before which time he was chief investment officer of White River Corporation and president of Hanover Advisors, Inc. (1993-August 1994), chief investment officer of Fund American Enterprises, Inc. (1991-1993) and the fixed income portfolio manager of Firemen's Fund Insurance Company (1987-1990). Ms. Black is a Managing Director of WPC and has worked at WPC since 1985. The International Equity Sector is managed by Richard H. King and Nicholas P.W. Horsley. Mr. King has been a Managing Director of WPC since 1989. Mr. Horsley is an associate portfolio manager with WPC and has been with WPC since 1993, prior to which he was a director, portfolio manager and analyst at Barclays deZoete Wedd in New York City. For the services provided and expenses assumed by it, WPC is entitled to receive a fee from RBB, computed daily and payable monthly at an annual rate of .90% of the Balanced Fund's average daily net assets. This fee is higher than that paid by most investment companies. THE DISTRIBUTOR. Counsellors Securities Inc. (the 'Counsellors Securities'), a wholly owned subsidiary of WPC, serves as the Funds' distributor. No compensation is payable by the Growth & Income Fund to Counsellors Securities for distribution services. Counsellors Securities receives a fee at an annual rate equal to .25% of the Balanced Fund's average daily net assets for distribution services, pursuant to a distribution plan (the '12b-1 Plan') adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act. Amounts paid to Counsellors Securities under the Balanced Fund 12b-1 Plan may be used by Counsellors Securities to cover expenses that are related to, (i) the sale of the No Load Shares of the Balanced Fund, (ii) ongoing servicing and/or maintenance of the accounts of shareholders of the Balanced Fund, and (iii) sub-transfer agency services, subaccounting services or administrative services related to the sale of the No Load Shares of the Balanced Fund, all as set forth in the Balanced Fund 12b-1 Plan. Payments under the 12b-1 Plan are not tied exclusively to the distribution expenses actually incurred by Counsellors Securities and payments may exceed distribution expenses actually incurred. RBB's Board of Directors will evaluate the appropriateness of the 12b-1 Plan on a continuing basis and in doing so will consider all relevant factors, including expenses borne by Counsellors Securities and amounts received under the 12b-1 Plan. CO-ADMINISTRATORS. The Funds employ Counsellors Funds Service, Inc. ('Counsellors Service'), a wholly-owned subsidiary of Counsellors, as a co-administrator. As co-administrator, Counsellors Service provides shareholder liaison services to the Funds including responding to shareholder inquiries and providing information on shareholder accounts. As compensation, the Growth & Income Fund pays to Counsellors Service a fee calculated at an annual rate of .05% of the Fund's average daily net assets for the first $125 million of average daily net assets and .10% of average daily net assets for assets above $125 million; the Balanced Fund pays to Counsellors Service a fee calculated at an annual rate of .10% of average daily net assets. The Funds also employ PFPC Inc. ('PFPC'), an indirect, wholly-owned subsidiary of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates the Funds' net asset values, provides all accounting services for the Funds and assists in related aspects of the Funds' operations. As compensation, the Growth & Income Fund pays to PFPC a fee calculated at an annual rate of .20% of the Fund's first $125 million of average daily net assets, and .15% of average daily net assets over $125 million; the Balanced Fund pays to PFPC a fee calculated at an annual rate of .15% of average daily net assets. PFPC has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809. CUSTODIAN. PNC Bank serves as RBB's custodian. State Street Bank and Trust Company ('State Street') serves as co-custodian for the Funds' foreign securities. 15 TRANSFER AGENT AND SUB-TRANSFER AGENT. PFPC serves as RBB's transfer agent and dividend disbursing agent. State Street acts as shareholder servicing agent, sub-transfer agent and dividend disbursing agent for the Funds. It has delegated to Boston Financial Data Services, Inc. ('BFDS'), a 50% owned subsidiary, responsibility for most shareholder servicing functions. State Street's principal business address is 225 Franklin Street, Boston, Massachusetts 02110. EXPENSES. The expenses of the Funds 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 Fund's investment adviser or Distributor, taxes, interest, legal fees, custodian fees, auditing fees, brokerage fees and commissions, certain of the fees and expenses of registering and qualifying the Funds and 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 class of shares of RBB, the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of RBB, fidelity bond and directors and officers liability insurance premiums, the expense of using independent pricing services and other expenses which are not expressly assumed by the adviser under its investment advisory agreements with respect to the Funds. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios 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 the Funds for the amount, if any, by which the total operating and management expenses of the Funds 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 Funds from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by RBB for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing a Fund's expense ratio and of decreasing yield to investors. For the Funds' fiscal year ended August 31, 1994, the Growth & Income Fund's total expenses were 1.28% of average net assets, and the Balanced Fund's total expenses were 5.46% of average net assets before expense waivers and reimbursements. WPC has agreed to waive expenses and provide reimbursements to limit the Balanced Fund's total expenses to 1.60% per annum of average net assets. However, there can be no assurance that WPC will continue to assume such expenses. FUND TRANSACTIONS. The Funds' adviser may consider a number of factors in determining which brokers to use in purchasing or selling the Funds' securities. These factors, which are more fully discussed in the Statement of Additional Information, include, but are not limited to, research services, the reasonableness of commissions and quality of services and execution. Transactions for the Funds may be effected through Authorized Dealers, subject to the requirements of best execution. The higher rate of turnover of a Fund's securities may involve correspondingly higher transaction costs, which will be borne directly by the Fund. A Fund may 16 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, a wholly owned subsidiary of WPC, with offices at 466 Lexington Avenue, New York, New York, acts as distributor for the Funds. HOW TO PURCHASE SHARES Shares of a Fund may be purchased either by mail, or with special advance instructions, by wire. BY MAIL. If the investor desires to purchase shares by mail, a check or money order made payable to RBB or Warburg Pincus Funds (in U.S. currency) should be sent along with the completed account application to Warburg Pincus Funds through its distributor, Counsellors Securities Inc., at the address set forth above. Checks payable to the investor and endorsed to the order of Warburg Pincus Funds will not be accepted as payment and will be returned to sender. If payment is received by check in proper form on or before 4:00 p.m. (Eastern time) on a day that a Fund calculates its net asset value (a 'business day') the purchase will be made at the Fund's net asset value calculated at the end of that day. If payment is received after 4:00 p.m., the purchase will be effected at the Fund's net asset value determined for the next business day after payment has been received. Checks or money orders that are not in proper form or that are not accompanied or preceded by a complete application will be returned to sender. Shares purchased by check are entitled to receive dividends and distributions beginning on the day after payment has been received. Checks should be made payable to Warburg Pincus Funds for an investment in more than one mutual fund managed by WPC, and should be accompanied by a breakdown of amounts to be invested in the Funds. If a check used for purchase does not clear, the Funds will cancel the purchase and the investor may be liable for losses or fees incurred. For a description of the manner of calculating a Fund's net asset value, see 'Net Asset Value' below. BY WIRE. Investors may also purchase shares in a Fund by wiring funds from their banks. Telephone orders will not be accepted until a completed account application in proper form has been received and an account number has been established. After telephoning (800) 888-6878 for instructions, an investor should then wire federal funds to Counsellors Securities Inc. using the following wire address: State Street Bank and Trust Co. 225 Franklin Street Boston, MA 02101 ABA# 0110 000 28 Attn: Mutual Funds/Custody Dept. [Warburg Pincus Growth & Income or Warburg Pincus Balanced Fund, as applicable] DDA# 9904-649-2 [Shareowner name] [Shareowner account number] If a telephone order is received by the close of regular trading on the New York Stock Exchange (the 'NYSE') (currently 4:00 p.m., Eastern time), and payment by wire is received on the same day in proper form (in accordance with instructions stated above), the shares will be priced according to the net asset value of the Fund on that day and are entitled to dividends and distributions beginning on that day. If payment by wire is received in proper form by the close of the NYSE without a prior telephone order, the purchase will be priced according to the net asset value of the Fund on that day and are entitled to dividends and distributions beginning on that day. However, if a wire received in proper form is not preceded by a telephone order and is received after the close of regular trading on the NYSE, the payment will be held 17 uninvested until the order is effected at the close of business on the next business day. Payment for orders that are not accepted will be returned to the prospective investor after prompt inquiry. If a telephone order is placed and payment by wire is not received on the same day, the Fund will cancel the purchase and the investor may be liable for losses or fees incurred. Shares of a Fund are sold without a sales charge. The minimum initial investment in a Fund is $1,000 and the minimum subsequent investments must be $100, except that subsequent minimum investments can be as low as $50 under the Automatic Monthly Investment Plan described in the next section. For a tax-deferred retirement plan, such as an IRA, the minimum initial and subsequent investment is $500, except that subsequent minimum investments can be as low as $50 under the Automatic Monthly Investment Plan. After an investor has made his initial investment, additional shares may be purchased at any time by mail or by wire in the manner outlined above. Wire payments for initial and subsequent investments should clearly indicate the investor's account number. In the interest of economy and convenience, physical certificates representing shares in a Fund are not normally issued. Investors who purchase shares of a Fund through a program of services offered or administered by a securities dealer or financial institution should read the program materials in conjunction with this Prospectus. Certain features of a Fund, such as the minimum initial or subsequent investment, may be modified in these programs, and administrative charges may be imposed for the services rendered. The Funds reserve the right to vary further the initial and subsequent minimum investment requirements at any time. The Funds understand that some broker-dealers (other than Counsellors Securities), financial institutions, securities dealers and other industry professionals ('Service Agents') may impose certain conditions on their clients that invest in the Funds, which are in addition to or different from those described in this Prospectus, and, to the extent permitted by applicable regulatory authority, may charge their clients direct fees. Certain features of the Funds, such as the minimum initial or subsequent investments, may be modified in these programs, and administrative charges may be imposed for the services rendered. Therefore, a client or customer should contact the organization acting on his behalf concerning the fees (if any) charged in connection with a purchase or redemption of a Fund's shares and should read this Prospectus in light of the terms governing his accounts with Service Agents. Service Agents will be responsible for promptly transmitting client or customer purchase and redemption orders to the Funds in accordance with their agreements with clients or customers. Certain Service Agents may receive compensation from Counsellors or Counsellors Service. See 'Shareholder Servicing.' Certain Service Agents that have entered into agreements with Counsellors Securities may enter confirmed purchase orders on behalf of customers, with payment to follow no later than the Funds' pricing on the following business day. If payment is not received by such time, the Service Agent could be held liable for resulting fees or losses. Each Fund may also be made available through the brokerage firms Waterhouse Securities, Inc. and Jack White & Company, Inc. Each Fund is also available through the Charles Schwab & Company, Inc. Mutual Fund OneSource'tm' Program ('Schwab') and the Fidelity Brokerage Services, Inc. FundsNetwork'tm' Program ('Fidelity'). For distribution and sub-accounting services with respect to shares of a Fund held by each of these firms, Counsellors pays Jack White & Company up to .25%, Waterhouse Securities up to .30% and pays Schwab and Fidelity up to .35% of the annual average value of such accounts. Purchases made through these programs do not require customers to pay a transaction fee. 18 AUTOMATIC MONTHLY INVESTING. Automatic monthly investing allows shareholders to authorize the Funds to debit their bank account monthly ($50 minimum) for the purchase of Fund shares on or about either the tenth or twentieth business day of each month. To establish the automatic monthly investing option, obtain a separate application or complete the 'Automatic Investment Program' section of the account application and include a voided, unsigned check from the bank account to be debited. Only an account maintained at an automated clearing house member may be used. Shareholders using this service must satisfy the initial investment minimum for a Fund prior to or concurrent with the start of any Automatic Investment Program. Please refer to an account application for further information or contact Warburg Pincus Funds at (800) 888-6878 to modify or terminate the program. Investors should allow a period of up to 30 days in order to implement an automated investment program. The failure to provide complete information could result in further delays. RETIREMENT PLANS. For information about investing in the Funds through a tax-deferred retirement plan, such as an Individual Retirement Account ('IRA') or a Simplified Employee Pension IRA ('SEP-IRA'), an investor should telephone Warburg Pincus Funds at (800) 888-6878 or write to Warburg Pincus Funds at the address set forth above. Investors should consult their own tax advisers about the establishment of retirement plans. HOW TO REDEEM AND EXCHANGE SHARES REDEMPTION OF SHARES. An investor of a Fund may redeem (sell) his shares on any day that the Fund's net asset value is calculated (see 'Net Asset Value' below). Shares of a Fund may either be redeemed by mail or by telephone. Investors should realize that in using the telephone redemption and exchange option, you may be giving up a measure of security that you may have if you were to redeem or exchange your shares in writing. If an investor desires to redeem his shares by mail, a written request for redemption should be sent to Warburg Pincus Funds at the address indicated below under 'Separate Transfer Agent Agreement.' An investor should be sure that the redemption request identifies the Fund, the number of shares to be redeemed and the investor's account number. In order to change the bank account or address designated to receive the redemption proceeds, the investor must send a written request (with signature guarantee of all investors listed on the account when such a change is made in conjunction with a redemption request) to Warburg Pincus Funds. Each mail redemption request must be signed by the registered owner(s) or his legal representative(s) exactly as the shares are registered. If an investor has applied for the telephone redemption feature on his account application, he may redeem his shares by calling Warburg Pincus Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m., Eastern time on any business day. An investor making a telephone withdrawal should state (i) the name of the Fund, (ii) the account number of the Fund, (iii) the name of the investor(s) appearing on the Fund's records, (iv) the amount to be withdrawn and (v) the name of the person requesting the redemption. After receipt of the redemption request by mail or by telephone, the redemption proceeds will, at the option of the investor, be paid by check and mailed to the investor of record or be wired to the investor's bank as indicated in the account application previously filled out by the investor. No Warburg Pincus Fund currently imposes a service charge for effecting wire transfers but each such Fund reserves the right to do so in the future. During periods of significant economic or market change, telephone redemptions may be difficult to implement. If an investor is unable to contact Warburg Pincus Funds by telephone, an investor may deliver the redemption request to Warburg Pincus Funds by 19 mail at the address shown below under 'Separate Transfer Agent Agreement.' Although the Funds will redeem shares purchased by check before the check clears, payments of the redemption proceeds will be delayed until such check has cleared, which may take up to 15 days from the purchase date. Investors should consider purchasing shares using a certified bank check or money order if they anticipate an immediate need for a redemption. If a redemption order is received prior to the close of regular trading on the NYSE, the redemption order will be effected at the net asset value per share as determined on that day. If a redemption order is received after the close of regular trading on the NYSE, the redemption order will be effected at the net asset value as next determined. Redemption proceeds will normally be mailed or wired to an investor on the next business day following the date a redemption order is effected. If, however, in the judgment of WPC, immediate payment would adversely affect a Fund, the Funds reserve the right to pay the redemption proceeds within seven days after the redemption order is effected. Furthermore, a Fund may suspend the right of redemption or postpone the date of payment upon redemption (as well as suspend or postpone the recordation of an exchange of shares) for such periods as are permitted under the 1940 Act. The proceeds paid upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. If an investor redeems all the shares in his account, all dividends and distributions declared up to and including the date of redemption are paid along with the proceeds of the redemption. If, due to redemptions, the value of an investor's account drops to less than $500, the Funds reserve the right to redeem the shares in that account at net asset value. Prior to any redemption, a Fund will notify an investor in writing that this account has a value of less than $500. The investor will then have 60 days to make an additional investment before a redemption will be processed by a Fund. SEPARATE TRANSFER AGENT ARRANGEMENT. Shareholders who purchased shares of the Funds through Counsellors Securities or Warburg Pincus Funds should send a written request for additional share purchases or redemptions in proper form directly to: Warburg Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030. Investors who indicated instructions for telephone redemption by wire or check on their original Warburg Pincus Funds application form may telephone Warburg Pincus Funds at 1-800-888-6878. Shareholders who made their purchases of shares of the RBB/Warburg Pincus Growth & Income Fund through any other Authorized Dealer or Brokerage Firm may direct their redemption requests in writing to Warburg Pincus Funds, c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. Shareholders who purchased their shares of these Funds through an Authorized Dealer may also place redemption requests through an Authorized Dealer, but such Authorized Dealer might charge a fee for this service. TELEPHONE TRANSACTIONS. In order to request redemptions by telephone, investors must have completed and returned to Warburg Pincus Funds an account application containing a telephone election. Unless contrary instructions are elected, an investor will be entitled to make exchanges by telephone. Neither a Fund nor its agents will be liable for following instructions communicated by telephone that it reasonably believes to be genuine. Reasonable procedures will be employed on behalf of the Funds to confirm that instructions communicated by telephone are genuine. Such procedures include providing written confirmation of telephone transactions, tape recording telephone instructions and requiring specific personal information prior to acting upon telephone instructions. If these or other reasonable procedures are not 20 followed, the Funds may be liable for any losses due to unauthorized or fraudulent instructions. AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash withdrawal plan under which investors may elect to receive periodic cash payments of at least $1,000 monthly or quarterly. To establish this service, complete the 'Automatic Withdrawal Plan' section of the account application and attach a voided check from the bank account to be credited. For further information regarding the automatic cash withdrawal plan or to modify or terminate the Plan, investors should contact Warburg Pincus Funds at (800) 888-6878. EXCHANGE OF SHARES. An investor may exchange shares of a Fund for shares of the same class of the other Fund or for shares of the same class of other mutual funds advised by WPC at their respective net asset value. However, shareholders may not effect exchanges between No Load Shares and Series 2 Shares. Exchanges may be effected by mail or by telephone in the manner described under 'Redemption of Shares' above. If an exchange request is received by Warburg Pincus Funds prior to 4:00 p.m. (Eastern time), the exchange will be made to the Fund's net asset value determined at the end of that business day. Exchanges will be effected without a sales charge but must satisfy the minimum dollar amount necessary for new purchases. Due to the costs involved in effecting exchanges, the Funds reserve the right to refuse to honor more than three exchange requests by a shareholder in any 30-day period. The exchange privilege may be modified or terminated at any time upon 60 days' notice to shareholders. Currently, exchanges may be made among the Funds with the following other funds: WARBURG PINCUS CASH RESERVE FUND -- a money market fund investing in short-term, high quality money market instruments; WARBURG PINCUS NEW YORK TAX EXEMPT FUND -- a money market fund investing in short-term, high quality municipal obligations designed for New York investors seeking income exempt from federal, New York State and New York City income tax; WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND -- an intermediate-term municipal bond fund designed for New York investors seeking income exempt from federal, New York State and New York City income tax; WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND -- an intermediate-term bond fund investing in obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities; WARBURG PINCUS FIXED INCOME FUND -- a bond fund seeking current income and, secondarily, capital appreciation by investing in a diversified portfolio of fixed-income securities; WARBURG PINCUS SHORT-TERM TAX-ADVANTAGED BOND FUND -- a bond fund seeking maximum income after the effect of federal income taxes as a primary objective and capital appreciation as a secondary objective through investments in taxable and tax-exempt debt instruments; WARBURG PINCUS GLOBAL FIXED INCOME FUND -- a bond fund investing in a portfolio consisting of investment grade fixed income securities of governmental and corporate issuers denominated in various currencies, including U.S. dollars; WARBURG PINCUS CAPITAL APPRECIATION FUND -- an equity fund seeking long-term capital appreciation by investing in equity securities of financially strong domestic companies; 21 WARBURG PINCUS EMERGING GROWTH FUND -- an equity fund seeking maximum capital appreciation by investing in emerging growth companies; WARBURG PINCUS INTERNATIONAL EQUITY FUND -- an international equity fund seeking long-term capital appreciation. WARBURG PINCUS JAPAN OTC FUND -- an equity fund seeking long-term capital appreciation by investing in a portfolio of securities traded in the Japanese over-the-counter market. The exchange privilege is available to shareholders residing in any state in which the Funds' shares being acquired may legally be sold. When an investor effects an exchange of shares, the exchange is treated for federal income tax purposes as a redemption. Therefore, the investor may realize a taxable gain or loss in connection with the exchange. Investors wishing to exchange shares of the Funds for shares in another Warburg Pincus Fund should review the prospectus of the other fund prior to making an exchange. For further information regarding the exchange privilege or to obtain a current prospectus for another Warburg Pincus Fund, an investor should contact Warburg Pincus Funds at (800) 257-5614. NET ASSET VALUE The net asset value per class of a Fund is calculated by adding the relevant class' pro rata share of the value of the Fund's securities, cash and other assets, deducting the relevant class' pro rata share of the actual and accrued liabilities and the liabilities specifically allocated to the relevant class, and dividing by the total number of Shares of the relevant class outstanding. The net asset value per class of the Fund is calculated as of 4:00 p.m. Eastern Time on each Business Day. Valuation of securities held by the Funds is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB's Board of Directors. The amortized cost method of valuation may also be used with respect to debt obligations with sixty days or less remaining to maturity. With the approval of the Board of Directors, a Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information. DIVIDENDS AND DISTRIBUTIONS The Funds will distribute substantially all of the net investment income and net realized capital gains, if any, of the Funds to the Funds' shareholders. All distributions are reinvested in the form of additional full and fractional Shares unless a shareholder elects otherwise. The Funds will declare and pay dividends, if any, from net investment income quarterly, near the end of each quarter. 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 Funds and their shareholders and is not intended as a substitute for careful tax planning. Accordingly, investors in 22 the Funds should consult their tax advisers with specific reference to their own tax situation. The Funds will elect to be taxed as regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the Funds qualify for this tax treatment, the Funds will be relieved of Federal income tax on amounts distributed to shareholders, but shareholders, unless otherwise exempt, will pay income or capital gains taxes on amounts so distributed (except distributions that constitute 'exempt interest dividends' or that are treated as a return of capital) regardless of whether such distributions are paid in cash or reinvested in additional Shares. Distributions out of the 'net capital gain' (the excess of net long-term capital gain over net short-term capital loss), if any, of the Funds 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 Funds anticipate that dividends paid by the Funds will be eligible for the 70% dividends received deduction allowed to certain corporations to the extent of the gross amount of qualified dividends received, respectively, by the Funds for the year. However, corporate shareholders will have to take into account the entire amount of any dividend received in determining their adjusted current earnings adjustment for alternative minimum tax purposes. The dividends received deduction is not available for capital gain dividends. The Funds will send written notices to shareholders annually regarding the tax status of distributions made by the Funds. Dividends declared in October, November or December of any year payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders on December 31, provided such dividends are paid during January of the following year. The Funds intend to make sufficient actual or deemed distributions prior to the end of each calendar year to avoid liability for Federal excise tax. Investors should be careful to consider the tax implications of buying Shares just prior to a distribution. The price of shares purchased at that time will reflect the amount of the forthcoming distribution. Those investors purchasing just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received. Shareholders who exchange Shares representing interests in the Funds for Shares representing interests in another Fund will generally recognize capital gain or loss for Federal income tax purposes. Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. Federal income tax treatment. An investment in any RBB portfolio is not intended to constitute a balanced investment program. Future legislative or administrative changes or court decisions may materially affect the tax consequences of investing in the Funds. Shareholders are also urged to consult their tax advisers concerning the application of state and local income taxes to investments in the Funds which may differ from the Federal income tax consequences described above. 23 SHAREHOLDER SERVICING Each Fund is authorized to offer a separate class of shares of the Fund (the 'Series 2 Shares') exclusively to financial institutions and retirement plans ('Institutions'), whose customers (or participants in the case of retirement plans) ('Customers') are beneficial owners of Series 2 Shares. Either those institutions or companies providing certain services to them (together, 'Service Organizations') will enter into service agreements ('Agreements') related to the sale of the Series 2 Shares with Counsellors Securities pursuant to a Distribution Plan as described below. Pursuant to the terms of the Agreements, the Service Organization agrees to perform certain distribution, shareholder servicing, administrative and accounting services for its Customers. Distribution services would be marketing or other services in connection with the promotion and sale of Series 2 Shares. Shareholder services that may be provided include responding to customer inquiries, providing information on customer investments and providing other shareholder liaison services. Administrative and accounting services related to the sale of the Series 2 Shares may include (i) aggregating and processing purchase and redemption requests from Customers and placing net purchase and redemption orders with a Fund's transfer agent, (ii) processing dividend payments from a Fund on behalf of Customers and (iii) providing sub-accounting relating to the sale of a Fund's shares beneficially owned by Customers or the information to RBB necessary for sub-accounting. The Board of Directors of RBB has approved a Distribution Plan (the 'Plan') pursuant to Rule 12b-1 under the 1940 Act under which Counsellors Securities may pay each participating Service Organization a negotiated fee on an annual basis not to exceed .75%, in each case of the value of the average daily net assets of its Customers invested in the Series 2 Shares. However, under the current Distribution Agreement between Counsellors Securities and RBB on behalf of the Funds, such fee shall not exceed .50% of average daily net assets of Customers. Each Fund may, in the future, enter into additional Agreements with Service Organizations. The Board of Directors of RBB will evaluate the appropriateness of the Plan on a continuing basis. Except as described above, the Series 2 Shares have distribution arrangements, services, and annual expenses which are substantially similar to the No Load Shares. Series 2 Shares may be exchanged for other Series 2 Shares of the Warburg Pincus Adviser Funds. No Load Shares may be sold to or through institutions that will not be paid a distribution fee by the Funds pursuant to Rule 12b-1 under the 1940 Act for services to their clients or customers who are beneficial owners of No Load Shares. These institutions may be paid a fee by the Funds for transfer agency, administrative or other services provided to their customers that invest in a Fund's No Load Shares. These services include maintaining account records, processing orders to purchase, redeem and exchange No Load Shares and responding to certain customer inquiries. WPC and Counsellors Securities may, from time to time, at their own expense, also provide compensation to these institutions. To the extent they do so, such compensation does not represent an additional expense to the Funds or their shareholders, since it will be paid from the assets of WPC, Counsellors Securities or their affiliates. Counsellors Securities receives a fee equal to an annual rate of .25% of the average daily net assets of the Balanced Fund's No Load Shares for distribution services. See 'Management -- Distributor.' DESCRIPTION OF SHARES RBB 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 and Income), 100 million shares are classified as Class B Common Stock, 100 million shares are 24 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 (International Fixed Income), 50 million shares are classified as Class AA Common Stock (Municipal Bond), 50 million shares are classified as Class BB Common Stock (Balanced), 50 million shares are classified as Class CC Common Stock (Short Duration), 100 million shares are classified as Class DD Common Stock (Growth & Income Series 2), 100 million shares are classified as Class EE Common Stock (Balanced Series 2), 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 25 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 A and C Common Stock constitute the RBB Classes offered by this Prospectus. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time. The classes of Common Stock have been grouped into 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, the Laffer/Canto Equity, 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 RBB Family represents interests in two non-money market portfolios as well as the Money Market and Municipal Money Market Portfolios. The Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents interests in the Money Market, Municipal Money Market, Government Obligations Money Market and New York Municipal Money Market Funds; the Bradford Family represents interests in the Municipal Money Market and Government Obligations Money Market Funds; the BEA Family represents interests in nine non-money market portfolios; the Laffer/Canto Equity represents interests in the 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. THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE WARBURG PINCUS GROWTH & INCOME CLASSES AND THE WARBURG PINCUS BALANCED CLASSES AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE WARBURG PINCUS GROWTH & INCOME AND BALANCED 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 Fund. Shares of RBB do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Shares will be fully paid and non-assessable. RBB currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, RBB will assist in shareholder communication in such matters. Shareholders of all investment portfolios of RBB (including the Funds) 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 26 'Additional Information Concerning Fund Shares' for examples when the 1940 Act requires voting by investment portfolio or by class.) Shareholders of RBB 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 RBB 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 Home Insurance Company owned more than 25% of the outstanding shares of the RBB Family Classes representing interests in the Government Securities Portfolio; Seymour Fein owned more than 25% of the outstanding shares of the RBB Family Class representing an interest in the Municipal Money Market; Boston Financial Data Services owned more than 25% of the outstanding shares of Warburg Pincus Class representing interests in the Growth & Income Fund; Planco Inc. Profit Sharing Plan Trust owned more than 25% of the outstanding shares of Warburg Pincus Class representing interests in the Balanced Fund; E. M. Warburg Pincus & Co., Inc. owned more than 25% of the outstanding shares of Warburg Pincus representing interests in the Balanced Fund; the Jewish Family and Children's Agency of Philadelphia Capital Campaign owned more than 25% of the outstanding shares of the Cash Preservation Class representing an interest in the Money Market Portfolio; the Crowe Trust owned more than 25% of the outstanding shares of the Cash Preservation Class representing an interest in the Municipal Money Market Portfolio; Wasner & Co for account of Paine Webber Managed Assets -- Sundry Holding owned more than 25% of the outstanding shares of the Sansom Street Family Class representing an interest in the Money Market Portfolio; the State of Oregon, Treasury Department, owned more than 25% of the outstanding Shares of the BEA Family Class representing an interest in the BEA Strategic Fixed Income Portfolio; the Bank of New York owned more than 25% of the outstanding Shares of the BEA Family Class representing an interest in the BEA U.S. Core Equity Portfolio; the New England UFCW and Employers' Pension Fund Board of Trustees 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; Bankers Trust on behalf of the Pechiney Corporation Pension Master Trust 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; the Bank of New York as trustee for the 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; and John Hancock Clearing Corporation Special Custody Account for the Exclusive Benefit of Customers owned more than 25% of the outstanding shares of the Laffer/Canto Equity Class representing an interest in the Laffer/Canto Equity Portfolio. OTHER INFORMATION REPORTS AND INQUIRIES. Shareholders will receive unaudited semi-annual reports describing RBB's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries can be made by contacting Warburg Pincus Funds at (800) 888-6878, or by writing to Warburg Pincus Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030. SHARE CERTIFICATES. RBB will issue share certificates for the Classes only upon the written request of a shareholder sent to PFPC. Share certificates are not available for shares purchased through Warburg Pincus. PERFORMANCE INFORMATION. From time to time, the Funds may advertise their performance, including comparisons to other mutual funds 27 with similar investment objectives and to stock or other relevant indices. All such advertisements will show the average annual total return, net of a Fund's maximum sales charge, over one, five and ten year periods or, if such periods have not yet elapsed, shorter periods corresponding to the life of the Fund. Such total return quotations will be computed by finding the compounded average annual total return for each time period that would equate the assumed initial investment of $1,000 to the ending redeemable value, according to a required standardized calculation. The standard calculation is required by the SEC to provide consistency and comparability in investment company advertising. The Funds may also from time to time include in such advertising an aggregate total return figure or a total return figure that is not calculated according to the standardized formula in order to compare more accurately a Fund's performance with other measures of investment return. For example, a 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. 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. From time to time, the Funds may also advertise their '30-day yield.' The yield refers to the income generated by an investment in a Fund over the 30-day period identified in the advertisement, and is computed by dividing the net investment income per share during the period by the maximum public offering price per share of the last day of the period. This income is 'annualized' by assuming that the amount of income is generated each month over a one-year period and is compounded semi-annually. The annualized income is then shown as a percentage of the net asset value. The yield on Shares of the Funds will fluctuate and are not necessarily representative of future results. Shareholders should remember that yield is generally a function of portfolio quality and maturity, type of instrument, operating expenses and market conditions. Any fees charged by broker/dealers directly to their customers in connection with investments in the Funds are not reflected in the yields on a Fund's Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. In reports or other communications to investors or in advertising, a Fund may also describe the general biography or work experience of the portfolio managers of the Fund and may include quotations attributable to the portfolio managers describing approaches taken in managing a Fund's investments, research methodology underlying stock selection or a Fund's investment objective. A Fund may also discuss the continuum of risk and return relating to different investments and the potential impact of foreign stocks on a portfolio otherwise composed of domestic securities. In addition, a Fund may from time to time compare its expense ratio to that of investment companies with similar objectives and policies, based on data generated by Lipper Analytical Services, Inc. or similar investment services that monitor mutual funds. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. ------------------------------------ 28 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 predominantly speculative with B respect to capacity to pay interest and repay principal in accordance with the terms of the CCC obligation. 'BB' indicates the lowest degree of speculation and 'CC' the highest degree of CC 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. (+) OR (-) The ratings from 'AAA' or 'CCC' may be modified by the addition of a 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.
A-1 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.
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-2 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. Baa Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly scecured. 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 A-3 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. 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. A-4 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 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. A-5 TABLE OF CONTENTS FINANCIAL HIGHLIGHTS ..................................................... 4 INVESTMENT OBJECTIVES AND POLICIES ....................................... 6 INVESTMENT LIMITATIONS .................................................. 13 MANAGEMENT .............................................................. 14 DISTRIBUTION OF SHARES .................................................. 17 HOW TO PURCHASE SHARES .................................................. 17 HOW TO REDEEM AND EXCHANGE SHARES . ..................................... 19 NET ASSET VALUE ......................................................... 22 DIVIDENDS AND DISTRIBUTIONS ............................................. 22 TAXES ................................................................... 22 SHAREHOLDER SERVICING ................................................... 24 DESCRIPTION OF SHARES ................................................... 24 OTHER INFORMATION ....................................................... 27 WPGBF-1-1294 [LOGO] [ ] WARBURG PINCUS GROWTH & INCOME FUND [ ] WARBURG PINCUS BALANCED FUND PROSPECTUS DECEMBER 28, 1994 AS REVISED MAY 10, 1995 [Logo] PROSPECTUS DECEMBER 28, 1994 AS REVISED MAY 15, 1995 [ ] WARBURG PINCUS GROWTH & INCOME FUND WARBURG PINCUS GROWTH & INCOME FUND PROSPECTUS December 28, 1994 as revised May 15, 1995 Warburg Pincus Advisor Funds are a family of open-end mutual funds that are offered to financial institutions investing on behalf of their customers and to retirement plans that elect to make one or more Advisor Funds an investment option for participants in the plans. One Advisor Fund is described in this Prospectus. The WARBURG PINCUS GROWTH & INCOME FUND (the 'Growth & Income Fund' or 'Fund') consists of multiple classes of common stock of The RBB Fund, Inc. ('RBB'). RBB is an open-end management investment company incorporated under the laws of the State of Maryland on February 29, 1988 and currently operating or proposing to operate nineteen separate investment portfolios. The Series 2 shares ('Shares') offered by this Prospectus represent interests in the Fund. The Growth & Income Fund's investment objective is to provide long-term growth of capital and income and a reasonable current return. The Growth & Income Fund seeks to achieve its objectives by investing primarily in equity securities, and in various income producing securities including, but not limited to dividend paying equity securities, fixed income securities and money market instruments. The Growth & Income Fund may also purchase without limitation dollar-denominated American Depository Receipts ('ADRs'). ADRs are issued by domestic banks and evidence ownership of underlying foreign securities. The Fund currently offers two classes of shares, one of which, the Series 2 Shares, is offered pursuant to this Prospectus. The Series 2 Shares of the Fund, as well as Series 2 Shares of certain other Warburg Pincus-advised funds, are sold under the name 'Warburg Pincus Advisor Funds.' The Series 2 Shares may not be purchased by individuals directly, but other financial institutions and retirement plans ('Institutions') may purchase Series 2 Shares for individuals. The Series 2 Shares impose a 12b-1 fee of up to .50% per annum, which is the economic equivalent of a sales charge. Common Shares are available for purchase by individuals directly and are offered by a separate prospectus. There is no minimum amount of initial or subsequent purchases of shares imposed on Institutions. See 'How to Purchase Shares.' NO MINIMUM INVESTMENT. SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. 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 28, 1994, as revised May 15, 1995 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 RBB's distributor by calling (800) 888-6878. - -------------------------------------------------------------------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- FEE TABLE SHAREHOLDER TRANSACTION EXPENSES* ANNUAL FUND OPERATING EXPENSES
Management fees**.............................................................................. .75% 12b-1 fees**................................................................................... .50 Other Expenses................................................................................. .53 ----- Total Fund Operating Expenses.................................................................. 1.78% =====
EXAMPLE An investor would pay the following expenses on a $1,000 investment in the Fund, assuming (1) a 5% annual return, and (2) redemption at the end of each time period:
ONE THREE FIVE TEN YEAR YEARS YEARS YEARS ---- ----- ---- ----- Growth & Income Fund Series 2 Shares.......................................... 18 56 96 209 ---- ----- ---- -----
- ------------ * No sales charge is imposed upon the purchase of Shares of the Fund. Thus, the full amount of the purchase price of Fund shares will be invested at the time of purchase or upon any other exchange of Shares of other Warburg Pincus Advisor Funds without imposition of any sales charge. ** Management fees and 12b-1 fees are 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. The Example in the Fee Table assumes that all dividends and distributions are reinvested and that the amounts listed under 'Annual Fund Operating Expenses' remain the same as the years shown. Certain broker-dealers and financial institutions also may charge their clients fees in connection with investments in the Fund's shares, which fees are not reflected in the table. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term Shareholders of the Shares of the Growth & Income Fund may pay more than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities Dealers, Inc. (the 'NASD'). 2 The Fee Table is designed to assist an investor in understanding the various costs and expenses that an investor in the Shares 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 expense figures for Series 2 Class of the Growth & Income Fund are based upon fees and costs of the Common Shares Class of the Fund as of August 31, 1994. OFFERING PRICE Series 2 Shares which represent interests in the Fund will be offered to the public at the next determined net asset value after receipt of an order by the Fund. See 'How to Purchase Shares.' EXCHANGES An institution may exchange Series 2 Shares of the Fund for Series 2 Shares of other Warburg Pincus Advisor Funds at their net asset values next determined after receipt by the relevant Fund of an exchange request. No exchange fee is currently charged for exchanges. See 'How to Redeem and Exchange Shares.' REDEMPTION PRICE Series 2 Shares may be redeemed at any time at their net asset value next determined after receipt by the Fund of a redemption request. See 'How to Redeem and Exchange Shares -- Redemption of Shares.' RISK FACTORS An investment in the Growth & Income Fund 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 the Fund will achieve its objective. The Fund, to the extent set forth under 'Investment Objectives and Policies,' may engage in the following investment practices: the purchase of mortgage-related securities, the lending of portfolio securities and engaging in options and futures transactions, and engaging in secured borrowings. All of these transactions involve certain special risks, as set forth under 'Investment Objectives and Policies.' SHAREHOLDER INQUIRIES Any questions or communications regarding an institution's account should be directed to Warburg Pincus Advisor Funds at (800) 888-6878, and written communications should be directed to P.O. Box 9030 Boston, Massachusetts 02205-9030. Series 2 Shares of the Fund had not yet been offered to the public as of August 31, 1994 and, accordingly, no financial information is provided with respect to such shares. Financial information with respect to Common Shares of the Fund is included in the Common Shares Prospectus and in the Fund's Annual Report dated August 31, 1994, which is available upon request. 3 INVESTMENT OBJECTIVES AND POLICIES GROWTH & INCOME FUND The Growth & Income Fund's investment objectives are to provide long-term growth of capital and income and a reasonable current return. The Growth & Income Fund seeks to achieve its objectives by investing primarily in equity securities. Equity securities include common stocks, securities which are convertible into common stocks and readily marketable securities, such as rights and warrants, which derive their value from common stock. The Growth & Income Fund seeks to achieve its income objective by investing in various income producing securities including, but not limited to, dividend paying equity securities and fixed income securities. The portion of the Fund invested from time to time in equity securities, fixed income securities and money market securities will vary depending on market conditions and there may be extended periods when the Fund is primarily invested in one of them. In addition, the amount of income generated from the Fund will fluctuate depending, among other things, on the composition of the Fund's holdings and the level of interest and dividend income paid on those holdings. Investments in common stock in general are subject to market risks that may cause their prices to fluctuate over time. Therefore, an investment in the Growth & Income Fund may be more suitable for long-term investors who can bear the risk of these fluctuations. The Growth & Income Fund may also purchase without limitation dollar-denominated American Depository Receipts ('ADRs'). ADRs are issued by domestic banks and evidence ownership of underlying foreign securities. The policy of the Growth & Income Fund is to invest substantially all of its assets in equity securities under normal market conditions. The Growth & Income Fund may invest in debt securities rated no less than investment grade by either Standard & Poor's or Moody's. Bonds in the lowest investment grade debt category (e.g., bonds rated BBB by Standard & Poor's Corporation or Baa by Moody's Investors Services, Inc.) have speculative characteristics, and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher grade bonds. The Growth & Income Fund may retain a bond which was rated as investment grade at the time of purchase but whose rating is subsequently downgraded below investment grade. The Growth & Income Fund may invest up to 10% of its total assets in securities of foreign issuers. Investing in securities of foreign issuers involves considerations not typically associated with investing in securities of companies organized and operated in the U.S. Foreign securities generally are denominated and pay dividends or interest in foreign currencies. The Growth & Income Fund may hold from time to time various foreign currencies pending their investment in foreign securities or their conversion into U.S. dollars. The value of the assets of the Growth & Income Fund as measured in U.S. dollars may therefore be affected favorably or unfavorably by changes in exchange rates. There may be less publicly available information concerning foreign issuers than is available with respect to U.S. issuers. Foreign securities may not be registered with the U.S. Securities and Exchange Commission, and generally, foreign companies are not subject to uniform accounting, auditing and financial reporting requirements comparable to those applicable to U.S. issuers. See 'Investment Objectives and Policies -- Foreign Securities' in the Statement of Additional Information. ILLIQUID SECURITIES. The Growth & Income Fund 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 4 readily available market are not deemed illiquid for purposes of this limitation. The Growth & Income Fund's 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. OPTIONS AND FUTURES CONTRACTS. The Growth & Income Fund may write covered call options, buy put options, buy call options and write put options, without limitation except as noted in this paragraph. Such options may relate to particular securities or to various indexes and may or may not be listed on a national securities exchange and issued by the Options Clearing Corporation. The Growth & Income Fund may also invest in futures contracts and options on futures contracts (index futures contracts or interest rate futures contracts, as applicable) for hedging purposes or for other purposes so long as aggregate initial margins and premiums required for non-hedging positions do not exceed 5% of its net assets, after taking into account any unrealized profits and losses on any such contracts it has entered into. However, the Growth & Income Fund may not write put options or purchase or sell futures contracts or options on futures contracts to hedge more than its total assets unless immediately after any such transaction the aggregate amount of premiums paid for put options and the amount of margin deposits on its existing futures positions do not exceed 5% of its total assets. Options trading is a highly specialized activity which entails greater than ordinary investment risks. A call option for a particular security gives the purchaser of the option the right to buy, and a writer the obligation to sell, the underlying security at the stated exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium paid to the writer is in consideration for undertaking the obligations under the option contract. A put option for a particular security gives the purchaser the right to sell the underlying security at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price of the security. In contrast to an option on a particular security, an option on an index provides the holder with the right to make or receive a cash settlement upon exercise of the option. The amount of this settlement will be equal to the difference between the closing price of the index at the time of exercise and the exercise price of the option expressed in dollars, times a specified multiple. The Growth & Income Fund will engage in unlisted over-the-counter options only with broker/dealers deemed creditworthy by its investment adviser. Closing transactions in certain options are usually effected directly with the same broker/dealer that effected the original option transaction. The Growth & Income Fund bears the risk that the broker/dealer will fail to meet its obligations. There is no assurance that the Growth & Income Fund will be able to close an unlisted option position. Furthermore, unlisted options are not subject to the protections afforded purchasers of listed options by the Options Clearing Corporation, which performs the obligations of its members who fail to do so in connection with the purchase or sale of options. To enter into a futures contract, the Growth & Income Fund must make a deposit of an initial margin with its custodian in a segregated account in the name of its futures broker. Subsequent payments to or from the broker, called variation margin, will be made on a daily basis as the price of the underlying security or index fluctuates, making the long and short positions in the futures contracts more or less valuable. The risks related to the use of options and futures contracts include: (i) the correlation between movements in the market price of a portfolio's investments (held or intended for purchase) being hedged and in the price of the futures contract or option may be imperfect; (ii) possible lack of a liquid' secondary market for closing out options or futures positions; (iii) the 5 need for additional portfolio management skills and techniques; and (iv) losses due to unanticipated market movements. Successful use of options and futures by the Growth & Income Fund is subject to the Adviser's ability to correctly predict movements in the direction of the market. For example, if the Growth & Income Fund uses future contracts as a hedge against the possibility of a decline in the market adversely affecting securities held by it and securities prices increase instead, the Growth & Income Fund will lose part or all of the benefit of the increased value of its securities which it has hedged because it will have approximately equal offsetting losses in its futures positions. The risk of loss in trading futures contracts in some strategies can be substantial, due both to the low margin deposits required, and the extremely high degree of leverage involved in future pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss or gain to the investor. Thus, a purchase or sale of a futures contract may result in losses or gains in excess of the amount invested in the contract. For a further discussion see 'Investment Policies' in the Statement of Additional Information. PORTFOLIO TURNOVER. The Growth & Income Fund will effect portfolio transactions without regard to holding period, if, in its judgment, such transactions are advisable in light of general market, economic or financial conditions. As a result, the Fund may engage in a substantial number of portfolio transactions which could cause the portfolio turnover rate to exceed 100%, although under normal conditions the Growth & Income Fund does not anticipate that its annual portfolio turnover rate will exceed 100%. However, it is impossible to predict portfolio turnover rates. The portfolio turnover rate is calculated by dividing the lesser of the Fund's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the Fund during the year. The anticipated portfolio turnover rate for the Growth & Income Fund is greater than that of many other investment companies. A higher than normal portfolio turnover rate may affect the degree to which the Fund's net asset value fluctuates. Higher portfolio turnover rates are likely to result in comparatively greater brokerage commissions. In addition, short-term gains realized from portfolio transactions are taxable to shareholders as ordinary income. The amount of portfolio activity will not be a limiting factor when making portfolio decisions. See Statement of Additional Information 'Fund Transactions' and 'Taxes.' TEMPORARY DEFENSIVE MEASURES. The Growth & Income Fund reserves the right to hold, as a temporary defensive measure, cash and eligible U.S. dollar-denominated money market instruments, as well as securities subject to repurchase agreements. The Growth & Income Fund's adviser will determine when market conditions warrant temporary defensive measures. The Growth & Income Fund's investment objectives and the policies described above may be changed by RBB's Board of Directors without the affirmative vote of the holders of a majority of the outstanding Shares representing interests in The Growth & Income Fund. Such changes may result in the Growth & Income Fund having investment objectives which differ from those an investor may have considered at the time of investment. There is no assurance that the Growth & Income Fund's investment objective will be achieved. INVESTMENT LIMITATIONS The Fund may not change the following investment limitations (with certain exceptions, as noted below) without the affirmative vote of the holders of a majority of the Fund's outstanding Shares. (A complete list of the investment limitations that cannot be changed without such 6 a vote of the shareholders is contained in the Statement of Additional Information under 'Investment Objectives and Policies.') 1. Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the value of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's total assets may be invested without regard to such limitations. 2. Purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Fund to be invested in the obligations of issuers in any industry, provided that there is no limitation with respect to investments in U.S. Government obligations. In addition, the Growth & Income Fund may not borrow money, except from banks or by entering into reverse repurchase agreements for temporary purposes and then in amounts not in excess of 10% of the value of the Fund'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 Fund; or mortgage, pledge or hypothecate any of its assets except in connection with any such borrowing or reverse repurchase agreement and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Fund's total assets at the time of such borrowing; or purchase portfolio securities while borrowings and reverse repurchase agreements in excess of 5% of the Fund's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Growth & Income Fund's securities by enabling the Growth & Income Fund to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient.) MANAGEMENT BOARD OF DIRECTORS. The business and affairs of RBB and the Fund are managed under the direction of RBB's Board of Directors. INVESTMENT ADVISER. Warburg, Pincus Counsellors, Inc. ('WPC') serves as the investment adviser to the Fund. WPC, organized in 1970, is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowment funds, foundations and other institutions and individuals. WPC currently manages over $9.0 billion in assets, of which approximately $4.0 billion are investment companies. WPC is a wholly owned subsidiary of Warburg Pincus Counsellors G.P., which has no business other than being a holding company of WPC and its subsidiaries. E.M. Warburg, Pincus & Co., Inc. controls WPC through its ownership of voting preferred stock of WPC. WPC's principal offices are located at 466 Lexington Avenue, New York, New York 10017-3147. As adviser to the Fund, WPC is responsible for overall management of the Fund, and is responsible for all purchases and sales of portfolio securities for the Fund. WPC may, at its own expense, provide promotional incentives to qualified recipients who support the sale of Series 2 Shares of the Fund. Qualified recipients are securities dealers who have sold Series 2 Shares or others, including banks and other financial institutions, under special arrangements. In some instances, these incentives may be offered only to certain institutions whose representatives provide services in connection with the sale or expected sale of significant amounts of Series 2 Shares. Anthony G. Orphanos, a Managing Director of WPC who has been with WPC for the last sixteen years, is Chief Investment Officer and is responsible for the day-to-day management of the Growth & Income Fund's investments. Mr. Orphanos has been the portfolio manager of the Growth & Income Fund since WPC began 7 serving as sub-advisor to the Fund in November 1991. Linda Diaz, CFA, Assistant Vice President, is a research analyst and assistant portfolio manager for the Warburg Pincus Growth & Income Fund. Ms. Diaz has been with WPC since 1995 and has 10 years of investment experience. Prior to joining WPC, Ms. Diaz was an Assistant Vice President and portfolio manager in the Asset Management Division for Kidder Peabody & Co. She received her B.S. degree from The Wharton School, University of Pennsylvania. For the services provided and expenses assumed by it, WPC is entitled to receive a fee from RBB, computed daily and payable monthly at an annual rate of .75% of the Growth & Income Fund's average daily net assets. This fee is higher than that paid by most investment companies. DISTRIBUTOR. Counsellors Securities Inc. ('Counsellors Securities'), a wholly owned subsidiary of WPC, serves as the Fund's distributor. Counsellors Securities is located at 466 Lexington Avenue, New York, New York 10017-3147. Counsellors Securities receives a fee at an annual rate equal to .50% of the Fund's average daily net assets for distribution services, pursuant to a distribution agreement between Counsellor's Securities and RBB in accordance with a distribution plan (the '12b-1 Plan') adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act. Amounts paid to Counsellors Securities under the Fund's 12b-1 Plan may be used by Counsellors Securities to cover expenses that are related to (i) the sale of Shares of the Fund, (ii) ongoing servicing and/or maintenance of the accounts of shareholders of the Fund, and (iii) sub-transfer agency services, subaccounting services or administrative services related to the sale of the Shares of the Fund, all as set forth in the Fund's 12b-1 Plan. Payments under the 12b-1 Plan are not tied exclusively to the distribution expenses actually incurred by Counsellors Securities and payments may exceed distribution expenses actually incurred. Counsellors Securities may delegate some or all of these functions to a Service Organization. See 'Shareholder Servicing.' RBB's Board of Directors will evaluate the appropriateness of the 12b-1 Plan on a continuing basis and in doing so will consider all relevant factors, including expenses borne by Counsellors Securities and amounts received under the 12b-1 Plan. CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc. ('Counsellors Service'), a wholly-owned subsidiary of WPC, as a co-administrator. As co-administrator, Counsellors Service provides shareholder liaison services to the Fund including responding to shareholder inquiries and providing information on shareholder accounts. As compensation, the Growth & Income Fund pays to Counsellors Service a fee calculated at an annual rate of .05% of the Fund's average daily net assets for the first $125 million of average daily net assets and .10% of average daily net assets for assets above $125 million. The Fund also employs PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates the Fund's net asset values, provides all accounting services for the Fund and assists in related aspects of the Funds' operations. As compensation, the Growth & Income Fund pays to PFPC a fee calculated at an annual rate of .20% of the Fund's first $125 million of average daily net assets, and .15% of average daily net assets over $125 million with a minimum annual fee of $75,000. PFPC has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809. CUSTODIAN. PNC Bank, National Association ('PNC Bank') serves as RBB's custodian. PNC is a subsidiary of PNC Bank Corp. Its principal business address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. State Street Bank and Trust Company ('State Street') serves as sub-custodian and as co-custodian for the Fund's foreign securities. State Street's principal 8 business address is 225 Franklin Street, Boston, Massachusetts 02110. TRANSFER AGENT AND SUB-TRANSFER AGENT. PFPC serves as RBB's transfer agent and dividend disbursing agent. State Street acts as shareholder servicing agent, sub-transfer agent and dividend disbursing agent for the Fund. It has delegated to Boston Financial Data Services, Inc. ('BFDS'), a 50% owned subsidiary, responsibility for most shareholder servicing functions. BFDS' principal business address is 2 Heritage Drive, North Quincy, Massachusetts 02171. EXPENSES. The expenses of the Fund are deducted from its total income before dividends are paid. These expenses include, but are not limited to, fees paid to the investment adviser, fees and expenses of officers and directors who are not affiliated with the Fund's investment adviser or distributor, taxes, interest, legal fees, custodian fees, auditing fees, brokerage fees and commissions, certain of the fees and expenses of registering and qualifying the Fund and the Series 2 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 class of shares of RBB, the expense of reports to shareholders, shareholders' meetings and proxy solicitations that are not attributable to a particular class of shares of RBB, fidelity bond and directors and officers liability insurance premiums, the expense of using independent pricing services and other expenses which are not expressly assumed by the adviser under its investment advisory agreement with respect to the Fund. Any general expenses of RBB that are not readily identifiable as belonging to a particular investment portfolio of RBB will be allocated among all investment portfolios of RBB based upon the relative net assets of the investment portfolios 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 the Fund for the amount, if any, by which the total operating and management expenses of the Fund for any fiscal year exceed the most restrictive state blue sky expense limitation in effect from time to time, to the extent required by such limitation. The investment adviser may assume additional expenses of the Fund from time to time. In certain circumstances, it may assume such expenses on the condition that it is reimbursed by RBB for such amounts prior to the end of a fiscal year. In such event, the reimbursement of such amounts will have the effect of increasing the Fund's expense ratio and of decreasing yield to investors. For the Fund's fiscal year ended August 31, 1994, the Growth & Income Fund's total expenses were 1.28% of average net assets. FUND TRANSACTIONS. The Fund's adviser may consider a number of factors in determining which brokers to use in purchasing or selling the Fund's securities. These factors, which are more fully discussed in the Statement of Additional Information, include, but are not limited to, research services, the reasonableness of commissions and quality of services and execution. Transactions for the Fund may be effected through authorized dealers, subject to the requirements of best execution. The higher rate of turnover of the Fund's securities may involve correspondingly higher transaction costs, which will be borne directly by the Fund. The Fund 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. 9 HOW TO PURCHASE SHARES Warburg Pincus Advisor Funds shares are only available for investment by financial institutions on behalf of their customers and through retirement plans that elect to make one or more Advisor Funds an option for participants in the plans. Individuals, including participants in retirement plans, cannot invest directly in Series 2 Shares of the Fund, but may do so only through a participating Institution. The Fund reserves the right to make Series 2 Shares available to other investors in the future. References in this Prospectus to shareholders or investors are generally to Institutions as the record holders of the Series 2 Shares. Each Institution separately determines the rules applicable to its customers investing in the Fund, including minimum initial and subsequent investment requirements and the procedures to be followed to effect purchases, redemptions and exchanges of Series 2 Shares. There is no minimum amount of initial or subsequent purchases of Series 2 Shares imposed on Institutions, although the Fund reserves the right to impose minimums in the future. Orders for the purchase of Fund shares are placed with an Institution by its customers. The Institution is responsible for the prompt transmission of the order to the Fund. Institutions may purchase Series 2 Shares by telephoning Warburg Pincus Advisor Funds and sending payment by wire. After telephoning (800) 888-6878 for instructions, an Institution should then wire federal funds to Counsellors Securities Inc. using the following wire address: State Street Bank and Trust Co. 225 Franklin St. Boston, MA 02101 ABA# 0110 000 28 Attn: Mutual Funds/Custody Dept. Warburg Pincus Advisor Funds -- Series 2 DDA# 9904-649-2 [Shareowner name] [Shareowner account number] Orders by wire will not be accepted until a completed account application has been received in proper form, and an account number has been established. If a telephone order is received by the close of regular trading on the New York Stock Exchange (the 'NYSE') (currently 4:00 p.m., Eastern time) and payment by wire is received on the same day in proper form in accordance with instructions set forth above, the shares will be priced according to the net asset value of the Fund on that day and are entitled to dividends and distributions beginning on that day. If payment by wire is received in proper form by the close of the NYSE without a prior telephone order, the purchase will be priced according to the net asset value of the Fund on that day and is entitled to dividends and distributions beginning on that day. However, if a wire received in proper form is not preceded by a telephone order and is received after the close of regular trading on the NYSE, the payment will be held uninvested until the order is effected at the close of business on the next day that the Fund calculates its net asset value (a 'business day'). Payment for orders that are not accepted will be returned to the institution after prompt inquiry. Certain organizations that have entered into agreements with the Fund or its agent may enter confirmed purchase orders on behalf of customers, with payment to follow no later than the Fund's pricing on the following business day. If payment is not received by such time, the organization could be held liable for resulting losses or fees incurred. After an investor has made his initial investment, additional shares may be purchased at any time in the manner outlined above. Payments for initial and subsequent investments should be preceded by an order placed with the Fund or its agent and should clearly indicate the investor's account number. In the interest of economy and convenience, physical certificates representing shares in the Fund are not normally issued. The Fund understands that some broker-dealers (other than Counsellors Securities), 10 financial institutions, securities dealers and other industry professionals may impose certain conditions on their clients that invest in the Fund, which are in addition to or different than those described in this Prospectus, and, to the extent permitted by applicable regulatory authority, may charge their clients direct fees. Certain features of the Fund may be modified in these programs and administrative charges may be imposed for the services rendered. Therefore, a client or customer should contact the organization acting on his behalf concerning the fees (if any) charged in connection with a purchase or redemption of Fund shares and should read this Prospectus in light of the terms governing his accounts with the organization. HOW TO REDEEM AND EXCHANGE SHARES REDEMPTION OF SHARES. An investor may redeem (sell) shares on any day that the Fund's net asset value is calculated (see 'Net Asset Value' below). Requests for the redemption (or exchange) of Series 2 Shares are placed with an Institution by its customers. The institution is responsible for the prompt transmission of its customers' requests to the Fund or its agent. Institutions may redeem Series 2 Shares by calling Warburg Pincus Advisor Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any day on which the Fund's net asset value is calculated. An investor making a telephone withdrawal should state (i) the name of the Fund, (ii) the account number of the Fund, (iii) the name of the investor appearing on the Fund's records, (iv) the amount to be withdrawn and (v) the name of the person requesting the redemption. After receipt of the redemption request, the redemption proceeds will be wired to the investor's bank as indicated in the account application previously filled out by the investor. The Fund does not currently impose a service charge for effecting wire transfers but the Fund reserves the right to do so in the future. During periods of significant economic or market change, telephone redemptions may be difficult to implement. If an investor is unable to contact Warburg Pincus Advisor Funds by telephone, an investor may deliver the redemption request to Warburg Pincus Advisor Funds by mail at Warburg Pincus Advisor Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030. If a redemption order is received prior to the close of regular trading on the NYSE, the redemption order will be effected at the net asset value per share as determined on that day. If a redemption order is received after the close of regular trading on the NYSE, the redemption order will be effected at the net asset value as next determined. Redemption proceeds will normally be wired to an investor on the next business day following the date a redemption order is effected. If, however, in the judgment of WPC, immediate payment would adversely affect the Fund, the Fund reserves the right to pay the redemption proceeds within seven days after the redemption order is effected. Furthermore, the Fund may suspend the right of redemption or postpone the date of payment upon redemption (as well as suspend or postpone the recordation of an exchange of shares) for such periods as are permitted under the 1940 Act. The proceeds paid upon redemption may be more or less than the amount invested depending upon a share's net asset value at the time of redemption. If an investor redeems all the shares in his account, all dividends and distributions declared up to and including the date of redemption are paid along with the proceeds of the redemption. EXCHANGE OF SHARES. An Institution may exchange Series 2 Shares of the Fund for Series 2 Shares of the other Warburg Pincus Advisor Funds at their respective net asset values. Exchanges may be effected in the manner described under 'Redemption of Shares' above. If an exchange request is received by Warburg Pincus Advisor Funds prior to 4:00 p.m. (Eastern 11 time), the exchange will be made at each fund's net asset value determined on the same business day. Exchanges may be effected without a sales charge. The exchange privilege may be modified or terminated at any time upon 60 days' notice to shareholders. The exchange privilege is available to shareholders residing in any state in which the Series 2 Shares being acquired may legally be sold. When an investor effects an exchange of shares, the exchange is treated for federal income tax purposes as a redemption. Therefore, the investor may realize a taxable gain or loss in connection with the exchange. Investors wishing to exchange Series 2 Shares of the Funds for Series 2 Shares in another Warburg Pincus Advisor Fund should review the prospectus of the other fund prior to making an exchange. For further information regarding the exchange privilege or to obtain a current prospectus for another Warburg Pincus Advisor Fund, an investor should contact Warburg Pincus Advisor Funds at (800) 888-6878. NET ASSET VALUE The net asset value per class of the Fund is calculated as of 4:00 p.m. Eastern Time on each day the NYSE is open. The net asset value of the Series 2 Shares of the Fund is calculated by adding the Series 2 Shares' pro rata share of the value of the Fund's securities, cash and other assets, deducting the Series 2 Shares' pro rata share of the actual and accrued liabilities and the liabilities specifically allocated to the Series 2 Shares, and dividing by the total number of Series 2 Shares outstanding. Valuation of securities held by the Fund is as follows: securities traded on a national securities exchange or on the NASDAQ National Market System are valued at the last reported sale price that day; securities traded on a national securities exchange or on the NASDAQ National Market System for which there were no sales on that day and securities traded on other over-the-counter markets for which market quotations are readily available are valued at the mean of the bid and asked prices; and securities for which market quotations are not readily available are valued at fair market value as determined in good faith by or under the direction of RBB's Board of Directors. The amortized cost method of valuation may also be used with respect to debt obligations with sixty days or less remaining to maturity. With the approval of the Board of Directors, the Fund may use a pricing service, bank or broker-dealer experienced in such matters to value the Fund's securities. A more detailed discussion of net asset value and security valuation is contained in the Statement of Additional Information. DIVIDENDS AND DISTRIBUTIONS The Fund will distribute substantially all of the net investment income and net realized capital gains, if any, of the Fund to the Fund's shareholders. All distributions are reinvested in the form of additional full and fractional Series 2 Shares unless a shareholder elects otherwise. The Fund will declare and pay dividends, if any, from net investment income quarterly, near the end of each quarter. Net realized capital gains (including net short-term capital gains), if any, will be distributed at least annually. TAXES The following discussion is only a brief summary of some of the important tax considerations generally affecting the Fund and its shareholders and is not intended as a substitute for careful tax planning. Accordingly, investors in the Fund should consult their tax advisers with specific reference to their own tax situation. The Fund has elected to be taxed as regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the Fund continues to 12 qualify for this tax treatment, the Fund will be relieved of Federal income tax on amounts distributed to shareholders, but shareholders, unless otherwise exempt, will pay income or capital gains taxes on amounts so distributed (except distributions that 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 Series 2 Shares. Distributions out of the 'net capital gain' (the excess of net long-term capital gain over net short-term capital loss), if any, of the Fund will be taxed to shareholders as long-term capital gain regardless of the length of time a shareholder has held his Series 2 Shares, whether such gain was reflected in the price paid for the Series 2 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 Fund anticipates that dividends paid by the Fund will be eligible for the 70% dividends received deduction allowed to certain corporations to the extent of the gross amount of qualified dividends received by the Fund for the year. However, corporate shareholders will have to take into account the entire amount of any dividend received in determining their adjusted current earnings adjustment for alternative minimum tax purposes. The dividends received deduction is not available for capital gain dividends. The Fund will send written notices to shareholders annually regarding the tax status of distributions made by the Fund. Dividends declared in October, November or December of any year payable to shareholders of record on a specified date in such a month will be deemed to have been received by the shareholders on December 31, provided such dividends are paid during January of the following year. The Fund intends to make sufficient actual or deemed distributions prior to the end of each calendar year to avoid liability for Federal excise tax. Investors should be careful to consider the tax implications of buying Series Shares just prior to a distribution. The price of shares purchased at that time will reflect the amount of the forthcoming distribution. Those investors purchasing just prior to a distribution will nevertheless be taxed on the entire amount of the distribution received. Shareholders who exchange Series 2 Shares representing interests in the Fund for Series 2 Shares representing interests in another fund will generally recognize capital gain or loss for Federal income tax purposes. Shareholders who are nonresident alien individuals, foreign trusts or estates, foreign corporations or foreign partnerships may be subject to different U.S. Federal income tax treatment. An investment in any RBB portfolio is not intended to constitute a balanced investment program. Future legislative or administrative changes or court decisions may materially affect the tax consequences of investing in 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. SHAREHOLDER SERVICING The Fund is authorized to offer Series 2 Shares exclusively to Institutions whose clients or customers (or participants in the case of retirement plans) ('Customers') are beneficial owners of Series 2 Shares. Either those Institutions or companies providing certain services to them 13 (together, 'Service Organizations') will enter into service agreements ('Agreements') related to the sale of the Series 2 Shares with Counsellors Securities pursuant to a Distribution Plan as described below. Pursuant to the terms of an Agreement, the Service Organization agrees to perform certain distribution, shareholder servicing, administrative and accounting services for its Customers. Distribution services would be marketing or other services in connection with the promotion and sale of Series 2 Shares. Shareholder services that may be provided include responding to Customer inquiries, providing information on Customer investments and providing other shareholder liaison services. Administrative and accounting services related to the sale of the Series 2 Shares may include (i) aggregating and processing purchase and redemption requests from Customers and placing net purchase and redemption orders with the Fund's transfer agent, (ii) processing dividend payments from the Fund on behalf of Customers and (iii) providing sub-accounting relating to the sale of Series 2 Shares beneficially owned by Customers or the information to RBB necessary for sub-accounting. The Board of Directors of RBB has approved a Distribution Plan (the 'Plan') pursuant to Rule 12b-1 under the 1940 Act under which Counsellors Securities may pay each participating Service Organization a negotiated fee on an annual basis not to exceed .75% of the value of the average daily net assets of its Customers invested in the Series 2 Shares. However, under the current Distribution Agreement between Counsellors Securities and RBB on behalf of the Fund, this fee shall not exceed .50% of average daily net assets of Customers. The Fund may, in the future, enter into additional Agreements with Service Organizations. The Board of Directors of RBB will evaluate the appropriateness of the Plan on a continuing basis. DESCRIPTION OF SHARES RBB 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 14 Class Y Common Stock (U.S. Core Fixed-Income), 50 million shares are classified as Class Z Common Stock (International Fixed Income), 50 million shares are classified as Class AA Common Stock (Municipal Bond), 50 million shares are classified as Class BB Common Stock (BEA Balanced), 50 million shares are classified as Class CC Common Stock (Short Duration), 100 million shares are classified as Class DD Common Stock (Growth & Income Series 2), 100 million shares are classified as Class EE Common Stock (Balanced Series 2), 700 million shares are classified as Class Alpha 1 Common Stock (Money), 200 million shares are classified as Class Alpha 2 Common Stock (Municipal Money), 500 million shares are classified as Class Alpha 3 Common Stock (U.S. Government Money), 100 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 DD Common Stock constitutes the RBB Class offered by this Prospectus. Under RBB's charter, the Board of Directors has the power to classify or reclassify any unissued shares of Common Stock from time to time. The classes of Common Stock have been grouped into 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, the Laffer/Canto Equity, the Janney Montgomery Scott Family, the Beta Family, the Gamma Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta Family. The RBB Family represents interests in two non-money market portfolios as well as the Money Market and Municipal Money Market Portfolios. The Cash Preservation Family represents interests in the Money Market and Municipal Money Market Funds; the Sansom Street Family represents interests in the Money Market, Municipal Money Market and Government Obligations Money Market Funds; the Bedford Family represents interests in the Money Market, Municipal Money Market, Gov- 15 ernment Obligations Money Market and New York Municipal Money Market Funds; the Bradford Family represents interests in the Municipal Money Market and Government Obligations Money Market Funds; the BEA Family represents interests in nine non-money market portfolios; the Laffer/Canto Equity represents interests in the Laffer/Canto Equity Fund Portfolio; and the Janney Montgomery Scott, 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. THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN RELATE PRIMARILY TO THE WARBURG PINCUS GROWTH & INCOME FUND SERIES 2 CLASS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THE WARBURG PINCUS GROWTH & INCOME FUND SERIES 2 CLASS. COMMON SHARES. The Fund offers a class of common shares (the 'Common Shares') which are offered directly to individual investors pursuant to a separate prospectus. Shares of each class represent equal pro rata interests in the Fund and accrue dividends in the same manner, except for the features of the Series 2 Shares described above under 'Shareholder Servicing.' The net asset value and performance quotations of the Common Shares are calculated in the same manner as the net asset value and performance of the Series 2 Shares (described elsewhere in this Prospectus). The Fund quotes performance of Common Shares separately from Series 2 Shares. The Common Shares of the Fund are offered without any sales load or 12b-1 fees. Because of different fees paid by the Series 2 Shares, the total return and yield on such shares can be expected, at any time, to be different from the total return and yield on Common Shares. Except as described above under 'Shareholder Services,' the Common Shares have distribution arrangements, services and expenses substantially similar to the Series 2 Shares. Common Shares may be exchanged for other Common Shares of the Warburg Pincus Funds. For more information on Common Shares or to obtain a prospectus, call Warburg Pincus Advisor Funds at (800) 888-6878. VOTING RIGHTS. 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 the Fund. Shares of RBB do not have preemptive or conversion rights. When issued for payment as described in this Prospectus, Series 2 Shares will be fully paid and non-assessable. RBB currently does not intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The law under certain circumstances provides shareholders with the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, RBB will assist in shareholder communication in such matters. Shareholders of all investment portfolios of RBB (including 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 or class within a 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 RBB 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 16 not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of Common Stock of RBB may elect all of the directors. RECORD OWNERSHIP. As of March 1, 1995, to RBB's knowledge, no person held of record 25% or more of the outstanding shares of all classes of RBB, although as of such date BFDS was record owner of more than 25% of the Growth & Income Fund; Warburg Pincus was record owner of more than 25% of the Balanced Fund; Eric, Linda and Howard Levine were record owners of more than 25% of the RBB Money Market Portfolio; Seymour Fein was record owner of more than 25% of the RBB Municipal Money Market; the Jewish Family and Children's Agency of Philadelphia Capital Campaign was record owner of more than 25% of the Cash Preservation Class Money Market Portfolio; the Crowe Trust was record owner of more than 25% of the Cash Preservation Municipal Money Market Portfolio; Wasner & Co for account of Paine Webber Managed Assets -- Sundry Holding was record owner of more than 25% of the Sansom Street Money Market Portfolio; Home Insurance Company was record owner of more than 25% of the RBB Government Securities Portfolio; the State of Oregon, Treasury Department, was record owner of more than 25% of the BEA Strategic Fixed Income Portfolio; The John Hancock Clearing Corporation was record owner of more than 25% of the Laffer/Canto Equity Portfolio; the Bank of New York was record owner of more than 25% of the BEA U.S. Core Equity Portfolio; the New England UFCW and Employers' Pension Fund Board of Trustees was record owner of more than 25% of the BEA U.S. Core Fixed Income Portfolio; Bankers Trust on behalf of the Pechiney Corporation Pension Master Trust was record owner of more than 25% of the BEA U.S. Core Fixed Income Portfolio; the Bank of New York as trustee for the Eastern Enterprises Retirement Plan Trust was record owner of more than 25% of the BEA Global Fixed Income Portfolio, and the Southwest Master Trust was record owner of more than 25% of the BEA Global Fixed Income Portfolio. OTHER INFORMATION REPORTS AND INQUIRIES. Shareholders will receive unaudited semi-annual reports describing RBB's investment operations and annual financial statements audited by independent accountants. Shareholder inquiries can be made by contacting Warburg Pincus Advisor Funds at (800) 888-6878, or by writing to Warburg Pincus Advisor Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030. SHARE CERTIFICATES. Share certificates are not available for Shares purchased through Warburg Pincus Advisor Funds. PERFORMANCE INFORMATION. From time to time, the Fund may advertise its performance, including comparisons to other mutual funds with similar investment objectives and to stock or other relevant indices. All such advertisements will show the average annual total return, net of the Fund's maximum sales charge, over one, five and ten year periods or, if such periods have not yet elapsed, shorter periods corresponding to the life of the Fund. Such total return quotations will be computed by finding the compounded average annual total return for each time period that would equate the assumed initial investment of $1,000 to the ending redeemable value, according to a required standardized calculation. The standard calculation is required by the Securities and Exchange Commission to provide consistency and comparability in investment company advertising. The Fund may also from time to time include in such advertising an aggregate total return figure or a total return figure that is not calculated according to the standardized formula in order to compare more accurately the Fund's performance with other measures of investment return. For example, a portfolio's total return may be compared with data published by Lipper Analytical Services, Inc., CDA Investment Tech- 17 nologies, Inc. or Weisenberger Investment Company Service, or with the performance of the Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average. 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 Series 2 Shares, when redeemed, may be worth more or less than their original cost. Warburg Pincus Advisor Funds currently anticipate establishing a listing for the Series 2 Shares in The Wall Street Journal so that the net asset value of the Series 2 Shares will be listed separately there each business day. Set forth below is certain performance data provided by WPC relating to the Common Shares Class of the Growth & Income Fund, a separate class of shares of the Fund. The Series 2 Class of the Fund has the same investment objective and policies as the Common Shares Class of the Fund, but the Series 2 Class will have higher expenses than the Common Shares Class so that total return can be expected, at any time, to be lower than the total return on the Common Shares Class. Investors should not rely on the following performance data as an indication of future performance of the Fund. AVERAGE ANNUAL TOTAL RETURN FOR THE COMMON SHARES CLASS OF THE WARBURG PINCUS GROWTH & INCOME FUND FOR PERIODS ENDING 3/31/95
FUND ----- One year 6.15% From 12/31/91 17.62%*
*Average annual total return calculated from 12/31/91. The Fund commenced operations on October 6, 1988 under management by a different advisor; WPC began to provide advisory services to the Fund in late December 1991. Previous periods during which the Fund was not advised by WPC are not shown. Detailed information regarding the historical performance of the Common Shares Class may be obtained by calling Warburg Pincus Funds at 1-800-888-6878. From time to time, the Fund may also advertise its '30-day yield.' The yield refers to the income generated by an investment in a Fund over the 30-day period identified in the advertisement, and is computed by dividing the net investment income per share during the period by the maximum public offering price per share of the last day of the period. This income is 'annualized' by assuming that the amount of income is generated each month over a one-year period and is compounded semi-annually. The annualized income is then shown as a percentage of the net asset value. The yield on Series 2 Shares of the Fund will fluctuate and are not necessarily representative of future results. Shareholders should remember that yield is generally a function of portfolio quality and maturity, type of instrument, operating expenses and market conditions. Any fees charged by broker/dealers directly to their customers in connection with investments in the Fund are not reflected in the yields on the Fund's Series 2 Shares, and such fees, if charged, will reduce the actual return received by shareholders on their investments. In reports or other communications to investors or in advertising, the Fund may also describe the general biography or work experience of the portfolio managers of the Fund and may include quotations attributable to the portfolio managers describing approaches taken in managing the Fund's investments, research methodology underlying stock selection or the Fund's investment objective. The Fund may also discuss the continuum of risk and return relating to different investments and the potential impact of foreign stocks on a portfolio otherwise composed of domestic securities. In addition, the Fund may from time to time compare its expense ratio to that of investment companies with similar objec- 18 tives and policies, based on data generated by Lipper Analytical Services, Inc. or similar investment services that monitor mutual funds. ------------------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN RBB'S STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RBB OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. 19 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 predominantly speculative with B respect to capacity to pay interest and repay principal in accordance with the terms of the CCC obligation. 'BB' indicates the lowest degree of speculation and 'CC' the highest degree of CC 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. (+) OR (-) The ratings from 'AAA' or 'CCC' may be modified by the addition of a 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.
A-1 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.
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-2 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. Baa Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly scecured. 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 A-3 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. 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. A-4 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 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. A-5 TABLE OF CONTENTS INVESTMENT OBJECTIVES AND POLICIES ....................................... 4 INVESTMENT LIMITATIONS ................................................... 6 MANAGEMENT ............................................................... 7 HOW TO PURCHASE SHARES .................................................. 10 HOW TO REDEEM AND EXCHANGE SHARES . 11 NET ASSET VALUE ......................................................... 12 DIVIDENDS AND DISTRIBUTIONS ............................................. 12 TAXES ................................................................... 12 SHAREHOLDER SERVICING ................................................... 13 DESCRIPTION OF SHARES ................................................... 14 OTHER INFORMATION ....................................................... 17 WPGBF-1-1294 [LOGO] [ ] WARBURG PINCUS GROWTH & INCOME FUND PROSPECTUS DECEMBER 28, 1994 AS REVISED MAY 15, 1995 WARBURG PINCUS GROWTH & INCOME FUND (Investment Portfolio of The RBB Fund, Inc.) STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information provides supplementary information pertaining to shares of the Series 2 Class (the "Shares") representing interests in the Warburg Pincus Growth & Income Fund (the "Growth & Income Fund" or "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a prospectus, and should be read only in conjunction with the Warburg Pincus Advisor Funds Prospectus dated December 28, 1994, as revised May 15, 1995 (the "Prospectus"). A copy of the Prospectus may be obtained from the Funds' distributor by calling toll-free (800) 888-9723. This Statement of Additional Information is dated December 28, 1994, as revised May 15, 1995. CONTENTS
Prospectus Page Page ---- ---- General .................................................... 2 2 Investment Objectives and Policies ......................... 2 7 Directors and Officers ..................................... 15 N/A Investment Advisory, Distribution and Servicing Arrangements ................................ 18 15 Fund Transactions .......................................... 23 17 Purchase and Redemption Information ........................ 25 17 Valuation of Shares ........................................ 25 23 Performance Information .................................... 26 28 Taxes ...................................................... 29 23 Additional Information Concerning Fund Shares .............. 33 25 Miscellaneous .............................................. 34 N/A Financial Statements ....................................... F-1 N/A
No person has been authorized to give any information or to make any representations not contained in this Statement of Additional Information in connection with the offering made by the Prospectus and, if given or made, such information or representations must not be relied upon as having been authorized by RBB or its distributor. The Prospectus does not constitute an offering by RBB or by the distributor in any jurisdiction in which such offering may not lawfully be made. GENERAL The RBB Fund, Inc. ("RBB") is an open-end management investment company currently operating or proposing to operate nineteen separate investment portfolios. This Statement of Additional Information pertains to the Series 2 Class of shares ("Shares") representing interests in the Warburg Pincus Growth & Income Fund (the "Growth & Income Fund" or "Fund") of RBB. The Shares are offered by the Prospectus dated December 28, 1994, as revised May 15, 1995. RBB was organized as a Maryland corporation on February 29, 1988. Capitalized terms used herein and not otherwise defined have the same meanings as are given to them in the Prospectus. INVESTMENT OBJECTIVES AND POLICIES The following supplements the information contained in the Prospectus concerning the investment objectives and policies of the Fund. Additional Information on Fund Investments Reverse Repurchase Agreements. Reverse repurchase agreements involve the sale of securities held by the Fund pursuant to the Fund's agreement to repurchase the securities at an agreed upon price, date and rate of interest. Such agreements are considered to be borrowings under the Investment Company Act of 1940, as amended (the "1940 Act"), and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, a Fund will maintain in a segregated account with the RBB's custodian or a qualified sub-custodian, cash, U.S. Government securities or other liquid, high-grade debt securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to Repurchase. Foreign Securities. Although the Fund generally intends to invest in securities of companies and governments of developed, stable nations, the value of the Fund's investments may be adversely affected by changes in political or social conditions, diplomatic relations, confiscatory taxation, expropriation, limitation on the removal of funds or assets, imposition of (or change in) exchange control regulations in those foreign nations and difficulty in enforcing judgments. In addition, changes in government administrations, economies or monetary policies in the U.S. or abroad could result in appreciation or depreciation of those portfolio securities. Furthermore, the economies of individual foreign nations may differ from the U.S. economy, whether favorably or unfavorably, in areas such as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Any foreign investments made by the Fund must be made in compliance with U.S. and foreign currency restrictions and tax laws restricting the amounts and types of foreign investments. 2 In addition, while the volume of transactions effected on foreign stock exchanges has increased in recent years, it remains appreciably below that of the New York Stock Exchange. Accordingly, the Fund's foreign investments may be less liquid and their prices may be more volatile than comparable investments in securities of U.S. companies. In buying and selling securities on foreign exchanges, the Fund will normally pay fixed commissions that are generally higher than the negotiated commissions charged in the U.S. Moreover, the Fund's expenses may be higher due to the additional cost of custody of foreign securities. In addition, there is generally less government supervision and regulation of securities exchanges, brokers and issuers in foreign countries than in the U.S. Dollar-Denominated Debt Obligations of Foreign Issuers. U.S. dollar-denominated debt securities issued by foreign corporations held by a Fund may not be registered with the Securities and Exchange Commission ("SEC"), and the issuers thereof may not be subject to its reporting requirements. Accordingly, there may be less publicly available information concerning foreign issuers of debt securities held by the Fund than is available concerning U.S. issuers. Foreign companies are not generally subject to uniform accounting, auditing and financial reporting standards or to other regulatory requirements comparable to those applicable to U.S. companies. Securities of many foreign companies may be less liquid and their prices more volatile than those of securities of comparable U.S. companies. In addition, with respect to certain foreign countries, there is the possibility of expropriation, confiscatory taxation, limitations on the use or removal of funds or the assets of the Fund, and political or social instability or diplomatic developments which could affect investments in those countries. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position. Mortgage-Related Debt Securities. Mortgage-related debt securities represent ownership interests in individual pools of residential mortgage loans. These securities are designed to provide monthly payments of interest and principal to the investor. Each mortgagor's monthly payment to his lending institution on his residential mortgage is "passed-through" to investors. Mortgage pools consist of whole mortgage loans or participations in loans. The terms and characteristics of the mortgage instruments are generally uniform within a pool but may vary among pools. Lending institutions which originate mortgages for the pools are subject to certain standards, including credit and underwriting criteria for individual mortgages included in the pools. Since the inception of the mortgage-related pass-through security in 1970, the market for these securities has expanded considerably. The size of the primary issuance market, and active participation in the secondary market by securities dealers and many types of investors, historically have made interests in government and government-related pass-through pools highly liquid, although no guarantee regarding future market conditions can be made. The average life of pass-through pools varies with the maturities of the underlying mortgage instruments. In addition, a pool's term may be shortened by unscheduled or early payments of principal and interest on the underlying mortgages. The occurrence of mortgage prepayments is affected by factors including the level of interest 3 rates, general economic conditions, the location and age of the mortgages and various social and demographic conditions. Because prepayment rates of individual pools vary widely, it is not possible to predict accurately the average life of a particular pool. For pools of fixed rate 30 year mortgages, common industry practice is to assume that prepayments will result in a 12 year average life. Pools of mortgages with other maturities or different characteristics will have varying assumptions concerning average life. The assumed average life of pools of mortgages having terms of less than 30 years is less than 12 years, but typically not less than 5 years. Yields on pass-through securities are typically quoted by investment dealers and vendors based on the maturity of the underlying instruments and the associated average life assumption. In periods of falling interest rates, the rate of prepayment tends to increase, thereby shortening the actual average life of a pool of underlying mortgage-related securities. Conversely, in periods of rising rates the rate of prepayment tends to decrease, thereby lengthening the actual average life of the pool. Historically, actual average life has been consistent with the 12-year assumption referred to above. Actual prepayment experience may cause the yield of mortgage-related securities to differ from the assumed average life yield. In addition, as noted in the Prospectus, reinvestment of prepayments may occur at higher or lower interest rates than the original investment, thus affecting the yield of the Fund. The coupon rate of interest on mortgage-related securities is lower than the interest rates paid on the mortgages included in the underlying pool, but only by the amount of the fees paid to the mortgage pooler, issuer, and/or guarantor of payment of the securities for the guarantee of the services of passing through monthly payments to investors. Actual yield may vary from the coupon rate, however, if mortgage-related securities are purchased at a premium or discount, traded in the secondary market at a premium or discount, or to the extent that mortgages in the underlying pool are prepaid as noted above. In addition, interest on mortgage-related securities is earned monthly, rather than semi-annually as is the case for traditional bonds, and monthly compounding may tend to raise the effective yield earned on such securities. U.S. Government Obligations. Examples of types of U.S. Government obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Federal National Mortgage Association, Government National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Maritime Administration, International Bank for Reconstruction and Development (the "World Bank"), the Asian-American Development Bank and the Inter-American Development Bank. Futures Contracts. When the Fund purchases a futures contract, it agrees to purchase a specified underlying instrument at a specified future date. When the Fund sells a futures contract, it agrees to sell the underlying instrument at a specified future date. The price at which the purchase and sale will take place is fixed when the Fund enters into the contract. The underlying 4 instrument may be a specified type of security, such as U.S. Treasury bonds or notes. The majority of futures contracts are closed out by entering into an offsetting purchase or sale transaction in the same contract on the exchange where they are traded, rather than being held for the life of the contract. Futures contracts are closed out at their current prices, which may result in a gain or loss. If the Fund holds a futures contract until the delivery date, it will be required to complete the purchase and sale contemplated by the contract. In the case of futures contracts on securities, the purchaser generally must deliver the agreed-upon purchase price in cash, and the seller must deliver securities that meet the specified characteristics of the contract. The Fund may purchase futures contracts as an alternative to purchasing actual securities. For example, if the Fund intended to purchase bonds but had not yet done so, it could purchase a futures contract in order to lock in current bond prices while deciding on particular investments. This strategy is sometimes known as an anticipatory hedge. Alternatively, the Fund could purchase a futures contract if it had cash and short-term securities on hand that it wished to invest in longer-term securities, but at the same time that Fund wished to maintain a highly liquid position in order to be prepared to meet redemption requests or other obligations. In these strategies the Fund would use futures contracts to attempt to achieve an overall return -- whether positive or negative -- similar to the return from longer-term securities, while taking advantage of potentially greater liquidity that futures contracts may offer. Although the Fund would hold cash and liquid debt securities in a segregated account with a value sufficient to cover its open futures obligations, the segregated assets would be available to the Fund immediately upon closing out the futures position, while settlement of securities transactions can take several days. However, because the Fund's cash that would otherwise have been invested in higher-yielding bonds would be held uninvested or invested in short-term securities so long as the futures position remains open, the Fund's return would involve a smaller amount of interest income and potentially a greater amount of capital gain or loss. The Fund may sell futures contracts to hedge its other investments against changes in value, or as an alternative to sales of securities. For example, if the investment adviser anticipated a decline in bond prices, but did not wish to sell bonds owned by the Fund, it could sell a futures contract in order to lock in a current sale price. If prices subsequently fell, the future contract's value would be expected to rise and offset all or a portion of the loss in the bonds that the Fund had hedged. Of course, if prices subsequently rose, the futures contract's value could be expected to fall and offset all or a portion of the benefit of the Fund. In this type of strategy, the Fund's return will tend to involve a larger component of interest income, because the Fund will remain invested in longer-term securities rather than selling them and investing the proceeds in short-term securities which generally provide lower yields. 5 Futures margin payments. The purchaser or seller of a futures contract is not required to deliver or pay for the underlying instrument unless the contract is held until the delivery date. However, both the purchaser and seller are required to deposit "initial margin" with a futures broker (known as a futures commission merchant, or FCM), when the contract is entered into. Initial margin deposits are equal to a percentage of the contract's value, as set by the exchange where the contract is traded, and may be maintained in cash or high quality liquid securities. If the value of either party's position declines, that party will be required to make additional "variation margin" payments to settle the change in value on a daily basis. The party that has a gain may be entitled to receive all or a portion of this amount. Initial and variation margin payments are similar to good faith deposits or performance bonds, unlike margin extended by a securities broker, and initial and variation margin payments do not constitute purchasing securities on margin for purposes of the Fund's investment limitations. In the event of the bankruptcy of an FCM that holds margin on behalf of a Fund, that Fund may be entitled to return of margin owed to it only in proportion to the amount received by the FCM's other customers. The investment adviser will attempt to minimize this risk by careful monitoring of the creditworthiness of the FCMs with which the Fund does business. Correlation of price changes. The prices of futures contracts depend primarily on the value of their underlying instruments. Because there are a limited number of types of futures contracts, it is likely that the standardized futures contracts available to the Fund will not match that Fund's current or anticipated investments. Futures prices can also diverge from the prices of their underlying instruments, even if the underlying instruments match the Fund's investments well. Futures prices are affected by such factors as current and anticipated short-term interest rates, changes in volatility of the underlying instrument, and the time remaining until expiration of the contract, which may not affect security prices the same way. Imperfect correlation between the Fund's investments and its futures positions may also result from differing levels of demand in the futures markets and the securities markets, from structural differences in how futures and securities are traded, or from imposition of daily price fluctuation limits for futures contracts. The Fund may purchase or sell futures contracts with a greater or lesser value than the securities it wishes to hedge or intends to purchase in order to attempt to compensate for differences in historical volatility between the futures contract and the securities, although this may not be successful in all cases. If price changes in the Fund's futures positions are poorly correlated with its other investments, its futures positions may fail to produce anticipated gains or result in losses that are not offset by the gains in the Fund's other investments. Liquidity of futures contracts. Because futures contracts are generally settled within a day from the date they are closed out, compared with a settlement period of seven days for some types of securities, the futures markets can provide liquidity superior to the securities markets in many cases. Nevertheless, there is no assurance a liquid secondary market will exist for any particular futures contract at any particular time. In addition, futures exchanges may establish daily price fluctuation limits for futures contracts, and may halt trading if a contract's price moves upward or downward more than the limit in a given day. On volatile trading days when the price fluctuation limit 6 is reached, it may be impossible for the Fund to enter into new positions or close out existing positions. If the secondary market for a futures contract is not liquid because of price fluctuation limits or otherwise, it would prevent prompt liquidation of unfavorable futures positions, and potentially could require the Fund to continue to hold a futures position until the delivery date regardless of changes in its value. As a result, the Fund's access to other assets held to cover its futures positions could also be impaired. Purchasing Put Options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. The option may give the Fund the right to sell only on the option's expiration date, or may be exercisable at any time up to and including that date. In return for this right, the Fund pays the current market price for the option (known as the option premium). The option's underlying instrument may be a security, or a futures contract. The Fund may terminate its position in a put option it has purchased by allowing it to expire or by exercising the option. If the option is allowed to expire, the Fund will lose the entire premium it paid. If the Fund exercises the option, it completes the sale of the underlying instrument at the strike price. If the Fund exercises a put option on a futures contract, it assumes a seller's position in the underlying futures contract. Purchasing an option on a futures contract does not require the Fund to make futures margin payments unless it exercises the option. A Fund may also terminate a put option position by closing it out in the secondary market at its current price, if a liquid secondary market exists. Put options may be used by the Fund to hedge securities it owns, in a manner similar to selling futures contracts, by locking in a minimum price at which the Fund can sell. If security prices fall, the value of the put option would be expected to rise and offset all or a portion of the Fund's resulting losses. However, option premiums tend to decrease over time as the expiration date nears. Therefore, because of the cost of the option in the form of the premium (and transaction costs), a Fund would expect to suffer a loss in the put option if prices do not decline sufficiently to offset the deterioration in the value of the option premium. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged to the same extent as selling a futures contract. Purchasing Call Options. The features of call options are essentially the same as those of put options, except that the purchaser of a call option obtains the right to purchase, rather than sell, the underlying instrument at the option's strike price (call options on futures contracts are settled by purchasing the underlying futures contract). By purchasing a call option, the Fund would attempt to participate in potential price increases of the underlying instrument, with results similar to those obtainable from purchasing a futures contract, but with risk limited to the cost of the option if security prices fell. At the same time, a Fund can expect to suffer a loss if security prices do not rise sufficiently to offset the cost of the option. 7 The Fund will purchase call options only in connection with "closing purchase transactions." The Fund may terminate its position in a call option by entering into a closing purchase transaction. A closing purchase transaction is the purchase of a call option on the same security with the same exercise price and call period as the option previously written by the Fund. If the Fund is unable to enter into a closing purchase transaction, the Fund may be required to hold a security that it might otherwise have sold to protect against depreciation. Writing Put Options. When the Fund writes a put option, it takes the opposite side of the transaction from the option's purchaser. In return for receipt of the premium, the Fund assumes the obligation to pay the strike price for the option's underlying instrument if the other party to the option chooses to exercise it. When writing an option on a futures contract the Fund will be required to make margin payments to an FCM as described above for futures contracts. The Fund may seek to terminate its position in a put option it writes before exercise by closing out the option in the secondary market at its current price. If the secondary market is not liquid for an option the Fund has written, however, the Fund must continue to be prepared to pay the strike price while the option is outstanding, regardless of price changes, and must continue to set aside assets to cover its position. The Fund may write put options as an alternative to purchasing actual securities. If security prices rise, the Fund would expect to profit from a written put option, although its gain would be limited to the amount of the premium it received. If security prices remain the same over time, it is likely that the Fund will also profit, because it should be able to close out the option at a lower price. If security prices fall, the Fund would expect to suffer a loss. This loss should be less than the loss the Fund would have experienced from purchasing the underlying instrument directly, however, because the premium received for writing the option should mitigate the effects of the decline. As with other futures and options strategies used as alternatives for purchasing securities, the Fund's return from writing put options generally will involve a smaller amount of interest income than purchasing longer-term securities directly, because the Fund's cash will be invested in shorter-term securities which usually offer lower yields. Writing Call Options. Writing a call option obligates the Fund to sell or deliver the option's underlying instrument, in return for the strike price, upon exercise of the option. The characteristics of writing call options are similar to those of writing put options, as described above, except that writing covered call options generally is a profitable strategy if prices remain the same or fall. Through receipt of the option premium, the Fund would seek to mitigate the effects of a price decline. At the same time, because the Fund would have to be prepared to deliver the underlying instrument in return for the strike price, even if its current value is greater, the Fund would give up some ability to participate in security price increases when writing call options. Combined Option Positions. The Fund may purchase and write options in combination with each other to adjust the risk and return characteristics of the overall position. For example, the Fund may purchase a put option and write a call option on the same underlying instrument, in order to construct a combined 8 position whose risk and return characteristics are similar to selling a futures contract. Another possible combined position would involve writing a call option at one strike price and buying a call option at a lower price, in order to reduce the risk of the written call option in the event of a substantial price increase. Because combined options positions involve multiple trades, they result in higher transaction costs and may be more difficult to open and close out. Risks of Options Transactions. Options are subject to risks similar to those described above with respect to futures contracts, including the risk of imperfect correlation between the option and a Fund's other investments and the risk that there might not be a liquid secondary market for the option. In the case of options on futures contracts, there is also a risk of imperfect correlation between the option and the underlying futures contract. Options are also subject to the risks of an illiquid secondary market, particularly in strategies involving writing options, which a Fund cannot terminate by exercise. In general, options whose strike prices are close to their underlying instruments' current value will have the highest trading volume, while options whose strike prices are further away may be less liquid. The liquidity of options may also be affected if options exchanges impose trading halts, particularly when markets are volatile. Asset Coverage for Futures and Options Positions. A Fund will not use leverage in its options and futures strategies. Such investments will be made for hedging purposes only. The Fund will hold securities or other options or futures positions whose values are expected to offset its obligations under the hedge strategies. The Fund will not enter into an option or futures position that exposes the Fund to an obligation to another party unless it owns either (i) an offsetting position in securities or other options or futures contracts or (ii) cash, receivables and short-term debt securities with a value sufficient to cover its potential obligations. A Fund will comply with guidelines established by the SEC with respect to coverage of options and futures strategies by mutual funds, and if the guidelines so require will set aside cash and high grade liquid debt securities in a segregated account with its custodian bank in the amount prescribed. Securities held in a segregated account cannot be sold while the futures or option strategy is outstanding, unless they are replaced with similar securities. As a result, there is a possibility that segregation of a large percentage of the Fund's assets could impede portfolio management or the Fund's ability to meet redemption requests or other current obligations. Limitations on Futures and Options Transactions. RBB on behalf of the Fund has filed a notice of eligibility for exclusion from the definition of the term "commodity pool operator" with the Commodity Futures Trading Commission ("CFTC") and the National Futures Association, which regulate trading in the futures markets. Pursuant to Section 4.5 of the regulations under the Commodity Exchange Act, the notice of eligibility includes the following representations: (a) The Fund will use commodity futures contracts and related commodity options solely for bona fide hedging purposes within the meaning of CFTC regulations; provided that the Fund may hold long positions in commodity futures contracts and related commodity options that do not fall within the definition of bona fide hedging transactions if the positions are used as part of a portfolio management strategy and are incidental to the Fund's activities 9 in the underlying cash market, and the underlying commodity value of the positions at all times will not exceed the sum of (i) cash or United States dollar-denominated high quality short-term money market instruments set aside in an identifiable manner, plus margin deposits, (ii) cash proceeds from existing investments due in 30 days, and (iii) accrued profits on the positions held by a futures commission merchant; and (b) The Fund will not enter into any commodity futures contract or option on a commodity futures contract if, as a result, the sum of initial margin deposits on commodity futures contracts and related commodity options and premiums paid for options on commodity futures contracts the Fund has purchased, after taking into account unrealized profits and losses on such contracts, would exceed 5% of the Fund's total assets. In addition, the Fund will not enter into any futures contract into any option if, as a result, the sum of (i) the current value of assets hedged in the case of strategies involving the sale of securities, and (ii) the current value of securities or other instruments underlying the respective Fund's other futures or options positions, would exceed 50% of the Fund's net assets. The Fund's limitations on investments in futures contracts and its policies regarding futures contracts and the limitations on investments in options and its policies regarding options discussed above in this Statement of Additional Information, are not fundamental policies and may be changed as regulatory agencies permit. The Fund will not modify the above limitations to increase its permissible futures and options activities without supplying additional information in a current Prospectus or Statement of Additional Information that has been distributed or made available to the Fund's shareholders. Various exchanges and regulatory authorities have recently undertaken reviews of options and futures trading in light of market volatility. Among the possible actions that have been presented are proposals to adopt new or more stringent daily price fluctuation limits for futures or options transactions, and proposals to increase the margin requirements for various types of strategies. It is impossible to predict what actions, if any, will result from these reviews at this time. Short Sales "Against the Box." In a short sale, the Fund sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Fund may engage in short sales if at the time of the short sale it owns or has the right to obtain, at no additional cost, an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." In a short sale, a seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. If the Fund engages in a short sale, the collateral for the short position will be maintained by the Fund's custodian or a qualified sub-custodian. While the short sale is open, the Fund will maintain in a segregated account an amount of securities equal in kind and amount to the securities sold short or securities convertible into or exchangeable for such equivalent securities. These securities constitute the Fund's long position. The Fund will not engage in short sales against the box for speculative purposes. 10 The Fund may, however, make a short sale as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security), or when the Fund wants to sell the security at an attractive current price, but also wishes to defer recognition of gain or loss for federal income tax purposes and for purposes of satisfying certain tests applicable to regulated investment companies under the Internal Revenue Code. In such case, any future losses in the Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns. There will be certain additional transaction costs associated with short sales against the box, but the Fund will endeavor to offset these costs with the income from the investment of the cash proceeds of short sales. Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is issued in reliance on the "private placement" exemption from registration which is afforded by Section 4(2) of the Securities Act of 1933. Section 4(2) paper is restricted as to disposition under the Federal securities laws and is generally sold to institutional investors such as the RBB which agree that they are purchasing the paper for investment and not with a view to public distribution. Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper normally is resold to other institutional investors through or with the assistance of investment dealers who make a market in the Section 4(2) paper, thereby providing liquidity. See "Illiquid Securities" below. Repurchase Agreements. The repurchase price under the repurchase agreements described in the Prospectus generally equals the price paid by the Fund involved plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). Securities subject to repurchase agreements will be held by the RBB's custodian in the Federal Reserve/Treasury book-entry system or by another authorized securities depository. Repurchase agreements are considered to be loans by the Fund involved under the 1940 Act. Rights Offerings and Purchase Warrants. Rights offerings and purchase warrants are privileges issued by a corporation which enable the owner to subscribe to and purchase a specified number of shares of the corporation at a specified price during a specified period of time. Subscription rights normally have a short lifespan to expiration. The purchase of rights or warrants involves the risk that the Fund could lose the purchase value of a right or warrant if the right to subscribe to additional shares is not executed prior to the rights and warrants expiration. Also, the purchase of rights and/or warrants involves the risk that the effective price paid for the right and/or warrant added to the subscription price of the related security may exceed the value of the subscribed security's market price such as when there is no movement in the level of the underlying security. Illiquid Securities. The Fund may not invest more than 15% of its total assets in illiquid securities, including repurchase agreements which have a maturity of longer than seven days and securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions 11 on resale. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation. The Fund's investment adviser will monitor the liquidity of such restricted securities under the supervision of the Board of Directors. Repurchase agreements subject to demand are deemed to have a maturity equal to the notice period. Historically, illiquid securities have included securities subject to contractual or legal restrictions on resale because they have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), securities which are otherwise not readily marketable and repurchase agreements having a maturity of longer than seven days. Securities which have not been registered under the Securities Act are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. The Board has adopted a policy that the Fund will not purchase private placements (i.e. restricted securities other than Rule 144A Securities). Mutual funds do not typically hold a significant amount of these restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities. In recent years, however, a large institutional market has developed for certain securities that are not registered under the Securities Act including repurchase agreements, commercial paper, foreign securities, municipal securities and corporate bonds and notes. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on an issuer's ability to honor a demand for repayment. The fact that there are contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of such investments. The SEC adopted Rule 144A which allows for a broader institutional trading market for securities otherwise subject to restriction on resale to the general public. Rule 144A establishes a "safe harbor" from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers. The investment adviser anticipates that the market for certain restricted securities such as institutional commercial paper will expand further as a result of this relatively new regulation and the development of automated systems for the trading, clearance and settlement of unregistered securities of domestic and foreign issuers, such as the PORTAL System sponsored by the NASD. The Adviser will monitor the liquidity of restricted securities in the Fund under the supervision of the Board of Directors. In reaching liquidity decisions, the Adviser may consider, inter alia, the following factors: (1) the unregistered nature of the security; (2) the frequency of trades and quotes for the security; (3) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (4) dealer undertakings to make a 12 market in the security and (5) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer). Investment Limitations The Fund has adopted the following fundamental investment limitations which may not be changed without the affirmative vote of the holders of a majority of the Fund's outstanding shares (as defined in Section 2(a)(42) of the Investment Company Act). The Fund may not: 1. Borrow money, except from banks or by entering into reverse repurchase agreements for temporary purposes and then in amounts not in excess of 10% of the value of the Growth & Income Fund's total assets at the time of such borrowing, and only if after such borrowing there is asset coverage of at least 300 percent for all borrowings of the Fund; or mortgage, pledge or hypothecate any of the Growth & Income Fund's assets except as may be necessary in connection with such borrowing or reverse repurchase agreements and in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the value of the Growth & Income Fund's total assets at the time of such borrowing; or purchase portfolio securities while borrowings and reverse repurchase agreements in excess of 5% of the Fund's net assets are outstanding. (This borrowing provision is not for investment leverage, but solely to facilitate management of the Growth and Income Fund's securities by enabling the Fund to meet redemption requests where the liquidation of portfolio securities is deemed to be disadvantageous or inconvenient); 2. Purchase securities of any one issuer, other than securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, if immediately after and as a result of such purchase more than 5% of the Fund's total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Fund's assets may be invested without regard to this 5% limitation; 3. Purchase securities on margin, except for short-term credit necessary for clearance of portfolio transactions, except that the Fund may establish margin accounts in connection with its use of options, futures contracts and options on futures contracts; 4. Underwrite securities of other issuers, except to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed an underwriter under Federal securities laws; 5. Make short sales of securities or maintain a short position or write or sell puts, calls, straddles, spreads or combinations thereof, except that the Fund may purchase and sell puts and call options on securities, stock indices and currencies and may purchase and sell options on futures contracts; 6. Purchase or sell real estate (including interests in real estate limited partnerships), provided that the Fund may invest in readily marketable interests in real estate investment trusts or in securities secured 13 by real estate or interests therein or issued by companies which invest in real estate or interests therein; 7. Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell futures contracts and related options; 8. Invest in oil, gas or mineral-related programs or leases; 9. Make loans except that the Fund may purchase or hold debt obligations in accordance with its investment objective, policies and limitations and except that the Fund may enter into repurchase agreements; 10. Purchase any securities issued by any other investment company except in connection with the merger, consolidation or acquisition of all the securities or assets of such an issuer; or 11. Make investments for the purpose of exercising control or management. In addition to the foregoing enumerated investment limitations, the Fund may not (a) invest more than 5% of its total assets (taken at the time of purchase) in securities of issuers (including their predecessors) with less than three years of continuous operations, (b) invest more than 5% of its total assets (taken at the time of purchase) in equity securities that are not readily marketable, and (c) purchase any securities which would cause, at the time of purchase, more than 25% of the value of the total assets of the Fund to be invested in the obligations of issuers in any industry (exclusive of the U.S. Government and its agencies and instrumentalities). DIRECTORS AND OFFICERS The directors and executive officers of RBB, their business addresses and principal occupations during the past five years are:
Name and Address Position with Principal Occupation RBB During Past Five Years Arnold M. Reichman* Director Since 1984, Managing Director 466 Lexington Avenue and Assistant Secretary, E.M. New York, NY 10017 Warburg, Pincus & Co., Inc.; Since 1984 Managing Director, Warburg Pincus Counsellors, Inc.; Since 1985, Vice President and Secretary, Counsellors Securities Inc; Officer of various investment companies advised by Warburg, Pincus Counsellors, Inc.
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Name and Address Position with Principal Occupation RBB During Past Five Years Robert Sablowsky** Director Since 1985, Executive Vice 14 Wall Street President of Gruntal & Co., New York, NY 10005 Inc., Director, Gruntal & Co., Inc. and Gruntal Financial Corp. Francis J. McKay Director Since 1963, Executive Vice 7701 Burholme Avenue President, Fox Chase Cancer Philadelphia, PA 19111 Center (Biomedical research and medical care.) Marvin E. Sternberg Director Since 1974, Chairman, Director 937 Mt. Pleasant Road and President, Moyco Bryn Mawr, PA 19010 Industries, Inc. (manufacturer of dental supplies and precision coated abrasives); Since 1968, Director and President, Mart MMM, Inc. (formerly Montgomeryville Merchandise Mart Inc.) and Mart PMM, Inc. (formerly Pennsauken Merchandise Mart, Inc.) (Shopping Centers); and Since 1975, Director and Executive Vice President, Cellucap Mfg. Co., Inc. (manufacturer of disposable headwear). Julian A. Brodsky Director Director, and Vice Chairman 1234 Market Street Comcast Corporation; Director, 16th Floor Comcast Cablevision of Philadelphia, PA Philadelphia (cable television 19107-3723 and communications) and Nextel wireless communications). Donald van Roden Director Self-employed businessman. 1200 Old Mill Lane From February 1980 to march Wyomissing, PA 19610 1987, Vice Chairman, SmithKline Beckman Corporation (pharmaceuticals); Director, AAA Mid-Atlantic (auto service); Director, Keystone Insurance Co.
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Name and Address Position with Principal Occupation RBB During Past Five Years Edward J. Roach President and Certified Public Accountant; Suite 152 Treasurer Vice Chairman of the Board, Fox Bellevue Park Corporate Chase Cancer Center; Vice Center President and Trustee, 103 Bellevue Parkway Pennsylvania School for the Wilmington, DE 19809 Deaf; Trustee, Immaculata College; Vice President and Treasurer of various investment companies advised by PNC Institutional Management Corporation. Morgan R. Jones Secretary Chairman of the law firm of 1100 PNB Bank Building Drinker Biddle & Reath, Broad and Chestnut Philadelphia, Pennsylvania; Streets Director, Rocking Horse Child Philadelphia, PA 19107 Care Centers of America, Inc.
- ------------------------ * Mr. Reichman is an "interested person" of RBB as that term is defined in the 1940 Act by virtue of his position with Counsellors Securities Inc., RBB's distributor. ** Mr. Sablowsky is an "interested person" of RBB as that term is defined in the 1940 Act by virtue of his position with Gruntal & Co., Inc., a broker-dealer which sells RBB's shares. Messrs. McKay, Sternberg and Brodsky are members of the Audit Committee of the Board of Directors. The Audit Committee, among other things, reviews results of the annual audit and recommends to RBB the firm to be selected as independent auditors. Messrs. Reichman, McKay and van Roden are members of the Executive Committee of the Board of Directors. The Executive Committee may generally carry on and manage the business of RBB when the Board of Directors is not in session. Messrs. McKay, Sternberg, Brodsky and van Roden are members of the Nominating Committee of the Board of Directors. The Nominating Committee recommends to the Board annually all persons to be nominated as directors of RBB. RBB pays directors who are not "affiliated persons" (as that term is defined in the 1940 Act) of the Fund $5,000 annually and $650 per meeting of the Board or any committee thereof that is not held in conjunction with a Board meeting. Directors who are not affiliated persons of RBB are reimbursed for any expenses incurred in attending meetings of the Board of Directors or any committee thereof. For the year ended August 31, 1994, Directors and officers of RBB received compensation and reimbursement of expenses in the aggregate amount of $35,999. On October 24, 1990, RBB adopted, as a participating 16 employer, RBB Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement plan for employees (currently Edward J. Roach) pursuant to which RBB will contribute on a monthly basis amounts equal to 10% of the monthly compensation of each eligible employee. By virtue of the services performed by Warburg, the Fund's adviser, and the Distributor, RBB itself requires only one part-time employee. No officer, director or employee of Warburg currently receives any compensation from RBB. For the year ended August 31, 1994, each of the following members of the Board of Directors received compensation from the Fund for fees and expenses incurred in attending meetings of the Board of Directors or any other committee thereof; Julian A. Brodsky in the aggregate amount of $6,950; Francis J. McKay in the aggregate amount of $7,600; Marvin E. Sternberg in the aggregate amount of $7,600; Donald van Roden in the aggregate amount of $8,600. INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS Advisory Agreements Warburg renders advisory services to the Fund pursuant to an Investment Advisory Agreement. The Advisory Agreement relating to the Growth & Income Fund is dated September 30, 1993 ("Advisory Contract"). During the fiscal years or periods ended August 31, 1992 and August 31, 1991, PIMC and Warburg rendered advisory and sub-advisory services, respectively, to the Growth & Income Fund pursuant to Advisory and Sub-Advisory Agreements dated August 16, 1988. For the year ended August 31, 1994, Warburg waived advisory fees with respect to the Growth & Income Fund in the amount of $0 under the Advisory Contract. During the same period, Warburg received advisory fees (after waivers) in the amount of $1,050,728. As required by various state regulations, Warburg will reimburse RBB or the Fund (as applicable) if and to the extent that the aggregate operating expenses of RBB or the Fund exceeds applicable state limits for the fiscal year, to the extent required by such state regulations. Currently, the most restrictive of such applicable limits is 2 1/2% of the first $30 million of average annual net assets, 2% of the next $70 million of average annual net assets and 1 1/2% of the remaining average annual net assets. Certain expenses, such as brokerage commissions, taxes, interest and extraordinary items, are excluded from this limitation. Whether such expense limitations apply to RBB as a whole or to the Fund depends upon the particular regulations of such states. The Fund bears all of its own expenses not specifically assumed by Warburg. General expenses of RBB not readily identifiable as belonging to a portfolio of RBB are allocated among all investment portfolios by or under the direction of RBB's Board of Directors in such manner as the Board determines to be fair and equitable. Expenses borne by the Fund include, but are not limited to, the following (or the Fund's share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by the Fund and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of the Fund by Warburg; (c) expenses of organizing RBB that are not attributable to a class of RBB; (d) certain of the filing fees and 17 expenses relating to the registration and qualification of RBB and the Fund's shares under Federal and/or state securities laws and maintaining such registrations and qualifications; (e) fees and salaries payable to RBB's directors and officers; (f) taxes (including any income or franchise taxes) and governmental fees; (g) costs of any liability and other insurance or fidelity bonds; (h) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against RBB or a portfolio for violation of any law; (i) legal, accounting and auditing expenses, including legal fees of special counsel for the independent directors; (j) charges of custodians and other agents; (k) expenses of setting in type and printing prospectuses, statements of additional information and supplements thereto for existing shareholders, reports, statements, and confirmations to shareholders and proxy material that are not attributable to a class; (l) costs of mailing prospectuses, statements of additional information and supplements thereto to existing shareholders, as well as reports to shareholders and proxy material that are not attributable to a class; (m) any extraordinary expenses; (n) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (o) costs of mailing and tabulating proxies and costs of shareholders' and directors' meetings; (p) costs of PFPC's use of independent pricing services to value a portfolio's securities; and (q) the cost of investment company literature and other publications provided by RBB to its directors and officers. Distribution expenses, transfer agency expenses, expenses of preparation, printing and mailing prospectuses, statements of additional information, proxy statements and reports to shareholders, and organizational expenses and registration fees, identified as belonging to a particular class of RBB, are allocated to such class. Under the Advisory Contract, Warburg will not be liable for any error of judgment or mistake of law or for any loss suffered by RBB or the Fund in connection with the performance of the Advisory Contract, except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Warburg in the performance of its duties or from reckless disregard of its duties and obligations thereunder. The Advisory Contract was approved on August 3, 1994 by vote of RBB's Board of Directors, including a majority of those directors who are not parties to the Advisory Contract or interested persons (as defined in the 1940 Act) of such parties. The Advisory Contract is terminable by vote of RBB's Board of Directors or by the holders of a majority of the outstanding voting securities of the Fund, at any time without penalty, on 60 days' written notice to Warburg. The Growth & Income Fund Advisory Contract became effective on September 30, 1993 and was approved by shareholders at a special meeting held September 30, 1993. The Advisory Contract terminates automatically in the event of assignment thereof. Custodian Agreements PNC Bank is custodian of RBB's assets pursuant to a custodian agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts in the name of the Fund (b) holds and transfers portfolio securities on account of the Fund, (c) accepts receipts and makes disbursements of money on behalf of 18 the Fund, (d) collects and receives all income and other payments and distributions on account of the Fund's portfolio securities and (e) makes periodic reports to the RBB's Board of Directors concerning the Fund's operations. PNC Bank is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of RBB, provided that PNC Bank remains responsible for the performance of all its duties under the Custodian Agreement and holds RBB harmless from the acts and omissions of any sub-custodian. For its services to RBB under the Custodian Agreement, PNC Bank receives a fee which is calculated based upon the Fund's average daily gross assets as follows: $.25 per $1,000 on the first $50 million of average daily gross assets; $.20 per $1,000 on the next $50 million of average daily gross assets; and $.15 per $1,000 on average daily gross assets over $100 million, with a minimum monthly fee of $1,000 per Fund, exclusive of transaction charges and out-of-pocket expenses, which are also charged to RBB. State Street Bank and Trust Company ("State Street") is co-custodian of the Fund's foreign securities pursuant to a sub-custodian agreement dated October 26, 1994 (the "Foreign Custodian Agreement"). Under the Foreign Custodian Agreement, State Street performs custodial functions with respect to the Fund's non-U.S. portfolio holdings, including appointment of non-U.S. custodians and agents. Transfer Agency and Sub-Transfer Agency Agreements PFPC, Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer and dividend disbursing agent for the Shares pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer Agency Agreement"). State Street Bank and Trust Company ("State Street") acts as shareholder servicing agent, subtransfer agent and dividend disbursing agent for the Fund, under which it (a) issues and redeems Shares, (b) addresses and mails all communications by the Fund to record owners of Shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders, (c) maintains shareholder accounts and, if requested, sub-accounts and (d) makes periodic reports to RBB's Board of Directors concerning the operations of the class. For its services to the Fund under the Sub-Transfer Agency Agreement, State Street receives a fee at the annual rate of $8.00 per account for the Funds, plus $5.00 per new account establishment, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses. Co-Administration Agreements Counsellors Funds Service, Inc. ("Counsellors Service") serves as co- administrator to the Fund pursuant to a Co-Administration Agreement dated August 4, 1994 (the "Counsellors Service Co-Administration Agreement"). Counsellors Service has agreed to provide shareholder liaison services to the Fund including responding to shareholder inquiries and providing information on shareholder accounts. The Counsellors Service Co-Administration Agreement provides that Counsellors Service shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Fund in connection with the performance of the agreement, except a loss resulting from willful misfeasance, bad faith or negligence, or reckless disregard of its duties and obligations thereunder. In consideration for providing services pursuant to the Counsellors 19 Service Co-Administration Agreement, Counsellors Services receives a fee with respect to the Growth & Income Fund calculated at an annual rate of .05% of the Growth & Income Fund's average daily net assets for the first $125 million of average daily net assets, and .10% of average daily net assets for assets above $125 million. PFPC also serves as co-administrator to the Fund pursuant to a Co-Administration Agreement dated August 4, 1994 (the "PFPC Co-Administration Agreement"). PFPC has agreed to calculate the Fund's net asset value, provide all accounting services for the Fund, and assist in related aspects of the Fund's operations. The PFPC Co-Administration Agreement provides that PFPC shall not be liable for any error of judgment or mistake of law or any loss suffered by RBB or the Fund in connection with the performance of the agreement, except a loss resulting from willful misfeasance, bad faith or negligence, or reckless disregard of its duties and obligations thereunder. In consideration for providing services pursuant to the PFPC Co-Administration Agreement, PFPC receives a fee with respect to the Growth & Income Fund calculated at an annual rate of .20% of the Growth & Income Fund's average daily net assets, with a minimum annual fee of $75,000, for the first $125 million of average daily net assets, and .15% of average daily net assets for assets above $125 million. Distribution and Shareholder Servicing Counsellors Securities has entered into a Servicing Agreement with Service Organizations with respect to the Growth & Income Fund pursuant to which support services are provided to the holders of Series 2 Shares in consideration of the Fund's payment of up to .50%, on an annualized basis of the average daily net assets of the Series 2 Shares held of record of the Fund. See Prospectus, "Shareholder Servicing." Counsellors Securities may, in the future, enter into additional Servicing Agreements with Service Organizations to perform certain distribution, shareholder servicing, administrative and accounting services for their Customers who are beneficial owners of the Fund's Shares. A Service Organization with which Counsellors Securities has entered into Servicing Agreements on behalf of the Fund may charge a Customer one or more of the following types of fees, as agreed upon by the Service Organization and the Customer, with respect to the cash management or other services provided by the Service Organization: (a) account fees (a fixed amount per month or per year); (b) transaction fees (a fixed amount per transaction processed); (c) compensation balance requirements (a minimum dollar amount a Customer must maintain in order to obtain the services offered); or (d) account maintenance fees (a periodic charge based upon the percentage of assets in the account or of the dividend paid on those assets). Services provided by a Service Organization to Customers are in addition to, and not duplicative of, the services to be provided under Servicing Agreements. A Customer of a Service Organization should read the Fund's Prospectus and Statement of Additional Information in conjunction with the Servicing Agreement and other literature describing the services and related fees that would be provided by the Service Organization to its Customers prior to any purchase of shares of the Fund. Service Organizations and other interested investors may obtain Prospectuses from the Fund's distributor upon request. No preference will be shown in the selection of the Fund's portfolio investments for the instruments of Service Organizations. 20 There are currently unresolved issues with respect to existing laws and regulations relating to the permissible activities of banks and trust companies, including the extent to which certain Service Organizations may perform shareholder and administrative services. A judicial or administrative decision or interpretation with respect to those laws and regulations, as well as future changes in such laws and regulations, could prevent certain Service Organizations from performing these services or from receiving payments for performing such services. If a Service Organization was prohibited from performing these services, it is expected that all arrangements between Counsellors Securities or behalf of the Fund and the Service Organization would be terminated and that Customers of the Service Organization who seek to invest in the Fund would have to purchase and redeem shares directly through the Fund's distributor or transfer agent. Counsellors Securities' agreements with Service Organizations is governed by a Distribution Plan (the "Plan"). The Plan requires PFPC and Counsellors Service, the Fund's co-administrators, to provide the Board of Directors, at least quarterly, with written reports of amounts expended under the Plan and the purpose for which such expenditures were made. The Plan will continue in effect for so long as their continuance is specifically approved at least annually by the Board of Directors, including a majority of the Directors who are not interested persons of RBB and who have no direct or indirect financial interest in the operation of the Plan ("Independent Directors"). Any material amendment of the Plan would require the approval of the Board of Directors in the manner described above. The Plan may be terminated at any time, without penalty, by vote of a majority of the Independent Directors or by a vote of a majority of the outstanding voting securities of the relevant class of shares of the Fund. FUND TRANSACTIONS Subject to policies established by the Board of Directors, Warburg is responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In executing portfolio transactions, Warburg seeks to obtain the best net results for the Fund, taking into account such factors as the price (including the applicable brokerage commission or dealer spread), size of the order, difficulty of execution and operational facilities of the firm involved. While Warburg generally seeks reasonably competitive commission rates, payment of the lowest commission or spread is not necessarily consistent with obtaining the best results in particular transactions. No Fund has any obligation to deal with any broker or group of brokers in the execution of portfolio transactions. Warburg may, consistent with the interests of the Fund and subject to the approval of the Board of Directors, select brokers on the basis of the research, statistical and pricing services they provide to the Fund and other clients of Warburg. Information and research received from such brokers will be in addition to, and not in lieu of, the services required to be performed by Warburg under its respective contracts. A commission paid to such brokers may be higher than that which another qualified broker would have charged for effecting the same transaction, provided that Warburg, as applicable, determines in good faith that such commission is 21 reasonable in terms either of the transaction or the overall responsibility of or Warburg, as applicable, to a Fund and its other clients and that the total commissions paid by a Fund will be reasonable in relation to the benefits to a Fund over the long-term. Corporate debt and U.S. Government securities are generally traded on the over-the-counter market on a "net" basis without a stated commission, through dealers acting for their own account and not as brokers. The Funds will primarily engage in transactions with these dealers or deal directly with the issuer unless a better price or execution could be obtained by using a broker. Prices paid to a dealer in debt securities will generally include a "spread," which is the difference between the prices at which the dealer is willing to purchase and sell the specific security at the time, and includes the dealer's normal profit. Warburg may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from the Fund prior to their maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Fund's anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Fund would incur a capital loss in liquidating commercial paper (for which there is no established market), especially if interest rates have risen since acquisition of the particular commercial paper. Investment decisions for the Fund and for other investment accounts managed by Warburg are made independently of each other in the light of differing conditions. However, the same investment decision may occasionally be made for two or more of such accounts. In such cases, simultaneous transactions are inevitable. Purchases or sales are then averaged as to price and allocated as to amount according to a formula deemed equitable to each such account. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as a Fund is concerned, in other cases it is believed to be beneficial to the Fund. The Fund will not purchase securities during the existence of any underwriting or selling group relating to such security of which Warburg or any affiliated person (as defined in the 1940 Act) thereof is a member except pursuant to procedures adopted by the RBB's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things, these procedures, which will be reviewed by the RBB's directors as deemed necessary from time to time, require that the commission paid in connection with such a purchase be reasonable and fair, that the purchase be at not more than the public offering price prior to the end of the first business day after the date of the public offer, and that Warburg not participate in or benefit from the sale to the Fund. In no instance will portfolio securities be purchased from or sold to the Distributor, PNC Bank or Warburg or any affiliated person of the foregoing entities except as permitted by SEC exemptive order or by applicable law. During the year ended August 31, 1994, the Growth & Income Fund paid $1,222,416 of brokerage commissions. A high rate of portfolio turnover involves correspondingly greater brokerage commission expenses and other transaction 22 costs, which must be borne directly by the Fund. Federal income tax laws may restrict the extent to which the Fund may engage in short term trading of securities. See "Taxes". For the year or period ended August 31, 1994, the Growth & Income Fund had a portfolio turnover rate of 150%. The Fund anticipates that its annual portfolio turnover rate will vary from year to year. The portfolio turnover rate is calculated by dividing the lesser of the Fund's annual sales or purchases of portfolio securities (exclusive of purchases or sales of securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year. PURCHASE AND REDEMPTION INFORMATION The Fund reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of the Fund's shares by making payment in whole or in part in securities chosen by RBB and valued in the same way as they would be valued for purposes of computing the Fund's net asset value. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. RBB has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Fund is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its net asset value during any 90-day period for any one shareholder of the Fund. Under the 1940 Act, the Fund may suspend the right to redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange (the "NYSE") is closed (other than customary weekend and holiday closings), or during which trading on said Exchange is restricted, or during which (as determined by the SEC by rule or regulation) an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Fund may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions.) VALUATION OF SHARES The net asset value per share of the Fund is calculated as of 4:00 p.m. Eastern Time on each Business Day. "Business Day" means each weekday when the NYSE is open. Currently, the NYSE is closed on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day (observed). Securities which are listed on stock exchanges are valued at the last sale price on the day the securities are valued or, lacking any sales on such day, at the mean of the bid and asked prices available prior to the evaluation. In cases where securities are traded on more than one exchange, the securities are generally valued on the exchange designated by the Board of Directors as the primary market. Securities traded in the over-the-counter market and listed on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") are valued at the last trade price listed on the NASDAQ at 4:00 p.m.; securities listed on NASDAQ for which there were no sales on that day and other over-the-counter securities are valued at the mean of the bid and asked prices available prior to valuation. Securities for 23 which market quotations are not readily available are valued at fair value as determined in good faith by or under the direction of RBB's Board of Directors. The amortized cost method of valuation may also be used with respect to debt obligations with sixty days or less remaining to maturity. In determining the approximate market value of portfolio investments, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund's books at their face value. Other assets, if any, are valued at fair value as determined in good faith by RBB's Board of Directors. PERFORMANCE INFORMATION Total Return. For purposes of quoting and comparing the performance of the Fund to that of other mutual funds and to stock or other relevant indices in advertisements or in reports to shareholders, performance may be stated in terms of total return. Under the rules of the Securities and Exchange Commission, the Fund's advertising performance must include total return quotes calculated according to the following formula: P(1 + T)n = ERV Where: P = a hypothetical initial payment of $1,000 T = average annual total return n = number of years (1, 5 or 10) ERV = ending redeemable value at the end of the 1, 5 or 10 year periods (or fractional portion thereof) of a hypothetical $1,000 payment made at the beginning of the 1, 5 or 10 year periods. Under the foregoing formula, the time periods used in advertising will be based on rolling calendar quarters, updated to the last day of the most recent quarter prior to submission of the advertisement for publication, and will cover one, five and ten year periods or a shorter period dating from the effectiveness of the Fund's registration statement. In calculating the ending redeemable value, the maximum sales load is deducted from the initial $1,000 payment and all dividends and distributions by the Fund are assumed to have been reinvested at net asset value, as described in the Prospectus, on the reinvestment dates during the period. Total return, or "T" in the formula above, is computed by finding the average annual compounded rates of return over the 1, 5 and 10 year periods (or fractional portion thereof) that would equate the initial amount invested to the ending redeemable value. Any sales loads that might in the future be made applicable at the time to reinvestments would be included as would any recurring account charges that might be imposed by the Fund. 24 Calculated according to the SEC rules, for the year ended August 31, 1994, both the average annual total return and the aggregate total return was 14.41% for the Growth & Income Fund. Calculated according to the SEC rules, for the period beginning on the commencement of the Fund's operations and ending August 31, 1994, the average annual total return (commencing October 6, 1988) was 15.76% for the Growth & Income Fund. For the same period, the aggregate total return (commencing October 6, 1988) was 137.40% for the Growth & Income Fund. Performance. From time to time, the Fund may advertise its average annual total return over various periods of time. These total return figures show the average percentage change in value of an investment in the Fund from the beginning of the measuring period to the end of the measuring period. The figures reflect changes in the price of the Fund's shares assuming that any income dividends and/or capital gain distributions made by the Fund during the period were reinvested in shares of the Fund. Total return will be shown for recent one-, five- and ten-year periods, and may be shown for other periods as well (such as from commencement of the Fund's operations or on a year-by-year, quarterly or current year-to-date basis). When considering average total return figures for periods longer than one year, it is important to note that the Fund's annual total return for one year in the period might have been grater or less than the average for the entire period. When considering total return figures for periods shorter than one year, investors should bear in mind that the Fund seeks long-term appreciation and that such return may not be representative of the Fund's return over a longer market cycle. The Fund may also advertise aggregate total return figures for various periods, representing the cumulative change in value of an investment in the Fund for the specific period (again reflecting changes in the Fund's share prices and assuming reinvestment of dividends and distributions). Aggregate and average total returns may be shown by means of schedules, charts or graphs, may indicate various components of total return (i.e., change in value of initial investment, income dividends and capital gain distributions) and would be quoted separately for each class of the Fund's shares. Investors should note that total return figures are based on historical earnings and are not intended to indicate future performance. In reports or other communications to investors or in advertising material, the Fund may describe general economic and market conditions affecting the Fund and may compare their performance with (1) that of other mutual funds as listed in the rankings prepared by Lipper Analytical Services, Inc. or similar investment services that monitor the performance of mutual funds or as set forth in the publications listed below; (2) with the S&P 500, which is an unmanaged indexes of common stocks prepared by Standard & Poor's Corporation or (3) other appropriate indices of investment securities or with data developed by Counsellors derived from such indices. The Fund may also include evaluations published by nationally recognized ranking services and by financial publications that are nationally recognized, such as The Wall Street Journal, Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune, Forbes Business Week, Morningstar, Inc. and Financial Times. 25 In reports or other communications to investors or in advertising, the Fund may also describe the general biography or work experience of the portfolio managers of the Fund and may include quotations attributable to the portfolio managers describing approaches taken in managing the Fund's investments, research methodology, underlying stock selection or the Fund's investment objective. The Fund may also discuss the continuum of risk and return relating to different investments, and the potential impact of foreign stock on a portfolio otherwise composed of domestic securities. In addition, the Fund may from time to time compare their expense ratios to those of investment companies with similar objective and policies, as advertised by Lipper Analytical Services, Inc. or similar investment services that monitor mutual funds. Yield. The Fund may also advertise its yield. Under the rules of the SEC, the Fund advertising yield must calculate yield using the following formula: YIELD = 2 [(a-b+1)'pp'6 - 1] --- cd Where: a = dividends and interest earned during the period. b = expenses accrued for the period (net of reimbursement). c = the average daily number of shares outstanding during the period that were entitled to receive dividends. d = the maximum offering price per share on the last day of the period. Under the foregoing formula, yield is computed by compounding semi-annually, the net investment income per share earned during a 30 day period divided by the maximum offering price per share on the last day of the period. For the purpose of determining the interest earned (variable "a" in the formula) on debt obligations that were purchased by the Fund at a discount or premium, the formula generally calls for amortization of the discount or premium; the amortization schedule will be adjusted monthly to reflect changes in the market values of the debt obligations. The yield for the 30 day period ended August 31, 1994 was 0.68% for the Growth & Income Fund. Yield may fluctuate daily and does not provide a basis for determining future yields. Because the yields will fluctuate, they cannot be compared with yields on savings account or other investment alternatives that provide an agreed to or guaranteed fixed yield for a stated period of time. However, yield information may be useful to an investor considering temporary investments in money market instruments. In comparing the yield of one fund to another, consideration should be given to each fund's investment policies, including the types of investments made, lengths of maturities of the portfolio securities, the method used by each fund to compute the yield (methods may differ) and whether there are any special account charges which may reduce the effective yield. 26 The yields on certain obligations are dependent on a variety of factors, including general market conditions, conditions in the particular market for the obligation, the financial condition of the issuer, the size of the offering, the maturity of the obligation and the rates on the issue. The ratings of Moody's Investors Service, Inc. and Standard & Poor's Corporation represent their respective opinions as to the quality of the obligations they undertake to rate. Ratings, however, are general and are not absolute standards of quality. Consequently, obligations with the same rating, maturity and interest rate may have different market prices. In addition, subsequent to its purchase by the Fund, an issue may cease to be rated or may have its rating reduced below the minimum required for purchase. In such an event, the Fund's investment adviser or sub-adviser will consider whether the Fund should continue to hold the obligation. From time to time, in advertisements or in reports to shareholders with respect to the Fund, the yields of the Fund may be quoted and compared to those o other mutual funds with similar investment objectives and to stock or other relevant indices. For example, the yield of the Fund may be compared to the Donoghue's Money RRB Report(R) of Holliston, MA, 10746, a widely recognized independent publication that monitors the performance of money market funds, or to the data prepared by Lipper Analytical Services, Inc., a widely-recognized independent service that monitors the performance of mutual funds. TAXES The following is only a summary of certain additional tax considerations generally affecting the Fund and their shareholders that are not described in the Prospectus. No attempt is made to present a detailed explanation of the tax treatment of the Fund or their shareholders, and the discussion here and in the RBB's Prospectus is not intended as a substitute for careful tax planning. Investors are urged to consult their tax advisers with specific reference to their own tax situation. The Fund has elected to be taxed as a regulated investment company under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a regulated investment company, the Fund is exempt from Federal income tax on its net investment income and realized capital gains which it distributes to shareholders, provided that it distributes an amount equal to the sum of (a) at least 90% of its investment company taxable income (net taxable investment income and the excess of net short-term capital gain over net long-term capital loss), if any, for the year and (b) at least 90% of its net tax-exempt interest income, if any, for the year (the "Distribution Requirement") and satisfies certain other requirements of the Code that are described below. Distributions of investment company taxable income and net tax-exempt interest income made during the taxable year or, under specified circumstances, within twelve months after the close of the taxable year will satisfy the Distribution Requirement. The Distribution Requirement for any year may be waived if a regulated investment company establishes to the satisfaction of the Internal Revenue Service that it is unable to satisfy the Distribution Requirement by reason of distributions previously made for the purpose of avoiding liability for Federal excise tax (discussed below). 27 In addition to satisfaction of the Distribution Requirement each Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans and gains from the sale or other disposition of stock or securities or foreign currencies, or from other income derived with respect to its business of investing in such stock, securities, or currencies (the "Income Requirement") and derive less than 30% of its gross income from the sale or other disposition of any of the following investments, if such investments were held for less than three months: (a) stock or securities (as defined in Section 2(a)(36) of the 1940 Act); (b) options, futures, or forward contracts (other than options, futures or forward contracts on foreign currencies); and (c) foreign currencies (or options, futures or forward contracts on foreign currencies) but only if such currencies (or options, futures or forward contracts) are not directly related to the regulated investment company's principal business of investing in stock or securities (or options and futures with respect to stocks or securities) (the "Short-Short Gain Test"). Interest (including accrued original issue discount and, in the case of debt securities bearing taxable interest income, "accrued market discount") received by the Fund at maturity or on disposition of a security held for less than three months will not be treated as gross income derived from the sale or other disposition of such security for purposes of the Short-Short Gain Test. However, any other income which is attributable to realized market appreciation will be treated as gross income from the sale or other disposition of securities for this purpose. Future Treasury regulations may provide that currency gains that are not "directly related" to the Fund's principal business of investing in stock or securities (or in options or futures with respect to stock or securities) will not satisfy the Income Requirements. Income derived by a regulated investment company from a partnership or trust will satisfy the Income Requirement only to the extent such income is attributable to items of income of the partnership or trust that would satisfy the Income Requirement if they were realized by a regulated investment company in the same manner as realized by the partnership or trust. In addition to the foregoing requirements, at the close of each quarter of its taxable year, at least 50% of the value of the Fund's assets must consist of cash and cash items, U.S. Government securities, securities of other regulated investment companies, and securities of other issuers (as to which the Fund has not invested more than 5% of the value of its total assets in securities of such issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of such issuer), and no more than 25% of the value of the Fund's total assets may be invested in the securities of any one issuer (other than U.S. Government securities and securities of other regulated investment companies), or in two or more issuers which such Fund controls and which the engaged in the same or similar trades or businesses (the "Asset Diversification Requirement"). The Internal Revenue Service has taken the position, in informal rulings issued to other taxpayers, that the issuer of a repurchase agreement is the bank or dealer from which securities are purchased. A Fund will not enter into repurchase agreements with any one bank or dealer if entering into such agreements would, under the informal position expressed by the Internal Revenue Service, cause it to fail to satisfy the Asset Diversification Requirement. 28 Distributions of investment company taxable income will be taxable (subject to the possible allowance of the dividend received deduction described below) to shareholders as ordinary income, regardless of whether such distributions are paid in cash or are reinvested in shares. Shareholders receiving any distribution from RBB in the form of additional shares will be treated as receiving a taxable distribution in an amount equal to the fair market value of the shares received, determined as of the reinvestment date. The Fund intends to distribute to shareholders its excess of net long-term capital gain over net short-term capital loss ("net capital gain"), if any, for each taxable year. Such gain is distributed as a capital gain dividend and is taxable to shareholders as long-term capital gain, regardless of the length of time the shareholder has held his shares, whether such gain was recognized by the Fund prior to the date on which a shareholder acquired shares of the Fund and whether the distribution was paid in cash or reinvested in shares. The aggregate amount of distributions designated by any Fund as capital gain dividends may not exceed the net capital gain of the Fund for any taxable year, determined by excluding any net capital loss or net long-term capital loss attributable to transactions occurring after October 31 of such year and by treating any such loss as if it arose on the first day of the following taxable year. Such distributions will be designated as capital gain dividends in a written notice mailed by RBB to shareholders not later than 60 days after the close of each Fund's respective taxable year. In the case of corporate shareholders, distributions (other than capital gain dividends) of a Fund for any taxable year generally qualify for the 70% dividends received deduction to the extent of the gross amount of "qualifying dividends" received by the Fund for the year. Generally, a dividend will be treated as a "qualifying dividend" if it has been received from a domestic corporation. However, a dividend received by a taxpayer will not be treated as a "qualifying dividend" if (1) it has been received with respect to any share of stock that the taxpayer has held for 45 days (90 days in the case of certain preferred stock) or less (excluding any day more than 45 days (or 90 days in the case of certain preferred stock) after the date on which the stock becomes ex-dividend), or (2) to the extent that the taxpayer is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. RBB will designate the portion, if any, of the distribution made by the Fund that qualifies for the dividends received deduction in a written notice mailed by RBB to shareholders not later than 60 days after the close of the Fund's taxable year. Investors should note that changes made to the Code by the Tax Reform Act of 1986 and subsequent legislation have not entirely eliminated distinctions in the tax treatment of capital gain and ordinary income distributions. The nominal maximum marginal rate on ordinary income for individuals, trusts and estates is currently 31%, but for individual taxpayers whose adjusted gross income exceeds certain threshold amounts (that differ depending on the taxpayer's filing status) in taxable years beginning before 1996, provisions phasing out personal exemptions and limiting itemized deductions may cause the actual maximum marginal rate to exceed 31%. The maximum rate on the net capital gain of individuals, trusts and estates, however, is in all cases 28%. Capital gains and ordinary income of corporate taxpayers are taxed at a nominal maximum rate of 34% 29 (an effective marginal rate of 39% applies in the case of corporations having taxable income between $100,000 and $335,000). Investors should be aware that any loss realized upon the sale, exchange or redemption of shares held for six months or less will be treated as a long-term capital loss to the extent any capital gain dividends have been paid with respect to such shares. Distributions of net investment income received by the Fund from investments in debt securities will be taxable to shareholders as ordinary income and will not be treated as "qualifying dividends" for purposes of the dividends received deduction. A shareholder will recognize gain or loss upon an exchange of shares of the Fund for shares of another portfolio upon exercise of an exchange privilege. Shareholders may not include the initial sales charge in the tax basis of the Shares exchanged for shares of another Fund for the purpose of determining gain or loss on the exchange, where the Shares exchanged have been held 90 days or less. The sales charge will increase the basis of the shares acquired through exercise of the exchange privilege (unless the shares acquired are also exchanged for shares of another portfolio within 90 days after the first exchange). The Code imposes a non-deductible 4% excise tax on regulated investment companies that do not distribute with respect to each calendar year an amount equal to 98% of their ordinary income for the calendar year plus 98% of their capital gain net income for the 1-year period ending on October 31 of such calendar year. The balance of such income must be distributed during the next calendar year. For the foregoing purposes, a company is treated as having distributed any amount on which it is subject to income tax for any taxable year ending in such calendar year. Because the Fund intends to distribute all of its taxable income currently, no Fund anticipates incurring any liability for this excise tax. However, investors should note that the Fund may in certain circumstances be required to liquidate investments in order to make sufficient distributions to avoid excise tax liability. RBB will be required in certain cases to withhold and remit to the United States Treasury 31% of dividends paid to any shareholder (1) who has provided either an incorrect tax identification number or no number at all, (2) who is subject to backup withholding by the Internal Revenue Service for failure to report the receipt of interest or dividend income properly, or (3) who has failed to certify to RBB that he is not subject to backup withholding or that he is an "exempt recipient." The foregoing general discussion of Federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein. Although the Fund expects to qualify as a "regulated investment company" and to be relieved of all or substantially all Federal income taxes, depending upon the extent of its activities in states and localities in which its 30 offices are maintained, in which its agents or independent contractors are located or in which it is otherwise deemed to be conducting business, the Fund may be subject to the tax laws of such states or localities. ADDITIONAL INFORMATION CONCERNING FUND SHARES RBB does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. RBB's amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of RBB have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, RBB will assist in shareholder communication in such matters. As stated in the Prospectus, holders of shares of each class of RBB will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of RBB will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding securities of an investment company such as RBB shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding shares of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under the Rule, the approval of an investment advisory agreement or any change in a fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants, the approval of principal underwriting contracts and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to portfolio. Notwithstanding any provision of Maryland law requiring a greater vote of shares of RBB's common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law, (for example by Rule 18f-2 discussed above) or by RBB's Articles of Incorporation, RBB may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio). MISCELLANEOUS Counsel. The law firm of Ballard Spahr Andrews & Ingersoll, 1735 Market Street, 51st Floor, Philadelphia, Pennsylvania 19103 serves as counsel to RBB, PIMC, PNC Bank and PFPC. The law firm of Drinker Biddle & Reath, 1100 Philadelphia National Bank Building, Broad and Chestnut Streets, 31 Philadelphia, Pennsylvania 19107, serves as counsel to RBB's independent directors. Independent Accountants. Coopers & Lybrand L.L.P., 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as RBB's independent accountants. RBB's financial statements which appear in this Statement of Additional Information have been audited by Coopers & Lybrand L.L.P., as set forth in their report, which also appears in this Statement of Additional Information, and have been included herein in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. Control Persons. As of September 30, 1994 to RBB's knowledge, the following named persons at the addresses shown below owned of record approximately 5% or more of the total outstanding shares of the class of RBB indicated below. Such classes are described in the Prospectus. RBB does not know whether such persons also beneficially own such shares.
Class of Common Stock Names and Addresses Percent of - --------------------- of Record Owners Outstanding ------------------- Shares of Class Owned ----------- Class A Boston Financial Data Services 99% (Growth & Income) Omnibus Account Attn: Warburg Pincus, 3rd Fl. 2 Heritage Drive Quincy, MA 02171 Class C Warburg, Pincus Counsellors, 44% (Balanced) Inc. 466 Lexington Avenue New York, NY 10017 Class C Planco Inc. 30% (Balanced) Profit Sharing Plan Trust 16 Industrial Blvd. Paoli, PA 19301 Class C Jane T. Bell 9% (Balanced) 15 Schooner Drive Mystic, CT 06335 Class D Gruntal Co. 8% (Tax Free) FBO 995-16852-14 14 Wall Street New York, NY 10005 Class D Gruntal Co. 8% (Tax Free) FBO 995-10773-13 14 Wall Street New York, NY 10005
32
Class of Common Stock Names and Addresses Percent of - --------------------- of Record Owners Outstanding ------------------- Shares of Class Owned ----------- Class D Gruntal Co. 8% (Tax Free) FBO 995-10702-19 14 Wall Street New York, NY 10005 Class F William B. Pettus & 9% (Municipal) Augustine W. Pettus Trust 827 Winding Path Lane St. Louis, MO Class F Seymour Fein 91% (Municipal) P.O. Box 486 Tremont Post Office Bronx, NY 10457-0486 Class G Saver's Marketing Inc. 20% (Money) c/o Planco 16 Industrial Blvd. Paoli, PA 19301 Class G Jewish Family and Childrens 36% (Money) Agency of Philadelphia Capital Campaign 1610 Spruce Street Philadelphia, PA 19103 Class G Lynda R. Campbell Caring Trust 6% (Money) 935 Rutger Street St. Louis, MO 63104 Class G Dominic & Barbara Pisciotta 6% (Money) Caring Trust 424 Quiet Drive St. Charels, MO 63303 Class H Kelly H. Vandelicht 5% (Municipal) Crystal C. Vandelicht P.O. Box 296 Belle, MO 65013 Class H Emil R. Hunter 12% (Muncipal) Mary J. Hunter 4518 Shenandoah St. Louis, MO 63110
33
Class of Common Stock Names and Addresses Percent of - --------------------- of Record Owners Outstanding ------------------- Shares of Class Owned ----------- Class H Deborah C. Brown, Trustee 26% (Municipal) Barbara J.C. Custis, Trustee The Crowe Trust 9921 West 128th Ter. Overland Park, KS 66213 Class H Larnie Johnson 6% (Municipal) Mary Alice Johnson 4927 Lee Avenue St. Louis, MO 63115-1726 Class H Gary L. Lange 5% (Municipal) Susan D. Lange 13 Muirfield Court North St. Charles, MO 63304 Class H David L. Ferguson 9% (Municipal) Jill A. Ferguson 873 D Foxsprings Drive Chesterfield, MO 63017 Class I WASNER & Co. 83% (Money) For Account of Paine Webber Managed Assts - Sundry Holdings Attn: Judy Guille 01-04-04 1632 Chestnut Street Philadelphia, PA 19103 Class P Home Insurance Company 72% (Government) Att. Edward F. Linekin 59 Maiden Lane 21st Floor New York, NY 10038 Class P Home Indemnity Company 6% (Government) Att. Edward F. Linekin 59 Maiden Lane 21st Floor New York, NY 10038 Class Q* Gruntal & Co. Inc. 10% (High Yield) FBO 535-92269-19 14 Wall Street New York, NY 10005 Class Q* PJM & Sons Inc. 14% (High Yield) Pension Plan & Trust 8 Linnea Place Ringwood, NJ 07456
34
Class of Common Stock Names and Addresses Percent of - --------------------- of Record Owners Outstanding ------------------- Shares of Class Owned ----------- Class Q* Gruntal & Co. Inc. 12% (High Yield) FBO 215-31152-13 14 Wall Street New York, NY 10005 Class Q* Chin Fook Dune & Moy 10% (High Yield) Bow Song JT/WROS 51-42 Codwise Place Elmhurt, NY 11373 Class Q* Gruntal & Co. Inc. 11% (High Yield) 14 Wall Street New York, NY 10005 Class T EG&C Inc. 5% (International) EG&G Master Trust 45 William Street Wellesley, MA 02181-4078 Class U State of Oregon 43% (Strategic) Treasury Department 159 State Capital Building Salem, OR 07310
- ------------------------ * The High Yield Fund ceased oeprations as of November 30, 1994. As of such date, no person owned of record or, to RBB's knowledge, beneficially, more than 25% of the outstanding shares of all classes of RBB. As of the above date, directors and officers as a group owned less than one percent of the shares of RBB. Litigation. There is currently no material litigation affecting RBB. 35 - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND STATEMENT OF NET ASSETS August 31, 1994 - --------------------------------------------------------------------------------
NUMBER OF SHARES VALUE --------- ----------- COMMON STOCKS AND WARRANTS (62.7%) Banking (1.9%) Prime Resources Group, Inc. Warrants** 238,000 $ 1,888,125 Prime Resources Group, Inc.** 762,000 6,045,175 ----------- 7,933,300 ----------- Construction (2.1%) Stone & Webster, Inc. 256,000 8,544,000 ----------- Drugs (2.4%) Merck & Co., Inc. 290,000 9,896,250 ----------- Drugs and Health Care (0.6%) Tambrands, Inc. 70,000 2,598,750 ----------- Electronic & Other Electrical Equipment (5.8%) EG&G, Inc. 400,000 6,350,000 Hewlett Packard Co. 140,000 12,582,500 Motorola, Inc. 89,000 4,806,000 ----------- 23,738,500 ----------- Electronic Computers (11.2%) GRC International, Inc.** 600,000 7,425,000 Honeywell, Inc. 321,000 11,515,875 International Business Machines Corp. 210,000 14,411,250 Storage Technology** 350,000 12,556,250 ----------- 45,908,375 ----------- Entertainment (5.8%) Acclaim Entertainment, Inc.** 399,500 6,791,500 Boardwalk Casino, Inc.** 460,000 2,415,000 Boardwalk Casino, Inc. Warrants** 475,000 831,250 Mirage Resorts, Inc.** 210,000 4,436,250 Time Warner, Inc. 250,000 9,531,250 ----------- 24,005,250 ----------- Financial Services (2.3%) Merrill Lynch & Co., Inc. 233,000 9,465,625 ----------- Food & Kindred Products (1.0%) Conagra, Inc. 126,000 4,126,500 -----------
See Accompanying Notes to Financial Statements. F-1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND STATEMENT OF NET ASSETS (CONTINUED) August 31, 1994 - --------------------------------------------------------------------------------
NUMBER OF SHARES VALUE --------- ----------- COMMON STOCKS AND WARRANTS (Continued) Health Care (5.2%) Columbia/HCA Healthcare, Corp. 289,000 $12,282,500 National Health Laboratories Holdings, Inc.** 725,000 8,971,875 ----------- 21,254,375 ----------- Insurance (5.0%) Allstate Corp. 289,000 7,514,000 Travelers, Inc. Warrants** 493,000 4,745,125 USF&G Corp. 600,000 8,100,000 ----------- 20,359,125 ----------- Medical & Medical Services (0.8%) Acuson Corp.** 250,000 3,500,000 ----------- Metals & Mining (11.9%) Homestake Mining Co. 444,000 8,380,500 Inco Ltd. 300,000 8,625,000 Newmont Mining Corp. 244,000 10,461,500 Pegasus Gold, Inc.** 583,000 9,328,000 Placer Dome, Inc. 340,000 7,735,000 Rayrock Yellowknife Research, Inc.** 300,000 3,665,730 Viceroy Resource Corp.** 110,000 692,110 ----------- 48,887,840 ----------- Semi-Conductors & Related Products (2.4%) LSI Logic Corp.** 310,000 9,765,000 ----------- Steel (0.3%) CBI Industries, Inc. 45,000 1,355,625 ----------- Telecommunications (3.1%) Comcast Corp. Special Class A Non-Voting 290,000 4,640,000 Tele-Communications, Inc. Class A** 350,000 7,896,875 ----------- 12,536,875 ----------- Transportation (0.9%) Kansas City Southern Industries, Inc. 92,700 3,592,125 ----------- TOTAL COMMON STOCKS AND WARRANTS (Cost $235,224,312) 257,467,515 -----------
See Accompanying Notes to Financial Statements. F-2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND STATEMENT OF NET ASSETS (CONCLUDED) August 31, 1994 - --------------------------------------------------------------------------------
PAR MATURITY (000) VALUE -------- -------- ------------ UNITED STATES TREASURY OBLIGATIONS (9.8%) U.S. Treasury Bill 4.115% 09/15/94 $ 28,000 $ 27,955,398 U.S. Treasury Strip 11/15/22 97,500 12,121,200 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $41,336,436) 40,076,598 ------------ REPURCHASE AGREEMENTS (26.0%) Greenwich Capital Markets Inc. 4.875% 09/01/94 106,956 106,956,000 (Agreement dated 08/31/94 to be repurchased at $106,970,484 collateralized by $108,870,000 U.S. Treasury Notes 6.875% due 08/31/99. Market value of collateral is $108,964,387). ------------ TOTAL REPURCHASE AGREEMENTS (Cost $106,956,000) 106,956,000 ------------ TOTAL INVESTMENTS AT VALUE (Cost $383,516,748*) (98.5%) 404,500,113 OTHER ASSETS IN EXCESS OF LIABILITIES (1.5%) 6,157,515 ------------ NET ASSETS (Applicable to 28,213,375 RBB shares) (100.0%) $410,657,628 ------------ ------------ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE ($410,657,628 [div] 28,213,375) $14.56 ------ ------ * Cost for Federal income tax purposes at August 31, 1994 is $383,545,038. The gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $23,947,344 Gross Depreciation (2,992,269) ----------- Net Appreciation $20,955,075 ----------- -----------
** Non-income producing. See Accompanying Notes to Financial Statements. F-3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND STATEMENT OF OPERATIONS For the Year Ended August 31, 1994 - -------------------------------------------------------------------------------- INVESTMENT INCOME: Dividends $ 1,006,608 Interest 1,370,892 ----------- Total investment income 2,377,500 ----------- EXPENSES: Investment advisory fees 1,050,728 Administration fees 294,045 Directors' fees 1,768 Custodian fees 47,340 Transfer agent fees 199,675 Legal fees 33,134 Audit fees 8,433 Registration fees 124,990 Amortization expense 14,499 Insurance expense 3,769 Printing expense 24,168 Miscellaneous 4,509 ----------- 1,807,058 Less fees waived (1,589) ----------- Total expenses 1,805,469 ----------- Net investment income 572,031 ----------- REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments 1,521,236 Increase in net unrealized appreciation on investments 16,450,701 ----------- Net gain on investments 17,971,937 ----------- Net increase in net assets resulting from operations $18,543,968 ----------- -----------
See Accompanying Notes to Financial Statements. F-4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
For the For the Year Ended Year Ended August 31, 1994 August 31, 1993 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income $ 572,031 $ 114,525 Net gain on investments 17,971,937 13,169,032 --------------- --------------- Net increase in net assets resulting from operations 18,543,968 13,283,557 --------------- --------------- Distributions to Shareholders: Dividends to shareholders from net investment income: RBB shares ($.0785 and $.0875, respectively, per share) (572,031) (213,921) Distributions to shareholders from net realized capital gains: RBB shares ($3.9751 and $.0788, respectively, per share) (10,054,939) (227,058) --------------- --------------- Total distributions to shareholders (10,626,970) (440,979) --------------- --------------- Net capital share transactions 342,051,251 18,870,498 --------------- --------------- Total increase in net assets 349,968,249 31,713,076 Net Assets: Beginning of year 60,689,379 28,976,303 --------------- --------------- End of year $ 410,657,628 $60,689,379 --------------- --------------- --------------- ---------------
See Accompanying Notes to Financial Statements. F-5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout Each Period) - --------------------------------------------------------------------------------
For the For the For the Year Ended Year Ended Year Ended August 31, 1994 August 31, 1993 August 31, 1992 --------------- --------------- --------------- NET ASSET VALUE, BEGINNING OF YEAR $ 16.72 $ 11.99 $ 12.11 --------------- --------------- --------------- Income From Investment Operations: Net Investment Income .0785 .0464 .1912 Net Gains (Losses) on Securities (both realized and unrealized) 1.8151 4.8499 .0402 --------------- --------------- --------------- Total From Investment Operations 1.8936 4.8963 .2314 --------------- --------------- --------------- Less Distributions Dividends (from net investment income) (.0785) (.0875) (.1871) Distributions (from capital gains) (3.9751) (.0788) (.1643) --------------- --------------- --------------- Total Distributions (4.0536) (.1663) (.3514) --------------- --------------- --------------- NET ASSET VALUE, END OF YEAR $ 14.56 $ 16.72 $ 11.99 --------------- --------------- --------------- --------------- --------------- --------------- Total Returns 14.41% 41.17% 1.99% RATIOS/SUPPLEMENTAL DATA: Net Assets, end of year $ 410,657,628 $60,689,379 $28,976,303 Ratios of Expenses to Average Net Assets 1.28%(a) 1.14%(a) 1.25%(a) Ratios of Net Investment Income to Average Net Assets .41% .30% 1.66% Portfolio Turnover Rate 150% 344% 175% For the For the Year Ended Year Ended August 31, 1991 August 31, 1990 --------------- --------------- NET ASSET VALUE, BEGINNING OF YEAR $ 11.00 $ 11.53 --------------- --------------- Income From Investment Operations: Net Investment Income .3744 .3574 Net Gains (Losses) on Securities (both realized and unrealized) 1.6891 (.1856) --------------- --------------- Total From Investment Operations 2.0635 .1718 --------------- --------------- Less Distributions Dividends (from net investment income) (.4043) (.3951) Distributions (from capital gains) (.5492) (.3067) --------------- --------------- Total Distributions (.9535) (.7018) --------------- --------------- NET ASSET VALUE, END OF YEAR $ 12.11 $ 11.00 --------------- --------------- --------------- --------------- Total Returns 19.91% 1.48% RATIOS/SUPPLEMENTAL DATA: Net Assets, end of year $24,725,586 $ 1,396,198 Ratios of Expenses to Average Net Assets 1.30%(a) 1.40%(a) Ratios of Net Investment Income to Average Net Assets 3.42% 3.32% Portfolio Turnover Rate 41% 98%
(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 Warburg Pincus Growth and Income Fund would have been 1.28%, 1.14%, 1.28%, 2.17% and 3.81% for the years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively. See Accompanying Notes to Financial Statements. F-6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND NOTES TO FINANCIAL STATEMENTS August 31, 1994 - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. (the 'Company') is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Company was incorporated in Maryland on February 29, 1988, and currently has seventeen investment Portfolios, one of which is included in this financial statement. The Company has authorized capital of thirty billion shares of common stock of which 25.9 billion are currently classified into fifty-five classes. Each class represents an interest in one of seventeen investment portfolios of the Company, sixteen of which are currently in operation. The classes have been grouped into fifteen separate 'families', seven of which have begun investment operations: the RBB Family, the BEA Family, the Sansom Street Family, the Bedford Family, the Cash Preservation Family, the Laffer/Canto Equity Portfolio and the Bradford Family. The RBB Family represents interests in seven portfolios, one of which is covered by this report. A) Security Valuation -- Fund securities for which market quotations are readily available are valued at market value, which is currently determined using the last reported sales price. If no sales are reported, as in the case of some securities traded over-the-counter, portfolio securities are valued at the mean between the last reported bid and asked prices. Corporate bonds and government securities are valued on the basis of quotations provided by an independent pricing service which uses information with respect to transactions on bonds, quotations from bond dealers, market transactions in comparable securities and various relationships between securities in determining value. Short-term obligations with maturities of 60 days or less are valued at amortized cost which approximates market value. B) Security Transactions and Investment Income -- Security transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Certain expenses, principally distribution, transfer agent and printing, are class specific expenses and vary by class. Expenses not directly attributable to a specific portfolio or class are allocated based on relative net assets of each Portfolio and class, respectively. C) Dividends and Distributions to Shareholders -- Dividends from net investment income, if any, are declared and paid at least quarterly. Any net realized capital gains will be distributed at least annually. D) Implementation of AICPA Statement of Position 93-2 -- As of September 1, 1993, the Funds implemented AICPA Statement of Position 93-2 -- Determination, Disclosure and Financial Statement Presentation of Income, Capital Gain, and Return of Capital Distributions by Investment Companies. Adoption of this standard results in the reclassification to paid-in capital of permanent differences between tax and financial reporting of net investment income and net realized gain (loss). The change has had no material effect on paid-in capital or other components of the net F-7 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) August 31, 1994 - -------------------------------------------------------------------------------- assets of any of the Funds at September 1, 1993. Distributions to shareholders and net asset values were not affected by this change. E) Federal Income Taxes -- No provision is made for Federal taxes as it is the Company's intention to have each portfolio to continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholder which will be sufficient to relieve it from Federal income and excise taxes. F) Organization Costs -- Costs incurred by the Company in connection with its organization and initial registration and public offering of shares have been deferred by the Company. Organization costs are being amortized on a straight-line basis for a five-year period which began upon the commencement of operations of the Company. G) Repurchase Agreements -- Money market instruments may be purchased subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price. The agreements are conditioned upon the collateral being deposited under the Federal Reserve book-entry system or with the Fund's custodian or a third party sub-custodian. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Pursuant to a vote on September 30, 1993, shareholders approved a new advisory contract between the Fund and Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of Warburg, Pincus Counsellors G.P. Under the new agreement, the Fund pays Warburg an advisory fee at an annual rate of .75% of the Fund's average daily net assets. The prior advisory agreement between the Fund and PNC Institutional Management Corp. ('PIMC') and a prior sub-advisory agreement between Warburg and PIMC was terminated as of that date. PNC Bank serves as custodian for the Fund. PFPC Inc. ('PFPC'), an indirect wholly owned subsidiary of PNC Bank Corp., serves as transfer and dividend disbursing agent. Also, PFPC and Counsellors Fund Services, Inc. ('Counsellors') serve as co-administrators for the Fund. The co-administration fees are computed daily and payable monthly at an annual rate of .20% of the first $125 million of average daily net assets and .15% of average daily net assets in excess of $125 million for PFPC and .05% of the first $125 million of average daily net assets and .10% of average daily net assets in excess of $125 million for Counsellors. For the year ended August 31, 1994, co-administration fees were $269,859 and $24,186 for PFPC and Counsellors, respectively. F-8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) August 31, 1994 - -------------------------------------------------------------------------------- 3. PURCHASES AND SALES OF SECURITIES For the year ended August 31, 1994, purchases and sales of investment securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES ---------------------------- PURCHASES SALES ------------ ------------ $389,713,864 $195,361,396
4. CAPITAL SHARES Transactions in capital shares for each year were as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 1994 AUGUST 31, 1993 --------------------------- -------------------------- SHARES VALUE SHARES VALUE ----------- ------------ ----------- ----------- Shares sold 29,256,806 $410,956,025 1,275,517 $19,722,217 Shares issued in reinvestment of dividends 67,788 894,152 11,281 158,165 Shares repurchased (4,741,678) (69,798,926) (73,729) (1,009,884) ----------- ------------ ----------- ----------- Net increase 24,582,916 $342,051,251 1,213,069 $18,870,498 ----------- ------------ ----------- ----------- ----------- ------------ ----------- ----------- Shares authorized 100,000,000 100,000,000 ----------- ----------- ----------- -----------
5. NET ASSETS At August 31, 1994, net assets consisted of the following: Capital paid-in $388,969,467 Accumulated net realized gain on investments 704,796 Unrealized appreciation on investments 20,983,365 ------------ $410,657,628 ------------ ------------
F-9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WARBURG PINCUS GROWTH AND INCOME FUND REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of net assets of Warburg Pincus Growth & Income Fund of The RBB Fund, Inc., as of August 31, 1994, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of investments held by the custodians as of August 31, 1994. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Warburg Pincus Growth and Income Fund of The RBB Fund, Inc., as of August 31, 1994, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. COOPERS & LYBRAND L.L.P. 2400 Eleven Penn Center Philadelphia, Pennsylvania October 14, 1994 F-10 - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----