-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VZcGvhCXt6UTlHEhdQrp8nnJL7z1/qAFP2zDP9h9drRUHAorv/VQw9//ZIjnegZ3 xoH3Kz6H9A1ppbSlEAkSBA== 0001024739-98-000987.txt : 19981102 0001024739-98-000987.hdr.sgml : 19981102 ACCESSION NUMBER: 0001024739-98-000987 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980831 FILED AS OF DATE: 19981026 DATE AS OF CHANGE: 19981030 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: N-30D SEC ACT: SEC FILE NUMBER: 811-05518 FILM NUMBER: 98730352 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 N-30D 1 ANNUAL REPORT AUGUST 31, 1998 ANNUAL REPORT CREDIT| ASSET BEA A member of SUISSE| MANAGEMENT INTERNATIONAL EQUITY FUND EMERGING MARKETS EQUITY FUND U.S. CORE EQUITY FUND GLOBAL TELECOMMUNICATIONS FUND SELECT ECONOMIC VALUE EQUITY FUND LONG-SHORT MARKET NEUTRAL FUND U.S. CORE FIXED INCOME FUND STRATEGIC GLOBAL FIXED INCOME FUND HIGH YIELD FUND MUNICIPAL BOND FUND BEA International Equity Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are writing to report on the results of the BEA International Equity Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund's Institutional Class was $22.70, compared to an NAV of $22.22 on August 31, 1997. As a result, the Institutional Class's total return (assuming reinvestment of dividends and distributions) was up 16.74%. By comparison, the MSCI EAFE Index (the "Index") was only up by 0.13% during the same period. The NAV of the Fund's Advisor Class was $22.56, compared to an NAV of $22.17 on August 31, 1997. As a result, the Advisor Class's total return (assuming reinvestment of dividends and distributions) increased by 16.33%. By comparison, the Index rose by 0.13% during the same period. Three factors contributed most positively to the Fund's strong outperformance during the year. The first, by far, was our strategy in Europe, notably stock selection and, to a lesser extent, regional and country allocation. Stock selection was most successful in France, the U.K., Italy, the Netherlands and Germany. Top-performing European stocks in the Fund included Cap Gemini S.A. and Danone in France; Vodafone Group plc and Compass Group plc in the U.K.; and Credito Italiano in Italy. Our decision to overweight Europe as a region versus the Index also added value, as European markets have been among the world's strongest for some time now. Country overweights in France and Italy magnified the effectiveness of our stock selection in those markets. The second factor driving outperformance was our significant underweighting of Japan, which we have maintained since late 1996. As the Japanese economy remains mired in recession and political gridlock, this approach continues to benefit the Fund's return. The final main contributor to outperformance was our near-total absence from Asian markets, whether developed or emerging. This worked to greatest effect in Hong Kong and Malaysia. We expect to remain minimally exposed to or out of Asia well into 1999, as there is little indication that the region's severe economic woes may have run their course. As other developments occur in the international equity markets or at BEA, we will be sure to keep you informed. Meanwhile, if you have questions, please feel free to call upon us at any time. Sincerely yours, BEA International Equities Management Team William P. Sterling, Executive Director Richard W. Watt, Managing Director Steven D. Bleiberg, Managing Director Susan Boland, Senior Vice President Emily Alejos, Vice President Robert Hrabchak, Vice President 1 BEA International Equity Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA International Equity Institutional Class and the MSCI EAFE Index from Inception 10/1/92 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA INTERNATIONAL EQUITY INSTITUTIONAL MSCI CLASS EAFE INDEX -------------------- ---------- 10/1/92 10,000 10,000 11/30/92 9,685 9,571 2/28/93 9,906 9,918 5/31/93 11,218 12,062 8/31/93 12,159 12,962 11/30/93 12,120 11,928 2/28/94 13,783 13,841 5/31/94 12,999 13,735 8/31/94 13,891 14,405 11/30/94 13,080 13,732 2/28/95 11,435 13,258 5/31/95 12,500 14,451 8/31/95 12,773 14,517 11/30/95 12,387 14,815 2/29/96 13,352 15,539 5/31/96 13,901 16,041 8/31/96 13,498 15,706 11/30/96 14,166 16,606 2/28/97 14,614 16,090 5/31/97 15,361 17,303 8/31/97 15,650 17,179 11/30/97 16,087 16,588 2/28/98 18,109 18,633 5/31/98 20,072 19,278 8/31/98 18,270 17,201 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 16.74% Three Years 13.07% Five Years 8.71% From Inception 11.41% ------------------------------ Comparison of Change in Value of $10,000 Investment in the BEA International Equity Advisor Class and the MSCI EAFE Index from Inception 11/1/96 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA INTERNATIONAL EQUITY ADVISOR MSCI CLASS EAFE INDEX -------------------- ---------- 11/1/96 10,000 10,000 11/30/96 10,398 10,369 2/28/97 10,716 10,046 5/31/97 11,254 10,803 8/31/97 11,461 10,726 11/30/97 11,776 10,357 2/28/98 13,243 11,634 5/31/98 14,656 12,037 8/31/98 13,333 10,740 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 16.33% From Inception 16.73% ------------------------------ Note: Past performance is not predictive of future performance. 2 BEA International Equity Fund of The RBB Fund, Inc. Schedule of Investments August 31, 1998 Number of Shares Value ---------- ------------- COMMON STOCKS, WARRANTS AND RIGHTS -- 91.3% Argentina -- 0.3% Sodigas del Sur S.A. .................. 403,923 $ 745,416 Sodigas Pampeana S.A. ................. 558,962 844,809 ------------ 1,590,225 ------------ Denmark -- 1.3% Tele Danmark A/S Cl. B ................ 83,110 8,810,042 ------------ Finland -- 2.0% Nokia Oyj Cl. A ....................... 174,177 12,430,087 ------------ France -- 16.3% Accor# ................................ 20,161 4,646,241 Alcatel Alsthom S.A.# ................. 93,724 15,144,910 AXA S.A.# ............................. 116,140 13,362,978 Banque Nationale de Paris ............. 91,665 6,056,714 Bouygues .............................. 31,990 6,116,531 Cap Gemini S.A.# ...................... 72,792 11,454,579 Etablissements Economiques du Casino Guichard- Perrachon S.A.# ..................... 96,400 9,134,349 Groupe Danone ......................... 34,780 9,204,047 LaGardere Groupe ...................... 182,932 6,871,557 Rhone Poulenc Ltd., Cl. A ............. 93,504 4,494,837 Suez Lyonnaise des Eaux ............... 64,840 10,664,041 Total S.A. Cl. B# ..................... 46,000 4,467,682 ------------ 101,618,466 ------------ Germany -- 13.6% Allianz AG Holding Registered Shares ................... 19,698 5,785,941 BMW# .................................. 10,061 7,587,782 BMW New# .............................. 2,077 1,531,094 Deutsche Lufthansa AG# ................ 280,350 6,978,903 Henkel KGaA ........................... 122,802 9,818,533 Mannesmann AG ......................... 170,642 15,820,702 Porsche AG Pfd. ....................... 1,846 4,051,023 RWE AG# ............................... 126,662 6,198,394 Siemens AG ............................ 187,590 12,392,464 Systeme, Anwendungen, Produkte in der Datenverarbeitung AG Pfd.# .......... 14,263 8,395,186 Tarkett Sommer AG ..................... 9,893 221,588 Volkswagen AG ......................... 91,036 6,710,866 ------------ 85,492,476 ------------ Ireland -- 1.7% Allied Irish Banks plc ................ 452,000 6,176,129 Bank of Ireland ....................... 297,174 4,692,576 ------------ 10,868,705 ------------ Italy -- 8.4% Banca di Roma S.p.A ................... 3,117,968 $ 6,020,003 Credito Italiano ...................... 1,915,368 9,204,009 Olivetti S.p.A ........................ 1,472,200 3,294,363 Seat S.p.A ............................ 18,428,538 11,747,486 Telecom Italia Mobile S.p.A ........... 1,196,206 7,851,850 Telecom Italia S.p.A .................. 1,349,736 10,423,987 Telecom Italia Savings Shares S.p.A ........................ 787,600 3,920,263 ------------ 52,461,961 ------------ Japan -- 15.1% Acom Company, Ltd. .................... 59,600 2,954,883 Bridgestone Corp. ..................... 117,000 2,577,165 Canon, Inc. ........................... 88,000 1,785,678 Casio Computer Company, Ltd.# ............................... 404,000 2,832,778 Citizen Watch Co. ..................... 447,000 3,181,776 Dai Nippon Printing Company, Ltd ................................. 3,000 41,880 Daiichi Pharmaceutical Co., Ltd ................................. 252,000 3,123,450 FamilyMart Co., Ltd.# ................. 112,600 4,067,284 Fuji Photo Film Co. ................... 98,000 3,158,155 Ito-Yokado Co., Ltd. .................. 83,000 3,862,242 Merrill Lynch "Honda Motor Corp." - (CPS) ...................... 3,200 3,536,640 Minebea Company# ...................... 203,000 2,058,899 Mitsubishi Corp. ...................... 591,000 3,193,802 Mitsubishi Heavy Industries, Ltd ................................. 1,000,000 3,640,484 Mitsubishi Steel Manufacturing Co., Ltd. ........................... 500 372 Mitsui & Co., Ltd. .................... 398,000 2,139,542 Mitsui Chemicals Industries# .......... 754,700 1,790,668 Morgan Stanley "Cannon Corp." - (CPS) ...................... 1,860 1,852,107 Morgan Stanley "Sony Corp." - (CPS) ............................... 1,750 2,695,627 Nintendo Co., Ltd. .................... 34,900 3,235,646 Nippon Express Co., Ltd. .............. 571,000 2,612,550 Nippon Paper Industries Company# ............................ 514,000 1,667,341 Nippon Telegraph & Telephone ........................... 304 2,303,845 Promise Co., Ltd. ..................... 67,100 2,803,952 Rohm Co., Ltd. ........................ 50,300 5,130,107 Sankyo Co., Ltd. ...................... 150,000 3,261,562 Sekisui House, Ltd. ................... 523,000 3,959,819 Sony Corp. ............................ 24,200 1,767,136 Sumitomo Corp. ........................ 798,000 3,283,787 Sumitomo Metal Mining Co. ............. 520,000 1,642,609 See Accompanying Notes to Financial Statements. 3 BEA International Equity Fund (Concluded) Number of Shares Value ---------- ------------- Japan -- (continued) TDK Corp. ............................. 77,100 $ 5,346,050 Terumo Corp.# ......................... 112,000 2,114,030 Toppan Printing Company, Ltd ................................. 373,000 3,698,561 Toyota Motor Corp. .................... 142,000 3,027,268 ------------- 94,347,695 ------------- Mexico -- 0.0% Telefonos de Mexico S.A. Unsponsored ADR ..................... 4,400 7,700 ------------- Netherlands -- 5.6% Heineken N.V .......................... 101,721 4,467,343 Internationale Nederlanden Groep# .............................. 125,186 7,372,430 Koninklijke KPN BT N.V. ............... 187,912 8,488,706 Nutreco Holding N.V. .................. 172,908 6,168,800 VNU Verenigd Bezit .................... 198,490 8,358,146 ------------- 34,855,425 ------------- South Africa -- 0.0% South African Breweries Limited ............................. 311 4,380 ------------- Spain -- 2.2% Corp. Bancaria de Espana# ............. 194,400 3,725,355 Banco Central Hispanoamericano S.A.# .............. 538,579 5,052,604 Telefonica S.A. ....................... 134,863 5,159,848 ------------- 13,937,807 ------------- Sweden -- 0.7% Foreningsbanken AB .................... 14,878 336,618 Skandia Forsakrings AB ................ 266,130 3,734,491 ------------- 4,071,109 ------------- Switzerland -- 7.5% Nestle S.A. ........................... 4,866 9,023,198 Novartis AG Registered Shares .............................. 7,310 11,366,753 Roche Holding AG ...................... 896 9,270,739 Swiss Reinsurance Group Registered Shares ................... 2,169 4,800,371 UBS AG ................................ 20,778 6,708,883 Zurich Allied AG ...................... 9,208 5,513,315 ------------- 46,683,259 ------------- United Kingdom -- 16.6% Avis Europe plc ....................... 1,802,230 7,303,202 BG plc ................................ 1,284,015 7,955,355 Boots Company plc ..................... 192,903 3,207,569 British Petroleum plc ................. 210,550 2,656,600 Cable & Wireless Communications plc .................. 1,153,662 10,142,047 CGU plc ............................... 326,299 4,764,529 United Kingdom -- (continued) Compass Group plc ..................... 1,093,800 $ 9,908,843 Glaxo Wellcome ........................ 238,708 7,194,941 Lloyds TSB Holdings Group plc ......... 360,608 4,305,391 National Grid Group plc ............... 800,511 5,763,994 Orange plc ............................ 352,536 4,191,308 SmithKline Beecham plc ................ 823,664 9,723,596 Unilever plc .......................... 377,132 3,517,518 Vodafone Group plc .................... 1,120,682 15,632,019 WPP Group plc ......................... 1,123,213 6,150,319 Zeneca Group plc ...................... 29,342 1,147,267 ------------- 103,564,498 ------------- TOTAL COMMON STOCKS, WARRANTS AND RIGHTS (Cost $493,672,542) ................. 570,743,835 ------------- PREFERRED STOCK -- 0.0% Israel -- 0% Geotek Communications, Inc. ........... 600 -- ------------- Par (000) ----- SHORT-TERM INVESTMENTS -- 6.9% BBH Grand Cayman U.S Dollar Time Deposit 4.938% 09/01/98 ..................... $43,178 43,178,000 ------------- TOTAL SHORT-TERM INVESTMENTS (Cost $43,178,000) .................. 43,178,000 ------------- TOTAL INVESTMENTS -- 98.2% (Cost $542,850,542*) ................ 613,921,835 ------------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.8% .............. 11,180,630 ------------- TOTAL NET ASSETS -- 100% ................ $ 625,102,465 ============= *Cost for Federal income tax purposes at August 31, 1998 is $549,191,720. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ............... $ 97,794,595 Gross Depreciation ............... (33,064,480) ------------ Net Appreciation ................. $ 64,730,115 ============ #Security or a portion thereof is out on loan. INVESTMENT ABBREVIATIONS ADR ...................................... American Depository Receipts CPS ...................................... Currency Protected Shares See Accompanying Notes to Financial Statements. 4 BEA International Equity Fund of The RBB Fund, Inc. Statement of Assets and Liabilities August 31, 1998 ASSETS Investments at value (Cost $542,850,542) ..................... $ 613,921,835 Collateral received for securities loaned .................... 88,971,334 Investments sold receivable .................................. 12,189,860 Tax Reclaim receivable ....................................... 712,439 Dividend receivable .......................................... 600,164 Interest receivable .......................................... 54,807 Prepaid expenses ............................................. 51,417 ------------- Total Assets ............................................... 716,501,856 LIABILITIES Payable upon return of securities loaned ..................... 88,971,334 Accrued expenses payable ..................................... 1,425,889 Investments purchased payable ................................ 982,591 Other liabilities ............................................ 19,577 ------------- Total Liabilities .......................................... 91,399,391 NET ASSETS (Applicable to 27,471,070 BEA Institutional Shares and 71,823 BEA Advisor Shares) ................................... $ 625,102,465 ============= NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($623,482,335 divided by 27,471,070) ............................................... $ 22.70 ============= NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA ADVISOR SHARE ($1,620,130 divided by 71,823) ......... $ 22.56 ============= NET ASSETS CONSISTED OF: Capital Paid-In .............................................. $ 499,946,470 Accumulated Net Investment Loss .............................. (3,213,146) Accumulated Net Realized Gain on Security and Foreign Exchange Transactions ................. 57,163,781 Net Unrealized Appreciation on Investments and Other ...................................... 71,205,360 ------------- NET ASSETS ...................................................... $ 625,102,465 =============
See Accompanying Notes to Financial Statements. 5 BEA Emerging Markets Equity Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are writing to report on the results of the BEA Emerging Markets Equity Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund's Institutional Class was $10.44, compared to an NAV of $19.64 on August 31, 1997. As a result, the Institutional Class's total return (assuming reinvestment of dividends and distributions) was down 42.96%. By comparison, the MSCI Emerging Markets Free Index (the "Index") fell by 49.56% during the same period. The NAV of the Fund's Advisor Class was $10.48, compared to an NAV of $19.60 on August 31, 1997. As a result, the Advisor Class's total return (assuming reinvestment of dividends and distributions) was down 42.86%. By comparison, the Index fell by 49.56% during the same period. Given the high level of volatility in emerging equity markets due to the "contagion" effect of Asian currency devaluations that began in the summer of 1997, most equity funds that focus on emerging markets have experienced large declines. While the fact that this is true of the Fund is a matter of concern, we note that the Fund has fared better than its Index and many of its contemporaries as well. Three factors contributed to the Fund declining less than the Index: o We raised a substantial level of cash toward the end of the fiscal year. This helped us to avoid some of the turbulence in Latin American and EMEA (i.e., Europe, Middle East and Africa) markets, which is still going on as we write. o We maintained a very underweighted exposure to Asia relative to the Index. Our analysis continues to suggest that Asian fundamentals are deteriorating rather than improving. There is also a serious decline in social conditions that, in turn, has raised existing political tensions. o We overweighted EMEA markets that we felt were reasonably well-insulated from global contagion. This group included Portugal, Greece, Israel and Egypt. Each does little business with Asia or Russia, and their stock markets have enjoyed the benefits of strong domestic liquidity trends for some time now. Thank you for your support, and please feel free to call upon us at any time if you have questions. Sincerely yours, BEA Emerging Markets Equities Management Team William P. Sterling, Executive Director Richard W. Watt, Managing Director Steven D. Bleiberg, Managing Director Susan Boland, Senior Vice President Emily Alejos, Vice President Robert Hrabchak, Vice President 6 BEA Emerging Markets Equity Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA Emerging Markets Equity Institutional Class and the MSCI Emerging Markets Free Index from Inception 2/1/93 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA EMERGING MSCI EMERGING MARKETS EQUITY MARKETS EQUITY INDEX INSTITUTIONAL CLASS -------------- ------------------- 2/1/93 10,000 10,000 2/28/93 10,027 10,159 5/31/93 10,815 10,923 8/31/93 12,377 12,443 11/30/93 14,653 14,648 2/28/94 17,078 17,058 5/31/94 14,839 15,724 8/31/94 16,832 18,257 11/30/94 15,879 17,189 2/28/95 11,460 13,765 5/31/95 12,677 15,243 8/31/95 12,720 15,263 11/30/95 11,835 14,349 2/29/96 12,992 15,795 5/31/96 13,881 16,481 8/31/96 13,144 15,846 11/30/96 13,295 15,817 2/28/97 14,938 17,699 5/31/97 14,605 17,759 8/31/97 14,235 16,573 11/30/97 12,683 13,717 2/28/98 12,894 14,298 5/31/98 11,634 12,734 8/31/98 8,120 8,360 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year (42.96)% Three Years (13.90)% Five Years (8.08)% From Inception (3.83)% ------------------------------ Comparison of Change in Value of $10,000 Investment in the BEA Emerging Markets Equity Advisor Class and the MSCI Emerging Markets Free Index from Inception 11/1/96 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA EMERGING MSCI EMERGING MARKETS EQUITY MARKETS FREE ADVISOR CLASS INDEX -------------- ------------- 11/1/96 10,000 10,000 11/30/96 10,200 10,106 2/28/97 11,451 11,309 5/31/97 11,190 11,347 8/31/97 10,896 10,589 11/30/97 9,701 8,765 2/28/98 9,869 9,135 5/31/98 8,913 8,136 8/31/98 6,227 5,341 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year (42.86)% From Inception (22.85)% ------------------------------ Note: Past performance is not predictive of future performance. 7 BEA Emerging Markets Equity Fund of The RBB Fund, Inc. Schedule of Investments August 31, 1998 Number of Shares Value ---------- ------------- COMMON STOCKS, WARRANTS AND RIGHTS -- 75.8% Argentina -- 2.5% Banco de Galicia y Buenos Aires S.A. de C.V. ADR# ................... 8,300 $ 95,450 Perez Companc S.A. .................... 67,500 267,343 Telefonica de Argentina S.A. .......... ADR# ................................ 11,900 266,262 ---------- 629,055 ---------- Brazil -- 13.7% Banco Bradesco S.A. PN ................ 31,182,222 175,039 Banco Bradesco S.A. Rights ............ 67,339 7 Banco Itau S.A. PN .................... 722,224 307,133 Ceval Alimentos S.A. .................. 47,548,688 112,426 Companhia Energetica de Minas Gerais PN ........................... 6,943,013 129,914 Companhia Paranaense de Energia ADR ......................... 25,400 139,700 Companhia Paranaense de Energia PN Cl. B .................... 15,429,900 91,864 Companhia Saneamento .................. 2,307,489 194,294 Companhia Vale do Rio Doce PN .................................. 26,398 350,252 Encorpar PN ........................... 1,055,582 1,742 Companhia Brasileira de Distribuicao Grupo Pao de Acucar ........................... 15,000 202,500 Santista Alimentos S.A. ............... 223,907 114,263 Telecomunicacoes Brasileiras S.A. ADR# ........................... 10,208 721,578 Telecomunicacoes do Rio de Janeiro S.A. PN ..................... 8,733 316 Telecomunicacoes do Sao Paulo, S.A. ON ............................. 2,079,900 229,970 Telecomunicacoes de Sao Paulo, S.A. PN ............................. 1,493,285 212,102 Uniao de Bancos Brasileriros S.A. GDR ............................ 9,400 141,000 Usinas Siderurgica de Minas Gerais S.A. PN ...................... 65,028 271,008 ---------- 3,395,108 ---------- Chile -- 2.7% Chilectra S.A. ADR .................... 7,617 122,478 Compania de Telecomunicaciones de Chile S.A. ADR ................... 11,210 171,653 Distribucion Y Servicio D & S S.A. ADR ............................ 11,145 101,698 Empresa Nacional de Electricidad S.A. ADR ............................ 12,158 110,182 Enersis S.A. ADR ...................... 9,552 173,130 ---------- 679,141 ---------- Colombia -- 0.0% Cementos Paz del Rio ADR .............. 118 $ 1,104 ---------- Croatia -- 1.1% Pliva D.D. GDR 144A ................... 32,200 277,619 ---------- Czech Republic -- 0.8% SPT Telecom A.S ....................... 18,045 199,729 ---------- Egypt -- 4.4% Al-Ahram Beverages Co., S.A.E. 144A GDR ..................... 29,450 941,072 Suez Cement Company 144A GDR ............................ 10,800 158,784 ---------- 1,099,856 ---------- Greece -- 6.5% Alpha Credit Bank ..................... 6,811 502,442 Ergo Bank S.A ......................... 4,230 337,759 Hellenic Bottling Co. S.A. ............ 4,610 101,689 Hellenic Telecommunications Organization S.A. ................... 22,856 264,199 STET Hellas Telecommunications S.A. ADR ............................ 5,000 146,250 Titan Cement Company S.A. ............. 4,248 262,309 ---------- 1,614,648 ---------- Hungary -- 3.7% Matav RT ADR# ......................... 20,061 406,235 MOL Magyar Olaj - es Gazipari Rt. GDR 144A ........................ 20,000 391,920 Richter ............................... 3,800 128,683 ---------- 926,838 ---------- India -- 7.0% Bharat Heavy Electricals Ltd. Participation Notes ................. 32,135 172,843 Hindustan Petroleum Corporation Ltd. Participation Notes ............ 51,900 341,646 ITC Agro-Tech, Ltd. GDR ............... 10,700 158,663 Larsen & Toubro Ltd. Participation Notes ................. 2,093 8,535 Mahanagar Telephone Nigam Ltd. 144A GDR# ...................... 17,400 164,341 Mahindra and Mahindra Ltd. Participation Notes ................. 7,750 28,853 Mahindra and Mahindra Ltd. 144A GDR ............................ 27,158 101,109 Morgan Stanley India Investment Fund, Inc. ............... 86,756 504,269 Ranbaxy Laboratories, Ltd. 144A GDR ............................ 8,100 96,820 Ranbaxy Laboratories, Ltd. GDR ................................. 1,600 20,640 State Bank of India, Ltd. GDR ......... 15,605 130,614 ---------- 1,728,333 ---------- See Accompanying Notes to Financial Statements. 8 BEA Emerging Markets Equity Fund (Continued) Number of Shares Value ---------- ------------- Israel -- 4.4% Bank Leumi of Israel Ltd. ............. 115,730 $ 185,090 Blue Square Chain Stores Properties & Investment ADR ................................. 17,700 245,587 ECI Telecommunications Ltd. ........... 13,500 371,250 First International Bank of Israel Ltd. ......................... 70,104 81,273 Koor Industries Ltd., ADR ............. 11,200 200,200 ---------- 1,083,400 ---------- Lebanon -- 0.8% Solidere 144A GDR ..................... 18,920 198,660 ---------- Mexico -- 9.8% Cementos Mexicanos S.A. de C.V. ................................ 5,725 11,678 Cementos Mexicanos S.A. de C.V. Cl. B .......................... 77,849 189,781 Cifra S.A. de CV Class V ADR# ................................ 20,689 224,958 Coca-Cola Femsa S.A. ADR# ............. 20,100 218,587 Corparacion GEO S.A. de C.V. Cl. B .......................... 32,802 83,229 Corporacion Industrial San Luis S.A. de C.V. CPO .................... 53,174 71,957 Fomento Economico Mexicano, S.A. de C.V. ADR# ................... 13,639 233,561 Grupo Modelo S.A. de C.V. ............. Cl. C ............................... 37,735 267,337 Grupo Televisa S.A. de C.V. ........... GDS ................................. 10,871 187,525 Kimberly-Clark de Mexico S.A. ......... de C.V. Cl. A ....................... 78,310 170,646 Telefonos de Mexico S.A. .............. ADR# ................................ 22,005 785,303 ---------- 2,444,562 ---------- Peru -- 0.5% Credicorp Limited ADR ................. 11,800 112,838 ---------- Poland -- 1.9% Elektrim Spolka Akcyjna S.A ........... 57,220 476,187 ---------- Portugal -- 1.2% Electricidade de Portugal S.A. ........ 13,148 $ 306,444 ---------- Russia -- 1.9% Global TeleSystem Group, Inc.# ........ 6,500 208,000 Lukoil Holding ADR Pfd. ............... 4,100 15,674 Mosenergo ADR 144A .................... 8,429 10,080 PLD Telekom, Inc. ..................... 27,600 65,550 Surgutneftegaz ADR# ................... 39,130 112,080 Unified Energy Systems ................ 21,158 58,904 ---------- 470,288 ---------- Singapore -- 0.8% Singapore Airlines Ltd. *** ........... 14,062 60,174 Singapore Press Holdings Ltd. ......... 9,710 68,340 Singapore Telecommunications Ltd. ................................ 47,713 69,579 ---------- 198,093 ---------- South Africa -- 2.0% Anglo American Corporation of South Africa Ltd. ................... 8,380 211,285 Liberty Life Association of Africa Limited ...................... 9,989 116,598 South African Breweries Limited ............................. 12,407 174,753 ---------- 502,636 ---------- Taiwan -- 5.6% Morgan Stanley Taiwan Opals ........... 16,400 1,377,600 ---------- Turkey -- 4.5% Akbank T.A.S. ......................... 11,849,958 217,712 Eregli Demir Ve Celik Fabrikalari T.A.S. .................. 2,880,200 246,424 Haci Omer Sabanci Holdings 144A ................................ 28,614 373,665 Yapi Ve Kredi Bankasi A.S. ............ 14,830,849 277,821 ---------- 1,115,622 ---------- TOTAL COMMON STOCKS, WARRANTS AND RIGHTS (Cost $29,253,491) .................. 18,837,761 ---------- See Accompanying Notes to Financial Statements. 9 Par (000) Value ---------- ----------- SHORT-TERM INVESTMENTS -- 14.3% BBH Grand Cayman U.S. Dollar Time Deposit 4.938% 09/01/98 ................. $ 3,553 $ 3,553,000 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $3,553,000) ............... 3,553,000 ----------- BONDS -- 8.4% Banco Nacional de Desenvolvimento Economico 144A Bonds (B1, BB-) 10.300% 12/16/98 ................ 1,106 876,505 Government of Bulgaria Discount FRN, Series A (B2, NR) 6.688% 07/28/24 .................BGL 500 284,063 Cia. Petroleos Mexicanos Guarantee Notes (Ba2, BB) 8.656% 07/15/05 ................. 300 261,000 Republic of Poland Discount Bond (Baa3, BBB-) 6.688% 10/27/24 .................PLZ 600 570,000 United Mexican States Certificado de Tesoreria (NR, NR) 0.000% 12/17/98 ................. 1,115 104,466 ----------- TOTAL BONDS (Cost $2,438,228) ............... 2,096,034 ----------- TOTAL INVESTMENTS -- 98.5% (Cost $35,244,719*) ............. 24,486,795 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5% .......... 367,270 ----------- TOTAL NET ASSETS -- 100% ............ $24,854,065 =========== *Cost for Federal income tax purposes at August 31, 1998 is $35,943,070. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ............ $ 228,583 Gross Depreciation ............ (11,684,858) ------------ Net Appreciation .............. $(11,456,275) ============ #Security or a portion thereof is out on loan. CURRENCY ABBREVIATIONS BGL .................................. Bulgarian Lev PLZ .................................. Polish Zloty INVESTMENT ABBREVIATIONS ADR .................................. American Depository Receipts ADS .................................. American Depository Shares GDR .................................. Global Depository Receipts See Accompanying Notes to Financial Statements. 10 BEA Emerging Markets Equity Fund of The RBB Fund, Inc. Statement of Assets and Liabilities August 31, 1998 ASSETS Investments at value (Cost $35,244,719) ..................... $ 24,486,795 Collateral received for securities loaned ................... 3,331,400 Dividend receivable ......................................... 121,310 Interest receivable ......................................... 85,866 Investments sold receivable ................................. 10,501 Prepaid expenses ............................................ 5,819 Other assets ................................................ 332,016 ------------ Total Assets .............................................. 28,373,707 LIABILITIES Payable upon return of securities loaned .................... 3,331,400 Accrued expenses payable .................................... 165,399 Other liabilities ........................................... 22,843 ------------ Total Liabilities ......................................... 3,519,642 NET ASSETS (Applicable to 2,319,065 BEA Institutional Shares and 60,696 BEA Advisor Shares) .................................. $ 24,854,065 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($24,217,996 divided by 2,319,065) ............................................... $ 10.44 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA ADVISOR SHARE ($636,069 divided by 60,696) .......... $ 10.48 ============ NET ASSETS CONSISTED OF: Capital Stock (Par .001 per share) .......................... $ 2,380 Paid-In Capital ............................................. 59,766,486 Accumulated Net Investment Loss ............................. (281,648) Accumulated Net Realized Loss on Security and Foreign Exchange Transactions ................ (23,872,754) Net Unrealized Depreciation on Investments and Other ..................................... (10,760,399) ------------ NET ASSETS ..................................................... $ 24,854,065 ============
See Accompanying Notes to Financial Statements. 11 BEA U.S. Core Equity Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are writing to report on the results of the BEA U.S. Core Equity Fund (the "Fund") for the fiscal year ended August 31, 1998. Performance Review At August 31, 1998, the net asset value ("NAV") of the Fund was $21.73, compared to an NAV of $24.40 on August 31, 1997. As a result, the Fund's total return (assuming reinvestment of dividends and distributions) was 3.18%. By comparison, the S&P 500 Index (the "Index") gained 8.11% during the same period. The Fund underperformed the Index primarily due to unfavorable selection of industry sectors and the stocks within them. This was most notable in commodity-oriented areas like basic materials and energy, in which we emphasized metals, paper, and explorers, producers and distributors of oil and natural gas. We shifted to an overweight position in these sectors relative to the Index in early 1998 as a result of our belief that their valuations were irrationally low and were already discounting a significant amount of bad news. Our overweights performed well during the year's first quarter, but experienced heavy selling pressure toward mid-year as investors returned their buying focus to the small group of big-name "mega-cap" stocks that have powered the bull market for several years now. Returns were most positive among consumer and health care stocks. Our top-performing consumer names included stable earners such as Clorox Company, Hershey Foods and Newell Co., as well as major retailers like Home Depot, Inc. and Wal-Mart Stores. In health care, selection was most successful in pharmaceutical companies, particularly Smithkline Beecham, Johnson & Johnson and Pharmacia & Upjohn. As developments occur that we believe would be of interest to you, we will keep you informed. Meanwhile, if you have any questions about your portfolio or the capital markets generally, please feel free to call upon us at any time. Sincerely yours, BEA Domestic Equities Management Team William W. Priest, Jr., Chief Executive Officer & Executive Director John B. Hurford, Executive Director Eric N. Remole, Managing Director James A. Abate, Senior Vice President Marc E. Bothwell, Vice President Michael A. Welhoelter, Vice President 12 BEA U.S. Core Equity Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA U.S. Core Equity Fund and the S&P 500 Index from Inception 9/1/94 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA U.S. CORE S&P 500 EQUITY FUND INDEX ----------- ------- 09/01/94 10,000 10,000 11/30/94 9,553 9,615 02/28/95 10,251 10,398 05/31/95 11,103 11,455 08/31/95 11,975 12,149 11/30/95 12,746 13,168 02/29/96 13,940 14,007 05/31/96 14,383 14,720 08/31/96 14,080 14,421 11/30/96 16,150 16,837 02/28/97 16,786 17,672 05/31/97 17,943 19,049 08/31/97 19,475 20,275 11/30/97 22,338 21,625 02/28/98 24,994 23,838 05/31/98 25,226 24,880 08/31/98 21,934 21,917 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 3.18% Three Years 18.84% From Inception 19.05% ------------------------------ Note: Past performance is not predictive of future performance. 13 BEA U.S. Core Equity Fund of The RBB Fund, Inc. Schedule of Investments August 31, 1998 Number of Shares Value --------- ----- COMMON STOCKS -- 83.9% Advertising -- 1.1% Interpublic Group of Companies ................ 12,170 $ 693,690 --------- Aerospace -- 0.7% Textron, Inc. ................................. 2,700 169,425 United Technologies ........................... 3,600 261,225 --------- 430,650 --------- Agriculture -- 0.6% Archer-Daniels-Midland ........................ 24,565 368,471 --------- Airlines -- 0.1% Delta Air Lines ............................... 400 40,800 --------- Automotive-- 1.0% Ford Motor .................................... 10,400 457,600 General Motors ................................ 1,900 109,725 Johnson Controls, Inc. ........................ 2,300 98,469 --------- 665,794 --------- Chemicals -- 0.3% Lyondell Petrochemical ........................ 8,000 172,500 --------- Computers, Software & Servicing-- 8.2% Autodesk, Inc. ................................ 1,900 44,412 Ceridian Corp. ................................ 7,600 368,600 Cisco Systems ................................. 2,100 171,937 Compaq Computer Corporation ................... 1,900 53,081 Dell Computer Corp. ........................... 3,000 300,000 EMC Corp. ..................................... 3,200 144,600 Gateway 2000 .................................. 8,300 392,694 I2 Technologies ............................... 22,315 315,199 International Business Machines ............... 3,500 394,187 Metacreations Corp. ........................... 18,255 58,188 Microsoft Corporation ......................... 30,900 2,964,469 --------- 5,207,367 --------- Conglomerates -- 1.0% General Electric Co. .......................... 7,600 608,000 --------- Construction & Building Materials -- 4.2% Fluor Corp.# .................................. 29,160 1,153,642 Sherwin Williams Co. .......................... 63,905 1,525,732 --------- 2,679,374 --------- Consumer Products & Services -- 4.6% Clorox Company ................................ 10,290 992,342 Newell Co. .................................... 28,860 1,378,065 Procter & Gamble .............................. 7,600 581,400 --------- 2,951,807 --------- Number of Shares Value --------- ----- Electronics -- 8.5% Altera Corp. ................................ 21,125 $ 615,266 Intel Corp. ................................. 25,780 1,835,214 Micron Technology# .......................... 69,420 1,579,305 Motorola, Inc. .............................. 26,365 1,135,343 Texas Instruments ........................... 4,300 205,056 --------- 5,370,184 --------- Energy & Oil Exploration -- 6.5% Anadarko Petroleum .......................... 14,495 416,731 Burlington Resources, Inc. .................. 2,840 83,957 Chevron Corp. ............................... 6,200 459,187 Columbia Gas System ......................... 1,000 49,750 DTE Energy .................................. 3,200 134,800 Edison International ........................ 22,500 639,844 Enron Oil & Gas ............................. 31,285 406,705 ENSCO International ......................... 8,830 92,715 Exxon Corporation ........................... 14,100 922,669 Marine Drilling ............................. 12,480 112,320 ONEOK Inc. .................................. 1,500 45,094 Pogo Producing .............................. 8,830 105,408 Royal Dutch Petroleum ....................... 2,200 87,450 Talisman Energy ............................. 5,400 78,975 Unocal Corp. ................................ 16,075 503,348 --------- 4,138,953 --------- Entertainment -- 0.9% Carnival Corp. Class A ...................... 12,100 349,387 CBS Corp. ................................... 9,200 239,200 --------- 588,587 --------- Financial Services -- 7.8% Allstate Corporation ........................ 9,200 345,000 American Express Company .................... 5,000 390,000 American International Group, Inc. .......... 500 38,656 BankAmerica Corporation ..................... 15,600 999,375 CIT Group, Inc. ............................. 18,820 483,439 Golden West Financial ....................... 2,900 220,762 Merrill Lynch ............................... 1,500 99,000 Northern Trust .............................. 4,900 273,175 St. Paul Cos., Inc. ......................... 5,400 165,038 SunAmerica, Inc. ............................ 9,700 600,794 SunTrust Banks .............................. 8,500 476,000 Transamerica Corp. .......................... 6,400 656,400 Wachovia Corporation ........................ 3,200 234,600 --------- 4,982,239 --------- Food & Beverage -- 1.8% Coca - Cola Co. ............................. 11,100 722,887 Hershey Foods ............................... 5,635 394,450 --------- 1,117,337 --------- Funeral Services -- 0.1% Service Corp. International ................. 1,500 50,812 --------- See Accompanying Notes to Financial Statements. 14 BEA U.S. Core Equity Fund (Concluded) Number of Shares Value --------- ----- Health Care -- 4.0% American Home Products ........................ 1,300 $ 65,163 Amgen, Inc. ................................... 700 42,613 Medtronic, Inc.# .............................. 40,735 2,092,761 United Healthcare ............................. 5,900 213,138 Wellpoint Health Networks ..................... 2,400 128,100 ---------- 2,541,775 ---------- Industrial Goods & Materials -- 4.4% Dover Corporation ............................. 45,285 1,234,016 Illinois Tool Works, Inc. ..................... 32,080 1,553,875 ---------- 2,787,891 ---------- Metals & Mining -- 3.3% Allegheny Teledyne ............................ 11,995 180,675 Aluminum Company of America# .................. 16,720 1,001,110 Bethlehem Steel ............................... 18,300 131,531 Inland Steel Industries ....................... 1,807 34,220 Newmont Mining ................................ 29,580 404,876 Phelps Dodge .................................. 2,965 132,684 USX-U.S. Steel Group .......................... 11,200 234,500 ---------- 2,119,596 ---------- Paper & Forest Products -- 1.4% Boise Cascade ................................. 2,920 71,358 Champion International ........................ 6,035 199,155 Georgia Pacific Corporation ................... 6,950 297,981 International Paper ........................... 4,280 158,360 Willamette Industries ......................... 5,715 140,732 ---------- 867,586 ---------- Pharmaceuticals -- 6.2% Bristol-Myers Squibb .......................... 11,890 1,163,734 Merck & Co. ................................... 5,700 660,844 Schering-Plough ............................... 14,735 1,267,210 Warner Lambert Co. ............................ 12,600 822,150 ---------- 3,913,938 ---------- Publishing & Information Services -- 4.8% Gannett Company, Inc. ......................... 38,660 2,280,940 Omnicom Group, Inc. ........................... 1,700 80,963 Tribune Co. ................................... 10,735 691,737 ---------- 3,053,640 ---------- Restaurants -- 0.2% Darden Restaurants ............................ 8,900 137,950 ---------- Retail -- 8.1% Dayton Hudson ................................. 11,200 403,200 Home Depot, Inc.# ............................. 45,060 1,734,810 Kroger Co. .................................... 13,700 616,500 Safeway, Inc. ................................. 1,400 55,125 TJX Companies, Inc. ........................... 17,700 394,931 Wal-Mart Stores# .............................. 32,645 1,917,894 ---------- 5,122,460 ---------- Number of Shares Value --------- ----- Telecommunications -- 3.7% Ameritech Corp. ............................. 11,400 $ 537,225 AT&T Corp. .................................. 15,800 791,975 BellSouth Corp. ............................. 6,200 425,088 General Instrument Corporation .............. 7,000 139,125 Lucent Technologies ......................... 2,400 170,100 Northern Telecom, Ltd. ...................... 3,800 181,450 WorldCom, Inc. .............................. 3,200 131,000 ----------- 2,375,963 ----------- Transportation -- 0.1% AMR Corporation ............................. 800 43,600 US Airways Group ............................ 700 40,775 ----------- 84,375 ----------- Trucking & Freight -- 0.3% NACCO Industries Cl. A ...................... 1,700 161,925 ----------- TOTAL COMMON STOCKS (Cost $58,979,812) ........................ 53,233,664 ----------- Par (000) ----- SHORT TERM INVESTMENTS -- 9.9% BBH Grand Cayman U.S. ................... Dollar Time Deposit 4.938%? 09/01/98 ...................... $ 6,316 6,316,000 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $6,316,000) ..................... 6,316,000 ----------- TOTAL INVESTMENTS -- 93.8% (Cost $65,295,812) .................... 59,549,664 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 6.2% ................ 3,964,301 ----------- TOTAL NET ASSETS -- 100% ................ $63,513,965 ----------- *Cost for Federal income tax purposes at August 31, 1998 is $65,347,764. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ......................... $2,323,433 Gross Depreciation ......................... (8,121,533) ----------- Net Appreciation ........................... $(5,798,100) =========== **Non-income producing securities. #Security or a portion thereof is out on loan. See Accompanying Notes to Financial Statements. 15 BEA U.S. Core Equity Fund of The RBB Fund, Inc. Statement of Assets and Liabilities August 31, 1998 ASSETS Investments at value (Cost $65,295,812) ..................... $ 59,549,664 Collateral received for securities loaned ................... 9,567,600 Investments sold receivable ................................. 3,994,117 Dividend receivable ......................................... 89,031 Prepaid expenses ............................................ 5,200 Interest receivable ......................................... 1,300 Other assets ................................................ 730 ------------ Total Assets .............................................. 73,207,642 LIABILITIES Payable upon return of securities loaned .................... 9,567,600 Accrued expenses payable .................................... 126,077 ------------ Total Liabilities ......................................... 9,693,677 NET ASSETS (Applicable to 2,923,534 BEA Institutional Shares) .. $ 63,513,965 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($63,513,965 divided by 2,923,534) .................................... $ 21.73 ============ NET ASSETS CONSISTED OF: Capital Stock (Par .001 per share) .......................... $ 2,924 Paid-In Capital ............................................. 42,420,318 Accumulated Net Investment Income ........................... 16,715 Accumulated Net Realized Gain on Security and Foreign Exchange Transactions ................ 26,820,156 Net Unrealized Depreciation on Investments and Other ..................................... (5,746,148) ------------ NET ASSETS ..................................................... $ 63,513,965 ============ See Accompanying Notes to Financial Statements. 16 BEA Global Telecommunications Fund Portfolio Manager's Letter September 24, 1998 Dear Shareholders: We are pleased to report on the results of the BEA Global Telecommunications Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value (NAV) of the Fund was $20.54, compared to an NAV of $17.30 on August 31, 1997. As a result, the Fund's total return was 25.38%. By comparison, the MSCI Telecommunications Index returned 40.56% during the same period. The Fund's performance was attributable to a combination of regional allocations and stock selection. On a regional level, our most effective decisions were to substantially underweight Asia and overweight Latin America. Because many Asian telecom stocks often are among the most liquid stocks in their domestic markets, they were hit especially hard by the "contagion" effect of currency devaluations and weakening stock prices that roiled global equity markets beginning in mid-1997. Our near-complete absence from a number of Asian markets during the period, then, proved quite helpful to the Fund's return. Stock selection was notably positive in emerging and developed Europe. In the emerging portion, one stock generated extraordinary results. This was Global TeleSystems Group, a young company that provides a broad range of telecommunications services throughout Western and Central Europe and also does business in the former Soviet Union. Among developed European markets, the Fund's top performers were the U.K., Germany, Spain and Portugal. Factors that adversely affected performance included our underweighting of the U.S.; stock selection in Canada; and a mixture of overweighting and poor stock selection in Israel. As developments occur in the telecommunications industry or at BEA that we believe would be of interest to you, we will be sure to keep you informed. Meanwhile, if you have questions, please feel free to call upon us at any time. Sincerely yours, BEA Global Telecommunications Management Team William P. Sterling, Executive Director Richard W. Watt, Managing Director Stephen D. Bleiberg, Managing Director James A. Abate, Senior Vice President Emily Alejos, Vice President Robert B. Hrabchak, Vice President Stephen R. Waite, Vice President 17 BEA Global Telecommunications Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA Global Telecommunications Advisor Class and the MSCI Telecommunications Index from Inception 12/4/96 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA GLOBAL MORGAN STANLEY TELECOMMUNICATIONS COMPOSITE INDEX FUND TELECOMMUNICATIONS ------------------ ------------------ 12/04/96 10,000 10,000 02/28/97 10,787 10,253 05/31/97 11,460 10,727 08/31/97 11,533 10,729 11/30/97 12,859 12,107 02/28/98 15,178 13,864 05/31/98 16,664 15,022 08/31/98 14,461 15,079 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 25.38% From Inception 23.58% ------------------------------ Note: Past performance is not predictive of future performance. 18 BEA Global Telecommunications Fund of The RBB Fund, Inc. Schedule of Investments August 31, 1998 Number of Shares Value --------- ----- COMMON STOCKS -- 84.3% Brazil -- 3.2% Companhia Riograndense Telecom ..................................... 11,300 $ 4,805 Telecomunicacoes Brasileiras S.A ......................................... 120,500 6,047 Telecomunicacoes Brasileiras S.A. PN ..................................... 30,500 3,320 Telecomunicacoes Brasileiras Celular S.A. PN ............................. 30,500 1,167 Telecomunicacoes de Minas Gerais S.A. PN Cl. B ........................ 70,000 2,800 Telecomunicacoes de Minas Gerais Celular S.A. PN ...................... 70,000 1,727 Telecomunicacoes do Rio de Janeiro S.A. PN ............................. 92,100 3,329 ---------- 23,195 ---------- Canada -- 6.6% BCE, Inc. ..................................... 292 9,399 Bell Canada International, Inc. ............... 730 8,304 Teleglobe, Inc. ............................... 300 7,350 Teleglobe, Inc. ............................... 730 17,781 Telesystem International Wireless Inc. ............................... 365 4,900 ---------- 47,734 ---------- China -- 2.2% China Telecommunications Ltd. ................. 670 15,410 ---------- Finland -- 2.0% Nokia Corp. ADR ............................... 219 14,632 ---------- Germany -- 2.4% Mannesmann AG ................................. 182 16,874 ---------- Greece -- 6.0% STET Hellas Telecommunications S.A. ADR .................................... 1,460 42,705 ---------- Israel -- 1.3% ECI Telecommunications Ltd. ................... 338 9,295 ---------- Italy -- 4.7% Olivetti S.p.A ................................ 8,030 17,969 Telecom Italia Savings Shares S.p.A ....................................... 3,210 15,978 ---------- 33,947 ---------- Mexico -- 1.7% Telefonos de Mexico S.A ....................... 348 12,419 ---------- Russia -- 1.3% PLD Telekom, Inc. ............................. 3,800 9,025 ---------- Sweden -- 1.7% Telefonaktiebolaget L.M. Ericsson ADR ................................ 584 12,520 ---------- Number of Shares Value --------- ----- United Kingdom -- 9.7% COLT Telecom Group plc ADR .................... 292 $ 42,048 Energis plc ................................... 1,071 14,840 Orange plc .................................... 1,095 13,018 ---------- 69,906 ---------- United States -- 41.5% Airtouch Communications, Inc. ................. 290 16,313 Amazon.com, Inc. .............................. 70 5,854 America Online ................................ 170 13,929 At Home Corp. Series A ........................ 690 19,665 AT&T Corp. .................................... 454 22,757 Broadcom Corp. Cl. A .......................... 395 20,145 Century Communications Corp. Cl. A ....................................... 1,060 24,645 Cisco Systems ................................. 285 23,334 Global TeleSystems Group, Inc. ................ 1,160 37,120 Lucent Technologies ........................... 310 21,971 Lycos, Inc. ................................... 270 5,830 MCI Communications ............................ 150 7,500 MediaOne Group, Inc. .......................... 360 14,760 Sprint Corp. .................................. 150 10,059 Tele-Communications, Inc. Cl. A ....................................... 230 7,590 Uniphase Corp. ................................ 340 13,611 WorldCom, Inc. ................................ 632 25,873 Yahoo, Inc. ................................... 99 6,726 ---------- 297,682 ---------- TOTAL COMMON STOCKS (Cost $620,629) ........................... 605,344 ---------- TOTAL INVESTMENTS -- 84.3% (Cost $620,629*) .......................... 605,344 ---------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 15.7% ................... 112,749 ---------- TOTAL NET ASSETS -- 100% .................... $718,093 ========== *Also cost for Federal income tax purposes at August 31, 1998. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation .................... $ 98,231 Gross Depreciation .................... (113,516) ---------- Net Appreciation ...................... $ (15,285) ========== INVESTMENT ABBREVIATIONS ADR ........................................... American Depository Receipts See Accompanying Notes to Financial Statements. 19 BEA Global Telecommunications Fund of The RBB Fund, Inc. Statement of Assets and Liabilities August 31, 1998 ASSETS Investments at value (Cost $620,629) ........................ $ 605,344 Investments sold receivable ................................. 235,351 Due from advisor ............................................ 28,001 Dividend receivable ......................................... 199 Interest receivable ......................................... 119 Reclaim receivable .......................................... 60 --------- Total Assets .............................................. 869,074 LIABILITIES Accrued expenses payable .................................... 23,161 Overdraft liability ......................................... 127,820 --------- Total Liabilities ......................................... 150,981 NET ASSETS (Applicable to 34,964 BEA Advisor Shares) ........... $ 718,093 ========= NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA ADVISOR SHARE ($718,093 divided by 34,964) .......... $ 20.54 ========= NET ASSETS CONSISTED OF: Capital Stock (Par .001 Per) ................................ $ 35 Paid-In Capital ............................................. 553,301 Accumulated Net Investment Loss ............................. (260) Accumulated Net Realized Gain on Security and Foreign Exchange Transactions ................ 179,704 Net Unrealized Depreciation on Investments and Other ..................................... (14,687) --------- NET ASSETS ..................................................... $ 718,093 ========= See Accompanying Notes to Financial Statements. 20 BEA Select Economic Value Equity Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are writing to report on the results of the BEA Select Economic Value Equity Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund was $13.17, compared to an NAV of $15.00 on the Fund's inception on August 3, 1998. As a result, the Fund's total return declined 12.20%. By comparison, the S&P 500 Index (the "Index") fell 14.44% during the same period. The Fund's outperformance of the Index was due to our adoption of a fairly defensive investment posture. Specifically, we chose to emphasize stocks with attractive dividend yields and relative price stability. We also focused on historically defensive industry sectors such as telecommunications providers and the major integrated oil companies. Top-performing telecom stocks during the period included BellSouth Corp. and US West Communications Group, while Mobil Corp. and Exxon Corporation were the most successful of our major holdings in the energy and oil exploration. Positions in two other sectors also benefited relative returns. These were technology companies like Micron Technology; and consumer names like Hershey Foods Corp. and Procter & Gamble. As developments occur that we believe would be of interest to you, we will keep you informed. Meanwhile, if you have any questions about your portfolio or the capital markets generally, please feel free to call upon us at any time. Sincerely yours, BEA Select Economic Value Equities Management Team William W. Priest, Jr., Chief Executive Officer & Executive Director John B. Hurford, Executive Director James A. Abate, Senior Vice President Susan Everly, Vice President James J. Mecca, Vice President 21 BEA Select Economic Value Equity Fund of The RBB Fund, Inc. Statement of Net Assets August 31, 1998 Number of Shares Value --------- ----- COMMON STOCKS -- 96.7% Advertising -- 2.2% Interpublic Group of Companies ................................... 8,700 $ 495,900 ---------- Agriculture -- 2.6% Archer-Daniels-Midland ........................ 38,905 583,575 ---------- Computers, Software & Servicing -- 7.8% Applied Materials ............................. 4,400 108,075 Cisco Systems ................................. 2,900 237,437 I2 Technologies ............................... 19,400 274,025 Metacreations Corp. ........................... 6,900 21,994 Micron Technology# ............................ 20,100 457,275 Microsoft Corporation ......................... 7,000 671,563 ---------- 1,770,369 ---------- Conglomerates -- 3.3% General Electric Co. .......................... 9,300 744,000 ---------- Construction & Building Materials -- 3.4% Fluor Corp. ................................... 12,400 490,575 Sherwin Williams Co. .......................... 12,000 286,500 ---------- 777,075 ---------- Consumer Products & Services -- 3.2% Newell Co. .................................... 15,000 716,250 ---------- Electronics -- 5.3% Altera Corp. .................................. 3,500 101,938 Intel Corp. ................................... 6,500 462,719 KLA-Tencor Corp. .............................. 4,800 102,000 Motorola, Inc. ................................ 10,200 439,237 Teradyne, Inc. ................................ 5,100 88,612 ---------- 1,194,506 ---------- Energy & Oil Exploration -- 12.1% Anadarko Petroleum ............................ 3,700 106,375 Chevron Corp. ................................. 8,200 607,313 Exxon Corporation ............................. 9,300 608,569 Mobil Corp. ................................... 9,100 629,037 Talisman Energy ............................... 3,545 51,846 Texaco, Inc. .................................. 9,300 516,731 Unocal Corp. .................................. 7,100 222,319 ---------- 2,742,190 ---------- Financial Services -- 8.6% American Express Company ...................... 4,700 366,600 American International Group, Inc. ................................. 2,800 216,475 BankAmerica Corporation ....................... 2,800 179,375 CIT Group, Inc. ............................... 7,900 202,931 First Union Corp. ............................. 8,300 402,550 NationsBank Corp. ............................. 3,100 176,700 State Street Corp. ............................ 7,700 400,881 ---------- 1,945,512 ---------- Number of Shares Value --------- ----- Food & Beverage -- 2.6% Hershey Foods Corp. ........................... 8,300 $ 581,000 ---------- Health Care -- 3.5% Centocor, Inc. ................................ 3,900 126,750 Medtronic, Inc. ............................... 13,100 673,012 ---------- 799,762 ---------- Industrial Goods & Materials -- 3.3% Dover Corporation ............................. 10,400 283,400 Illinois Tool Works, Inc. ..................... 9,700 469,844 ---------- 753,244 ---------- Metals & Mining -- 7.3% Allegheny Teledyne ............................ 7,700 115,981 Aluminum Company of America ..................................... 8,300 496,962 Barrick Gold .................................. 25,200 327,600 Battle Mountain Gold .......................... 13,200 40,425 Cominco Ltd. .................................. 2,600 23,888 Homestake Mining .............................. 11,500 102,063 Inco, Ltd. .................................... 13,000 108,875 Newmont Mining ................................ 23,500 321,656 Phelps Dodge .................................. 1,300 58,175 Placer Dome, Inc. ............................. 7,300 58,856 ---------- 1,654,481 ---------- Paper & Forest Products -- 2.0% Champion International ........................ 2,800 92,400 Georgia Pacific Corporation ................... 3,300 141,488 International Paper ........................... 6,000 222,000 ---------- 455,888 ---------- Pharmaceuticals -- 7.5% Bristol-Meyers Squibb ......................... 6,600 645,975 Coulter Pharmaceutical, Inc. .................. 3,000 42,000 Procter & Gamble .............................. 7,600 581,400 Schering-Plough Corp. ?80660 .................. 5,000 430,000 ---------- 1,699,375 ---------- Publishing & Information Services -- 5.1% Gannett Company, Inc. ......................... 11,200 660,800 Tribune Co. ................................... 7,600 489,725 ---------- 1,150,525 ---------- Retail -- 4.4% Home Depot, Inc. .............................. 12,300 473,550 Wal-Mart Stores ? ............................. 9,100 534,625 ---------- 1,008,175 ---------- See Accompanying Notes to Financial Statements. 22 BEA Select Economic Value Equity Fund (Concluded) Number of Shares Value --------- ----- Telecommunications -- 12.5% Bell Atlantic Corp. ................... 15,100 $ 666,288 BellSouth Corp. ....................... 12,400 850,175 SBC Communications, Inc. .............. 16,700 634,600 U S West Communications Group ............................... 13,100 681,200 ------------ 2,832,263 ------------ TOTAL COMMON STOCKS (Cost $25,038,832) .................. 21,904,090 ------------ Par (000) ----- SHORT-TERM INVESTMENTS -- 1.1% BBH Grand Cayman U.S. Dollar Time Deposit 4.938% 09/01/98 ..................... $ 260 259,919 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $259,919) ..................... 259,919 ------------ TOTAL INVESTMENTS -- 97.8% (Cost $25,298,751) .................. 22,164,009 ------------ COLLATERAL RECEIVED FOR SECURITIES LOANED ................... 475,000 ------------ PAYABLE UPON RETURN OF SECURITIES LOANED ................... (475,000) ------------ Value ----- OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.2% .............. $ 495,431 ------------ NET ASSETS (Applicable to 1,721,030 BEA Institutional Shares) -- 100.0% ................... $22,659,440 ------------ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($22,659,440 divided by 1,721,030) $ 13.17 ============ *Cost for Federal income tax purposes at August 31, 1998 is $25,312,798. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ............... $ 64,409 Gross Depreciation ............... (3,213,198) Net Appreciation ................. $(3,148,789) ============ #Security or a portion thereof is out on loan. At August 31, 1998, Net Assets Consisted Of: Amount ------ Capital Paid-In ............................... $25,813,705 Accumulated Net Investment Income ............. 18,161 Accumulated Net Realized Loss on Security and Foreign Exchange Transactions.. (37,684) Net Unrealized Depreciation on Investments and Other ...................... (3,134,742) - - - - - -------------------------------------------------------------------------------- NET ASSETS .................................... $22,659,440 - - - - - -------------------------------------------------------------------------------- See Accompanying Notes to Financial Statements. 23 BEA Long-Short Market Neutral Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are writing to report on the results of the BEA Long-Short Market Neutral Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund was $15.27, compared to an NAV of $15.00 on the Fund's inception on August 3, 1998. As a result, the Fund's total return was 1.80%. By comparison, the Salomon Smith Barney U.S. One-Month Treasury Bill Index (the "Index") gained 0.4% during the same period. Essentially, the Fund outperformed its benchmark because our core stock selection strategy worked well. We correctly emphasized two of the five "drivers" that we believe contribute most to appreciation in stock prices. These were earnings, in the form of improving earnings expectations, and stability. Stocks that had been outperforming on a relative basis continued to do so, while the valuation driver remained fairly unimportant. Our underestimation of the strong performance potential of the financial strength driver modestly detracted from the Fund's return. We added value within each industry sector represented in the portfolio. This was especially true in financial services, in which our short positions declined significantly more than our long positions. Notable shorts included Lehman Brothers; Morgan Stanley, Dean Witter; Peoples Bank Bridgeport; and Union Planters Corp., all of which fell at least 25%. Some of the offsetting longs were Jefferson-Pilot Corp.; Kimco Realty; Transamerica Corp.; and Amsouth Bancorp, whose average decline was less than 15%. As developments occur that we believe would be of interest to you, we will keep you informed. Meanwhile, if you have any questions about your portfolio or the capital markets generally, please feel free to call upon us at any time. Sincerely yours, BEA Structured Equities Management Team William W. Priest, Jr., Chief Executive Officer & Executive Director Eric N. Remole, Managing Director Marc E. Bothwell, Vice President Michael A. Welhoelter, Vice President 24 BEA Long-Short Market Neutral Fund of The RBB Fund, Inc. Schedule of Investments August 31, 1998 Number of Shares Value --------- --------- INVESTMENTS IN SECURITIES -- 85.5% COMMON STOCKS -- 76.0% Advertising -- 2.4% Omnicom Group ................................... 3,200 $152,400 -------- Air Transport -- 1.4% Southwest Airlines .............................. 5,100 90,844 -------- Automotive -- 1.3% Navistar International Corp. .................... 3,800 79,800 -------- Business Services -- 2.7% Ceridian Corp. .................................. 2,900 140,650 Robert Half International, Inc. ................. 400 19,200 Storage Technology Corp. ........................ 600 13,050 -------- 172,900 -------- Chemicals -- 3.8% Air Products & Chemicals, Inc. .......................................... 3,200 97,800 Lyondell Petrochemical Co. ...................... 6,600 142,313 -------- 240,113 -------- Communications & Media -- 3.3% A.H. Belo Corp. Cl. A ........................... 5,100 94,350 CBS Corp. ....................................... 700 18,200 Comsat Corp. .................................... 700 15,269 Knight-Ridder, Inc. ............................. 1,700 80,963 -------- 208,782 -------- Computers, Software & Servicing -- 4.5% Cadence Design Systems .......................... 1,200 25,350 GTECH Holdings .................................. 1,000 26,250 Ingram Micro, Inc., Cl. A ....................... 1,500 67,500 Microsoft Corp. ................................. 600 57,563 PeopleSoft, Inc. ................................ 300 8,438 Pixar, Inc. ..................................... 2,700 77,794 Transactions Systems Architects, Inc. Cl. A .................................... 600 19,875 -------- 282,770 -------- Construction & Building Materials -- 3.9% Caterpillar, Inc. ............................... 500 21,094 Ingersoll Rand .................................. 2,200 87,450 Lafarge Corp. ................................... 2,300 65,694 Masco Corp. ..................................... 2,200 50,600 Vulcan Materials ................................ 200 22,300 -------- 247,138 -------- Consumer Products -- 0.9% Avon Products ................................... 900 56,588 -------- Electric Utilities -- 4.7% Niagara Mohawk Power ............................ 5,300 82,150 Pinnacle West Capital ........................... 4,900 211,619 -------- 293,769 -------- Number of Shares Value --------- --------- Electronics -- 3.0% Broadcom Corp. .................................. 700 $ 35,875 Kohls Corp. ..................................... 200 9,088 Linear Technology Corp. ......................... 3,000 141,000 -------- 185,963 -------- Entertainment -- 1.2% Clear Channel Communications ................................ 1,500 67,500 -------- Financial Services-- 11.0% AmSouth Bancorp ................................. 1,700 58,437 Equitable Companies ............................. 800 45,750 First Union Corp. ............................... 400 19,400 Franklin Resources .............................. 3,400 109,650 Hartford Financial Services, Inc ........................................... 300 13,425 Jefferson-Pilot Corp. ........................... 1,600 90,800 Old Republic International ...................... 500 11,156 Regions Financial Corp. ......................... 1,830 63,364 SLM Holding ..................................... 2,200 78,925 T. Rowe Price Associates, Inc. .................. 1,300 39,569 Transamerica Corp. .............................. 500 51,281 20th Century Industries ......................... 1,500 37,125 UnionBanCal Corp. ............................... 1,000 74,875 -------- 693,757 -------- Food & Beverage -- 3.9% Coors, (Adolph) Cl. B ........................... 2,000 82,500 Fleming Cos. .................................... 12,600 150,413 Tootsie Roll Industries ......................... 400 13,500 -------- 246,413 -------- Gas Utilities -- 0.3% Peoples Energy .................................. 500 16,563 -------- Health Care -- 4.5% Safeskin Corp. .................................. 300 10,125 Stryker Corp. ................................... 600 19,275 U.S. Surgical ................................... 1,100 43,931 Uniphase Corp. .................................. 500 19,969 Wellpoint Health Networks, Inc. .......................................... 3,600 192,150 -------- 285,450 -------- Lodging & Restaurants -- 0.3% Host Marriott ................................... 1,300 18,200 -------- Metals & Mining -- 0.9% Freeport-McMoran Copper & Gold, Inc. Cl. B .............................. 4,700 54,638 -------- Oil & Gas Exploration -- 1.7% ENSCO International ............................. 900 9,450 Helmerich & Payne ............................... 6,200 100,750 -------- 110,200 -------- See Accompanying Notes to Financial Statements. 25 BEA Long-Short Market Neutral Fund (Continued) Number of Shares Value --------- --------- Pharmaceuticals -- 1.6% ALZA Corp. .................................. 2,300 $ 82,800 Schering-Plough ............................. 200 17,200 --------- 100,000 --------- Real Estate -- 4.3% Kimco Realty ................................ 6,400 227,200 Simon Debartolo Group ....................... 1,600 46,500 --------- 273,700 --------- Retail -- 4.8% Dollar Tree Stores .......................... 500 14,500 Federated Department Stores, Inc. ...................................... 600 26,138 Office Depot ................................ 4,100 104,550 TJX Companies ............................... 7,100 158,419 --------- 303,607 --------- Metals & Mining -- 1.8% Bethlehem Steel ............................. 2,900 20,844 Inland Steel Industries ..................... 2,279 43,159 USX-U.S. Steel Group ........................ 2,500 52,344 --------- 116,347 --------- Telecommunications -- 4.5% AirTouch Communications ..................... 800 45,000 AT&T Corp. .................................. 2,500 125,313 Lucent Technologies ......................... 100 7,088 Tele-Communications International ............................. 1,000 20,750 Tellabs, Inc. ............................... 1,800 76,050 WorldCom, Inc. .............................. 200 8,188 --------- 282,389 --------- Telecommunications & Equipment -- 2.4% General Instrument Corp. .................... 4,800 95,400 Northern Telecom, Ltd. ...................... 660 31,515 Vitesse Semiconductor Corp. ................. 900 24,413 --------- 151,328 --------- Waste Management -- 0.9% Browning-Ferris Industries .................. 1,800 58,500 --------- TOTAL COMMON STOCKS (Cost $5,690,115) ......................... 4,789,659 --------- Par (000) Value ---------- --------- REPURCHASE AGREEMENT -- 9.5% Bear Stearns (Agreement dated 8/31/98, to be repurchased at $600,597) 5.81%, 09/01/98 ................ $ 600 $ 600,500 ---------- INVESTMENTS IN SECURITIES (Cost $6,290,615*) ....................... 5,390,159 ---------- Number of Shares ----------- SECURITIES SOLD SHORT -- (75.9%) Aerospace & Defense -- (1.1%) B.F. Goodrich Co. .......................... (2,200) (59,538) Northrop Grumman ........................... (200) (12,675) -------- (72,213) -------- Agriculture -- (2.1%) IMC Global, Inc. ........................... (2,700) (49,613) Pioneer Hi-Bred International .............. (2,400) (81,000) -------- (130,613) -------- Air Transport -- (2.0%) UAL Corp. .................................. (2,100) (126,656) -------- Apparel -- (0.7%) Fruit of the Loom, Inc., Cl. A ............. (2,100) (47,119) -------- Automotive -- (0.4%) Genuine Parts Co. .......................... (900) (28,181) -------- Broadcasting -- (0.8%) Univision Communications, Inc. - Cl. A ............................. (600) (15,975) USA Networks, Inc. ......................... (1,600) (31,400) -------- (47,375) -------- Building & Building Materials -- (3.2%) Armstrong World Industries ................. (3,000) (144,000) Johns Manville Corp. ....................... (2,600) (35,588) Lennar Corp. ............................... (1,100) (19,938) -------- (199,526) -------- Business Services -- (2.8%) ACNielsen Corp. ............................ (1,300) (26,081) Electronic Data Systems .................... (4,400) (147,400) -------- (173,481) -------- Chemicals -- (1.3%) Cabot Corp. ................................ (500) (10,875) Hercules, Inc. ............................. (2,800) (71,575) -------- (82,450) -------- See Accompanying Notes to Financial Statements. 26 BEA Long-Short Market Neutral Fund (Continued) Number of Shares Value --------- --------- Computers, Software & Servicing -- (2.0%) Advanced Micro Devices ................... (4,300) $ (56,706) Cabletron Systems ........................ (4,300) (30,100) Hewlett-Packard Co. ...................... (400) (19,425) Netscape Communications Corp. .................................. (1,200) (21,675) --------- (127,906) --------- Containers -- (0.8%) Crown Cork & Seal Co., Inc. .............. (1,500) (49,125) --------- Consumer Products -- (3.9%) American Standard Companies .............................. (400) (15,650) Gillette Co. ............................. (3,300) (135,713) Kimberly-Clark ........................... (600) (22,875) Whitman Corporation ...................... (4,600) (71,300) --------- (245,538) --------- Electric Utilities -- (3.4%) Unicom Corp. ............................. (2,300) (81,938) Wisconsin Energy Corp. ................... (4,600) (133,688) --------- (215,626) --------- Electronics -- (2.1%) Atmel Corp. .............................. (11,600) (69,963) Avnet, Inc. .............................. (900) (42,525) Vishay Intertechnology ................... (1,800) (18,900) --------- (131,388) --------- Financial Services -- (9.2%) Aetna, Inc. .............................. (900) (54,169) American Financial Group ................. (3,700) (123,025) First Tennessee National Corp. ........... (400) (9,525) Firstar Corp. ............................ (1,100) (42,625) Lehman Brothers Holdings, Inc. ................................... (1,000) (39,375) Morgan Stanley Dean Witter Discover & Co. ......................... (3,200) (185,800) People's Bank/Connecticut ................ (2,000) (42,000) Union Planters Corporation ............... (2,100) (84,525) --------- (581,044) --------- Food & Beverage -- (1.1%) Anheuser-Busch Cos. ...................... (900) (41,513) IBP, Inc. ................................ (1,600) (26,500) --------- (68,013) --------- Health Care -- (1.8%) Foundation Health Systems, Inc. ................................... (1,200) (13,425) Humana, Inc. ............................. (1,100) (14,300) United Healthcare ........................ (2,300) (83,088) --------- (110,813) --------- Number of Shares Value --------- --------- Industrial Goods & Materials -- (0.7%) Owens-Illinois, Inc. ..................... (500) $ (15,594) UNIFI, Inc. .............................. (1,200) (26,700) --------- (42,294) --------- Machinery -- (1.6%) Briggs & Stratton Corp. .................. (2,800) (103,075) --------- Medical Equipment -- (8.9%) Beckman Coulter, Inc. .................... (3,500) (193,813) E.G. & G., Inc. .......................... (500) (11,719) KLA-Tencor Corp. ......................... (500) (10,625) Perkin Elmer ............................. (4,300) (248,863) Raychem Corp. ............................ (3,200) (92,800) --------- (557,820) --------- Metals & Mining -- (0.7%) Battle Mountain Gold ..................... (14,200) (43,488) --------- Office Equipment & Supplies -- (2.0%) Harland ( John H. ) Co. .................. (9,800) (128,013) --------- Oil & Gas Exploration -- (2.4%) Baker Hughes, Inc. ....................... (3,600) (65,700) Transocean Offshore ...................... (1,300) (31,931) USX - Marathon Group ..................... (2,100) (54,600) --------- (152,231) --------- Oil Services -- (2.4%) Dynegy Inc. .............................. (1,000) (9,563) Kerr-McGee Corp. ......................... (3,700) (142,913) --------- (152,476) --------- Paper & Forest Products -- (2.6%) Georgia Pacific .......................... (3,800) (162,925) --------- Pharmaceuticals -- (1.5%) Dura Pharmaceuticals ..................... (1,800) (29,700) Forest Laboratories, Inc. ................ (1,200) (39,300) Monsanto Co. ............................. (500) (27,344) --------- (96,344) --------- Railroads -- (0.5%) Wisconsin Central Transportation Corp. ................... (2,300) (28,894) --------- Real Estate -- (0.4%) Archstone Communities Trust .............. (1,400) (27,125) --------- Recreation -- (2.3%) Brunswick Corp. .......................... (9,500) (141,906) --------- See Accompanying Notes to Financial Statements. 27 BEA Long-Short Market Neutral Fund (Continued)
Number of Shares Value --------- ------------ Retail Trade -- (4.7%) Bausch & Lomb, Inc. ................................ (700) $ (29,619) Circuit City Stores ................................ (2,300) (71,013) Gap, Inc. .......................................... (700) (35,744) General Nutrition .................................. (5,200) (69,225) Ikon Office Solutions .............................. (6,700) (37,269) Pep Boys-Manny, Moe & Jack ......................... (3,800) (55,813) ----------- (298,683) ----------- Telecommunications -- (2.6%) Andrew Corp. ....................................... (900) (13,331) Citizens Utilities Co. Cl. B ....................... (2,317) (16,653) Frontier Corp. ..................................... (3,400) (103,275) Southern New England Telecommunications ............................... (500) (32,406) ----------- (165,665) ----------- Tobacco -- (0.4%) UST, Inc. .......................................... (900) (23,513) ----------- Transportation -- (0.3%) Ryder System ....................................... (800) (18,850) ----------- Waste Management -- (3.2%) Republic Industries, Inc. .......................... (11,500) (203,406) ----------- TOTAL SECURITIES SOLD SHORT (Proceeds $5,892,364) ............................ (4,783,775) ----------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 90.4% .......................... 5,695,898 ----------- NET ASSETS (Applicable to 412,744 BEA Institutional Shares) -- 100.0% ................................ $ 6,302,282 =========== *Cost for Federal income tax purposes at August 31, 1998 is $6,302,528. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation - Investments ................... $ 9,716 Gross Depreciation - Investments ................... (922,085) Gross Appreciation - Short Sales ................... 1,122,686 Gross Depreciation - Short Sales ................... (14,094) ----------- Net Appreciation ................................. $ 196,223 =========== **Non-income producing securities
See Accompanying Notes to Financial Statements. 28 BEA Long-Short Market Neutral Fund of The RBB Fund, Inc. Statement of Assets and Liabilities August 31, 1998
ASSETS Investments at value (Cost $6,290,615) ................................................................ $ 5,390,159 Deposits with brokers and custodian bank for securities sold short .................................... 5,430,217 Interest receivable ................................................................................... 25,436 Dividends receivable .................................................................................. 5,656 Other assets .......................................................................................... 250,245 ------------ Total Assets ........................................................................................ 11,101,713 LIABILITIES Securities sold short (proceeds $5,892,364) ........................................................... 4,783,775 Payable for dividends on securities sold short ........................................................ 11,484 Accrued expenses payable .............................................................................. 4,172 ------------ Total Liabilities ................................................................................... 4,799,431 NET ASSETS (Applicable to 412,744 BEA Institutional Shares) .............................................. $ 6,302,282 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($6,302,282 divided by 412,744) ........................................... $ 15.27 At August 31, 1998, Net Assets Consisted Of: Amount ----------- Capital Stock ........................................................................................... $ 413 Paid-In Capital ......................................................................................... 6,191,010 Accumulated Net Investment Income ....................................................................... 9,716 Accumulated Net Realized Loss on Security and Foreign Exchange Transactions ........................................................... (106,990) Net Unrealized Appreciation on Investments and Other ................................................................................ 208,133 ----------- NET ASSETS .............................................................................................. $ 6,302,282 -----------
See Accompanying Notes to Financial Statements. 29 BEA U.S. Core Fixed Income Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are pleased to report on the results of the BEA U.S. Core Fixed Income Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund was $15.72, compared to an NAV of $15.65 on August 31, 1997. As a result, the Fund's total return (assuming reinvestment of dividends and distributions of $1.1034 per share) was 7.77%. By comparison, the Lehman Brothers Aggregate Bond Index (the "Index") posted a return of 10.56% during the same period. Underperformance, relative to the Index, during the period was principally attributable to the Fund's holdings in "spread product" (i.e., debt securities whose market valuation is greatly driven by the spreads between their yields and those of U.S. Treasury debt). Much of the underperformance occurred in the month of August alone. Market volatility in August was such that many spread product sectors generated their worst-ever, relative returns for a single month. Returns among the various spread product sectors have been negative over the last year as well, as a classic "flight to quality" reaction caused Treasuries to become the favored asset among fixed income investors. Factors driving the flight to quality include the financial crisis in Emerging Asia, problematic economic and political conditions in Japan, deterioration in the Russian economy and a generalized concern about possible currency devaluations. While Treasuries gained from the flight to quality, spread product fell. Indeed, yield spreads began to grow to their historically widest levels in September 1997, when the Fund's fiscal year started. This was particularly true of emerging market debt securities. Although the Fund's exposure to the emerging sector was modest throughout the period, the sector's weakness was sufficient to account for much of the Fund's underperformance. Returns were also adversely affected by the Fund's overweighting of corporate bonds and its underweighting of Treasuries relative to the Index. Looking ahead, we believe that the confluence of big-picture events that is driving the decline in global credit quality and liquidity will continue to dictate the direction of spread product prices for at least the balance of 1998. We are hopeful that global financial markets will stabilize enough for investors' key investment consideration to change from "Will it be lower tomorrow?" to "Is the asset fundamentally cheap?" Should this occur, the compelling relative value of the spread product currently held in the Fund suggests that performance will meaningfully improve. As developments occur in the fixed income markets or at BEA that we believe would be of interest to you, we will be sure to keep you informed. Meanwhile, if you have questions, please feel free to call upon us at any time. Sincerely yours, BEA Fixed Income Management Team Robert J. Moore, Executive Director William P. Sterling, Executive Director Gregg M. Diliberto, Managing Director Mark K. Silverstein, Managing Director Jo Ann Corkran, Senior Vice President Diane C. Damskey, Senior Vice President Ira Edelblum, Senior Vice President Robert W. Justich, Senior Vice President 30 BEA U.S. Core Fixed Income Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA U.S. Core Fixed Income Fund and the Lehman Brothers Aggregate Bond Index from Inception 4/1/94 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicits the following plot points: BEA U.S. CORE LEHMAN BROTHERS FIXED INCOME AGGREGATE BOND FUND INDEX ------------- -------------- 04/1/94 10,000 10,000 05/31/94 9,913 9,999 08/31/94 10,017 10,188 11/30/94 9,812 10,007 02/28/95 10,204 10,520 05/31/95 10,864 11,148 08/31/95 11,078 11,342 11/30/95 11,475 11,775 02/29/96 11,590 11,809 05/31/96 11,464 11,638 08/31/96 11,658 11,806 11/30/96 12,328 12,488 02/28/97 12,420 12,442 05/31/97 12,567 12,607 08/31/97 13,001 12,991 11/30/97 13,327 13,437 02/28/98 13,670 13,735 05/31/98 13,898 13,985 08/31/98 14,011 14,364 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 7.77% Three Years 8.14% From Inception 7.93% ------------------------------ Note: Past performance is not predictive of future performance. 31 BEA U.S. Core Fixed Income Fund of The RBB Fund, Inc. Statement of Net Assets August 31, 1998 Par (000) Value ---------- ----------- CORPORATE BONDS -- 36.2% Aerospace/Defense -- 0.0% Boeing Co. ................................ Debentures (Aa3, AA) 7.500% 08/15/42 ......................... $ 150 $ 171,000 ---------- Banking -- 6.7% Chase Manhattan Corp. Sub. Notes (A1, A) 6.375% 04/01/08 ......................... 2,960 2,989,600 Cie. Financiere de Paribas Sub. Notes (A3, A-) 6.950% 07/22/13 ......................... 2,625 2,657,812 Credit Lyonnais Perpetual Sub. Variable Rate Notes, Rule 144A (Baa2, NR) 6.750%+++ ............................... 2,780 2,654,900 First Republic Bank Sub. Notes (NR, BB+) 7.750% 09/15/12 ......................... 2,070 2,189,025 ForeningsSparbanken AB Perpetual Sr. Sub. FRN (A3, NR) 6.438%+++ ............................. 980 980,098 Perpetual Sub. FRN (A3, NR) 7.500%+++ ............................. 1,340 1,412,896 Fuji Finance (Cayman) Ltd. Medium Term Notes (A3, NR) 7.300% 09/11/98 ....................... 730 525,600 Perpetual Sub. Notes (Ba1, NR) 6.550%+++ ............................. 820 590,400 Fuji JGB Investment LLC 144A Noncum. Preferred Securities Series A (Ba1, NR) 9.870% 12/30/98 ......................... 2,150 1,724,923 Long Island Savings Bank, Inc. Sr. Bank Notes (Baa3, BBB) 7.000% 06/13/02 ......................... 250 259,687 National Westminster Bank Gtd Capital Notes (Aa3, AA-) 9.375% 11/15/03 ......................... 550 631,213 Okobank Perpetual Medium Term FRN (A3, NR) 6.188%+++ ............................... 1,970 1,930,600 Santander Financial Issuances Perpetual Sub. FRN (A2, NR) 6.588% .................................. 750 727,500 Skandinaviska Enskilda Banken AB Perpetual Sub. FRN (NR, NR) 7.500%+++ ............................. 1,905 1,948,015 (Baa1, NR) 6.625%+++ ............................. 2,280 2,296,393 144A (Baa1, BBB+) 6.500%+++ ............................. 2,200 2,183,808 Par (000) Value ---------- ----------- Banking -- (continued) Sovereign Bancorp Sr. Notes (NR, BBB-) 6.750% 07/01/00 ......................... $ 185 $ 186,619 Trans Financial Bank N.A Notes (A1, A) 6.480% 10/23/98 ......................... 645 645,411 ----------- 26,534,500 ----------- Broadcasting -- 1.1% Fox/Liberty Network LLC Sr. Discount Notes (B1, B) 9.75% 08/15/07 .......................... 665 405,650 8.875% 08/15/07 ......................... 1,705 1,606,962 Turner Broadcasting System Inc. Sr. Notes (Baa3, BBB-) 7.400% 02/01/04 ......................... 2,120 2,210,100 ----------- 4,222,712 ----------- Cable -- 0.5% CSC Holdings Inc. ......................... Sr. Notes (Ba2, BB+) 7.875% 12/15/07 ......................... 1,305 1,313,156 Diamond Cable Communications PLC Yankee Sr. Discount Notes (Caa1, B-) 10.75% 02/15/07++ ....................... 675 505,406 Videotron Holdings Plc Yankee Sr. Discount Notes (NR, BBB+) 11.00% 08/15/05++ ....................... 95 85,262 ----------- 1,903,824 ----------- Conglomerates -- 0.0% General Electric Capital Corp. Remarketed Reset Notes (Aaa, AAA) 6.290% 12/15/07 ......................... 160 163,203 ----------- Energy -- 1.4% AO Sibneft Loan Participation Notes (NR, NR) 9.688% 08/15/00 ......................... 455 146,156 KN Energy, Inc. Reset Put Notes (Baa2, BBB-) 6.300% 03/01/01 ......................... 1,965 1,989,562 LASMO (USA) Inc. Gtd. Debentures (Baa2, BBB) 7.300% 11/15/27 25 25,937 Petroleum Geo-Services ASA Yankee Sr. Notes (Baa3, BBB) 7.125% 03/30/28 ......................... 2,115 2,125,575 Valero Energy Corp. 144A Putable Asset Trusts (Baa3, BBB-) 6.750% 12/15/02 ......................... 1,220 1,253,550 ----------- 5,540,780 ----------- See Accompanying Notes to Financial Statements. 32 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- Entertainment -- 2.3% Time Warner, Inc. Debentures (Baa3, BBB-) 8.050% 01/15/16 ....................... $ 1,875 $2,069,531 7.480% 01/15/08 ....................... 170 181,262 (Ba1, BBB-) 6.850% 01/15/26 ....................... 6,375 6,622,031 ---------- 8,872,824 ---------- Financial Services -- 7.4% American General Institutional Capital Trust Co. 144A Gtd Notes, Series B (A2, A+) 8.125% 03/15/46 ......................... 2,160 2,513,700 Associates Corp. of North America Sr. Debentures (Aa3, AA-) 5.960% 05/15/37 ......................... 195 199,875 AT&T Capital Corp. Medium Term Notes Series 4 (Baa3, BBB) 6.260% 02/18/99 ....................... 345 345,794 6.410% 08/13/99 ....................... 155 155,695 6.920% 04/29/99 ....................... 815 820,494 6.470% 12/03/99 ....................... 950 955,528 6.480% 12/03/99 ....................... 2,730 2,746,209 BellSouth Capital Funding Corp. Debentures (Aa1, AAA) 6.040% 11/15/26 ......................... 2,975 3,064,250 Fifth Mexican Acceptance Corp. Gtd. Notes (NR, NR)**** 8.000% 12/15/98 ......................... 3,060 866,592 First Nationwide (Parent) Holdings, Inc. Sr. Notes (Ba3, B) 12.500% 04/15/03 ........................ 1,770 1,986,825 Ford Holdings, Inc. Gtd. Notes (A1, A) 9.250% 03/01/00 ......................... 115 121,181 General Motors Acceptance Corp. Notes (A2, A) 7.750% 01/15/99 ....................... 200 201,598 6.375% 12/01/01 ....................... 295 302,375 6.625% 04/24/00 ....................... 1,325 1,348,187 6.900% 06/06/00 ....................... 2,320 2,372,293 6.210% 09/19/00 ....................... 550 556,875 5.800% 02/23/01 ....................... 2,165 2,181,237 6.800% 04/17/01 ....................... 625 645,312 Industrial Credit & Investment Corp. 144A Yankee Medium Term Notes (Baa2, BB+) 7.550% 08/15/07 ......................... 40 34,850 John Hancock Mutual Life Insurance Co. ........................... 144A Surplus Notes (A1, AA-) 7.375% 02/15/24 ......................... 370 407,000 Par (000) Value ---------- ----------- Financial Services -- (continued) L'Auxiliare du Credit Foncier de France Gtd. Notes (Baa3, NR) 5.582% 09/25/98 .................... $ 2,200 $ 2,125,860 5.598% 10/20/98 .................... 155 149,776 (A3, A) 8.000% 01/14/02 .................... 1,660 1,764,796 Prudential Insurance Co. of America 144A Capital Notes (A3, A) 6.875% 04/15/03 ...................... 1,600 1,656,000 Residential Reinsurance Ltd. Notes, Series 1998-A2 (NR, NR) 9.330% 10/01/98 ...................... 600 600,000 Travelers Group Inc. Debentures (Aa2, AA-) 6.875% 02/15/49 ...................... 40 41,750 Trinity Re, Ltd. 144A FRN, Series 1998, Class A2 (Ba3, NR) 9.250% 12/31/98 .................... 495 485,100 Defeasance FRN, Series 1998, Class A1 (Aaa, NR) 7.490% 12/31/98 .................... 325 321,750 ----------- 28,970,902 ----------- Food & Beverage -- 0.1% Arisco Produtos Alimenticios S.A. Gtd. Notes (NR, NR) 10.750%? 05/22/05 ....................... 340 289,000 ----------- Health Care -- 2.2% Columbia/HCA Healthcare Corp. Debentures (Ba2, BBB) 8.360% 04/15/24 ......................... 1,485 1,377,724 Merck & Co., Inc. Medium Term Notes Series B (Aaa, AAA) 5.760% 05/03/37 ......................... 7,130 7,326,075 ----------- 8,703,799 ----------- Industrial Goods & Materials -- 1.3% Dresser Industries, Inc. Debentures (Aa3, A) 7.600% 08/15/49 ......................... 1,785 2,099,606 Seagate Technology, Inc. Sr. Debentures (Baa3, BBB) 7.450% 03/01/37 ......................... 2,615 2,644,419 ----------- 4,744,025 ----------- Packaging/Containers -- 0.0% Crown Packaging Enterprises Ltd. Yankee Sr. Secured Discount Notes (Ca, NR) 14.00% 08/01/06++ ....................... 550 6,187 ----------- See Accompanying Notes to Financial Statements. 33 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- Paper & Forest Products -- 0.1% Fort James Corp. Notes (Baa3, BBB-) 6.234% 03/15/01 ......................... $ 330 $ 333,712 P. T. Indah Kiat Pulp & Paper Corp. Sr. Secured Notes (Caa1, CCC+) 8.875% 11/01/00 ......................... 280 159,600 Repap New Brunswick Inc. Sr. Secured Debentures (Caa1, CC) 10.625% 04/15/05 ........................ 35 30,362 ---------- 523,674 ---------- Publishing & Information Services -- 0.8% Belo (A.H.) Corp. Sr. Debentures (Baa2, BBB-) 7.250% 09/15/27 ....................... 540 567,675 Sr. Notes (Baa2, BBB-) 6.875% 06/15/02 ....................... 2,635 2,723,931 ---------- 3,291,606 ---------- Real Estate -- 0.9% EOP Operating LP Mandatory Par Put Remarketed Securities (Baa1, BBB) 6.376% 02/15/02 ......................... 3,505 3,531,287 Health and Retirement Properties Trust (Baa2, BBB) 6.114% 10/09/98 ......................... 100 99,625 ---------- 3,630,912 ---------- Restaurants, Hotels & Casinos -- 0.3% FelCor Suites Limited Partnership Gtd. Sr. Notes (Ba1, BB+) 7.700% 10/01/07 ......................... 1,065 1,072,987 Hyatt Equities Llc 144A Medium Term Notes (A3, BBB+) 6.800%? 05/15/00 ........................ 230 234,600 ---------- 1,307,587 ---------- Retail -- 0.4% K Mart Corp. Notes (Ba2, BB) 7.950% 02/01/23 ....................... 420 406,875 Pass Through Certificates, Series 1995-K3 (Ba2, BB) 8.540% 01/02/15 ....................... 1,072 1,142,201 ---------- 1,549,076 ---------- Telecommunications -- 5.3% BellSouth Telecommunications, Inc. Debentures (Aaa, AAA) 5.850% 11/15/45 ......................... 3,705 3,737,419 7.000% 12/01/45 ......................... 255 271,256 Par (000) Value ---------- ----------- Telecommunications -- (continued) CenCall Communications Corp. Sr. Discount Notes (B2, CCC-) 10.125% 01/15/04++ ...................... $ 425 $ 429,250 CS Wireless Systems, Inc. Sr. Discount Notes Series B (Ca, C) 11.375% 03/01/06++ ...................... 1,040 249,600 Globo Comunicacoes e Participacoes S.A 144A Sr. Notes (B1, BB-) 10.625% 12/05/08 ........................ 670 453,925 GTE Corp. Debentures (Baa1, A) 6.360% 04/15/06 ......................... 1,480 1,500,350 6.840% 04/15/18 ......................... 1,215 1,242,337 6.940% 04/15/28 ......................... 2,560 2,624,000 MCI Communications Corp. Sr. Notes (Baa2, BBB+) 6.125% 04/15/10 ....................... 1,510 1,515,662 6.500% 04/15/10 ....................... 635 632,619 Nextel Communications, Inc.: Sr. Serial Red. Discount Notes (B2, CCC+)++ 9.950% 02/15/08 ....................... 410 233,188 9.750% 10/31/07 ....................... 225 131,063 Sr. Redeemable Discount Notes (B2, CCC)++ 10.650% 09/15/07 ...................... 2,975 1,811,031 Tele-Communications, Inc. Medium Term Notes (Ba2, BB+) 6.340% 02/01/02 ......................... 1,585 1,608,775 Telefonica de Argentina 144A Medium Term Notes (Ba3, BBB-) 9.125% 05/07/08 ......................... 640 519,200 Teleport Communications Group, Inc. Sr. Discount Notes (Ba3, BB+) 9.650% 03/31/27 ......................... 695 796,644 Wireless One, Inc. Sr. Discount Notes (Ca, CCC+) 13.500% 08/01/06++ ...................... 635 63,500 Worldcom, Inc. Notes (Baa2, BBB+) 6.950% 08/15/28 ......................... 3,030 2,969,400 ---------- 20,789,219 ---------- Transportation -- 2.6% Continental Airlines, Inc. Sr. Notes (Ba2, B+) 9.500% 12/15/01 ......................... 1,755 1,816,425 See Accompanying Notes to Financial Statements. 34 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- Transportation -- (continued) Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V ................... Gtd. Sr. Notes (B2, B+) 11.75% 06/15/07++ ..................... $ 810 $ 433,350 Yankee Gtd. Sr. Discount Debentures (B2, B+) 11.75% 06/15/09++ ..................... 1,655 856,463 Norfolk Southern Corp. Notes (Baa1, BBB+) 7.875% 02/15/04 ......................... 5 5,469 7.050% 05/01/04 ......................... 2,650 2,875,250 Northwest Airlines, Inc. Gtd. Notes (Ba2, BB) 7.875% 03/15/08 ....................... 290 297,613 7.625% 03/15/05 ....................... 3,065 3,130,131 US Air, Inc. Gtd. Sr. Notes (B1, B) 9.625% 02/01/01 ....................... 760 788,500 ------------ 10,203,201 ------------ Utilities -- 2.7% Beaver Valley Funding Corp. ............... Secured Lease Obligation Bonds (Ba3, BB-) 9.000% 06/01/17 ......................... 2,370 2,704,763 Connecticut Light and Power Co. First and Refunding Mortgage Bonds, Series 97C (Ba2, BB) 7.750% 06/01/02 ....................... 1,060 1,103,725 Series D 7.875% 10/01/24 ....................... 720 757,800 Long Island Lighting Co. Debentures (Baa3, A-) 9.000% 11/01/22 ......................... 1,615 1,857,250 Niagara Mohawk Power Corp. First Mortgage Bonds (Ba1, BBB-) 8.750% 04/01/22 ......................... 1,110 1,200,188 North Atlantic Energy Corp. Secured First Mortgage Notes, Series A (B1, B+) 9.050% 06/01/02 ......................... 1,567 1,590,505 TU Electric Capital V, Capital Securities (Baa2, BBB) 8.175% 01/30/37 ......................... 1,410 1,441,725 ------------ 10,655,956 ------------ Waste Management -- 0.1% USA Waste Services, Inc. .................. Sr. Notes (Baa3, BBB+) 7.125% 10/01/07 ......................... 415 440,938 ------------ TOTAL CORPORATE BONDS (Cost $141,554,434) ..................... 142,514,925 ------------ Par (000) Value ---------- ----------- MUNICIPAL BONDS -- 3.9% California State G.O (FGIC Insured) (Aaa, AAA) 5.000% 02/01/23 ......................... $ 500 $ 495,000 Illinois State G.O. ....................... (MBIA Insured) (Aaa, AAA) 4.750% 06/01/23 ......................... 850 814,938 Jacksonville, Florida Electric Authority, Electric System Revenue Bonds Series 3-A (Aa2, AA) 5.000% 10/01/23 .......................... 675 669,938 Massachusetts Bay Transportation Authority, General Transportation Systems Revenue Bonds Series A (MBIA Insured) (Aaa, AAA) 4.750% 03/01/21 ....................... 765 732,488 Series D (Aa3, AA-) 5.000% 03/01/27 ....................... 130 129,188 Massachusetts State Turnpike Authority, Metropolitan Highway Systems Revenue Bonds, Series A (MBIA Insured) (Aaa, AAA) 5.000% 01/01/27 ......................... 100 99,000 Massachusetts State Water Resources Authority, General Revenue Bonds, Series A (FSA Insured) (Aaa, AAA) 4.750% 08/01/27 ......................... 960 914,400 Municipal Electric Authority of Georgia, Project One Sub Lien Revenue Bonds, Series A (Aaa, AAA) 5.000% 01/01/26 ......................... 2,725 2,704,563 Nevada State G.O. (Municipal Bond Bank Project Numbers 65 & R-6) (MBIA Insured) (Aaa, AAA) 4.750% 05/15/26 ......................... 1,000 957,500 New Jersey Economic Development Authority, State Pension Funding Revenue Bonds, (FSA Insured) Series B (Aaa, AAA) 0.000% 02/15/20 ....................... 155 43,341 Series B (AMBAC Insured) (Aaa, AAA) 0.000% 02/15/09 ....................... 155 85,541 0.000% 02/15/02 ....................... 165 137,016 0.000% 02/15/07 ....................... 1,410 879,093 0.000% 02/15/08 ....................... 1,285 756,210 0.000% 02/15/03 ....................... 1,085 855,588 0.000% 02/15/01 ....................... 320 282,182 Series A (MBIA Insured) (Aaa, AAA) 7.425% 02/15/29 ....................... 2,420 2,864,990 See Accompanying Notes to Financial Statements. 35 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- MUNICIPAL BONDS -- (continued) New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue Bond Series D (FGIC-TCRS Insured) (Aaa, AAA) 4.750% 06/15/25 ....................... $ 395 $ 380,681 Series D (MBIA IBC Insured) (Aaa, AAA) 4.750% 06/15/25 ....................... 735 707,438 New York Metropolitan Transit Authority Dedicated Tax Fund Revenue Bonds, Series A (FGIC Insured) (Aaa, AAA) 4.750% 04/01/28 ......................... 260 249,275 South Carolina State Public Service Authority, Revenue Bonds Series A (MBIA Insured) (Aaa, AAA) 5.000% 01/01/29 ......................... 530 527,350 Tampa, Florida Health Systems Revenue Bonds (Aaa, AAA) 4.750% 11/15/28 ......................... 45 42,750 ----------- TOTAL MUNICIPAL BONDS (Cost $14,633,997) ...................... 15,328,470 ----------- FOREIGN GOVERNMENT BONDS -- 6.5% Federal Republic of Brazil MYDFA Trust Certificates (NR, NR) 6.563% 09/15/07 ......................... 1,707 917,567 International Bank for Reconstruction & Development U.S. Dollar Bonds (Aaa, AAA) 7.625% 01/19/23 ......................... 550 691,625 Republic of Argentina Secured Par Bonds Series L-GP (Ba3, BB) 5.750% 11/30/98 ....................... 445 275,066 Structured Notes (Ba3, BB) 8.726% 04/10/05 ....................... 1,150 977,500 Yankee Spread Adjusted Notes (Ba3, BB) 9.150% 11/30/98 ....................... 2,750 2,213,750 Republic of Bulgaria Discount Bonds, Series A (B2, NR) 6.688% 01/28/99 ......................... 2,305 1,279,275 Republic of Colombia Notes (Baa3, BBB-) 8.625% 04/01/08 ......................... 2,985 2,328,300 Republic of Poland Past Due Interest Bonds (Baa3, BBB-) 4.000% 10/27/14 ....................... 1,050 870,188 4.000% 10/27/14 ....................... 8,420 6,525,500 Par (000) Value ---------- ----------- FOREIGN GOVERNMENT BONDS -- (continued) United Kingdom Treasury Bonds (AAA, NR) 7.250% 12/07/07 GBP ..................... 3,350 $ 6,400,213 United Mexican States Par Bonds, Series W-B (Ba2, BB) 6.250% 12/31/19 ......................... $ 4,150 3,034,688 ----------- TOTAL FOREIGN GOVERNMENT BONDS (Cost $28,983,582) ...................... 25,513,672 ----------- AGENCY OBLIGATIONS -- 31.3% Federal Home Loan Mortgage Corporation -- 6.6% Various Pools: 6.500% 07/01/99 ......................... 81 81,597 7.000% 12/01/09 ..................... ... 777 794,928 15-Year Gold TBA 0.000% 04/01/12 ......................... 17,425 17,719,047 REMIC-PAC Series 1014 Class E 7.950% 02/15/20.......................... 1,467 1,488,180 REMIC-PAC Series 1660 Class E 6.000% 01/15/07 ......................... 2,135 2,142,224 MACR Series 1860 Principal Only 0.000% 02/15/24 ......................... 1,689 1,397,447 MACR Series 1934, Class AB 6.000% 08/15/07 ......................... 2,495 2,506,653 ----------- TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION ............................. 26,130,076 ----------- Federal National Mortgage Association -- 23.7% Various Pools: 10.000% 02/01/05 ......................... 224 237,400 10.000% 01/01/10 ......................... 979 1,061,255 6.000% 04/01/28 ......................... 139 136,488 6.000% 11/01/12 ......................... 492 490,916 6.000% 04/01/28 ......................... 149 146,588 6.000% 06/01/28 ......................... 137 135,204 6.000% 08/01/28 ......................... 714 703,458 6.000% 08/01/28 ......................... 149 146,273 6.000% 07/01/13 ......................... 957 955,398 6.000% 03/01/13 ......................... 531 530,362 6.000% 03/01/28 ......................... 238 234,036 6.000% 07/01/13 ......................... 498 497,229 6.000% 04/01/28 ......................... 84 82,888 6.000% 05/01/28 ......................... 1,980 1,950,301 6.000% 06/01/13 ......................... 335 334,265 6.000% 04/01/13 ......................... 2,715 2,709,909 6.000% 07/01/13 ......................... 516 515,472 6.000% 08/21/28 ......................... 693 682,605 6.000% 08/01/28 ......................... 99 97,515 6.000% 08/01/28 ......................... 693 682,388 6.000% 08/01/28 ......................... 525 516,830 See Accompanying Notes to Financial Statements. 36 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- Federal National Mortgage Association -- (continued) 6.000% 08/01/13 ........................... $ 2,742 $ 2,737,158 6.000% 07/01/13 ........................... 990 988,144 6.000% 08/01/13 ........................... 506 505,417 (TBA) 6.000% 08/01/13 ........................... 173 172,926 6.000% 08/01/13 ........................... 970 968,381 15-Year TBA's 7.000% 01/01/11 ........................... 1,450 1,479,906 6.000% 01/15/11 ........................... 3,850 3,836,766 6.500% 05/01/13 ........................... 15,520 15,723,700 30-Year TBA's 6.000% 10/15/17 ........................... 1,950 1,917,703 8.000% 03/15/25 ........................... 13,890 14,376,150 6.500% 09/01/27 ........................... 29,290 29,427,297 7.000% 07/01/28 ........................... 7,695 7,827,258 REMIC-PAC 1991-165 Class M 8.250% 12/25/21 ........................... 13 13,626 REMIC-PAC Series 1993-235 Class G PO 0.000% 09/25/23 ........................... 90 57,290 MACR Series 1996-5 Class PX PO 0.000% 11/25/23 ........................... 235 170,375 REMIC Series 1997-16 Class M PO (Aaa, AAA) 0.000% 02/25/23 ........................... 170 124,180 ----------- TOTAL FEDERAL NATIONAL MORTGAGE ASSOCIATION ....................... 93,173,057 ----------- Government National Mortgage Association -- 0.2% Various Pools: 6.500% 09/15/03 .......................... 8 8,345 8.250% 08/15/04 .......................... 1 583 9.000% 11/15/04 .......................... 1 1,092 9.000% 12/15/04 .......................... 1 887 8.250% 04/15/06 .......................... 1 1,413 13.500% 07/15/14 .......................... 1 922 9.000% 12/15/16 .......................... 34 36,219 8.000% 04/15/17 .......................... 123 128,029 9.000% 08/15/21 .......................... 489 523,029 ----------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ............................. 700,519 ----------- Miscellaneous -- 0.9% Government Trust Certificates Collateral Trust Notes Series 1C (Aaa, AAA) 9.250% 11/15/01 ......................... 425 441,952 National Archives Facility Trust COP (Aaa, AAA) 8.500% 09/01/19 ......................... 682 850,269 Par (000) Value ---------- ----------- Miscellaneous -- (continued) Tennessee Valley Authority Debentures, Series B (Aaa, NR) 6.235% 07/15/45 ....................... $ 60 $ 62,775 Power Bonds Series A (Aaa, AAA) 5.880% 04/01/36 ....................... 1,980 2,029,500 ------------ 3,384,496 ------------ TOTAL AGENCY OBLIGATIONS (Cost $215,203,961) ..................... 123,388,148 ------------ ASSET BACKED SECURITIES -- 6.8% AESOP Funding II LLC, Automobile Lease Contracts, Series 1997-1, Class A1 (Aaa, AAA) 6.220% 10/20/01 ......................... 720 727,200 Capita Equipment Receivables Trust Series 1996-1, Class A3 (Aaa, AAA) 6.110% 07/15/99 ......................... 1,131 1,133,080 Cityscape Home Equity Loan Trust, Home Equity Loan Certificates Series 1996-2, Class A2 (Aaa, AAA) 7.200% 11/15/06 ......................... 500 507,136 ContiMortgage Home Equity Loan Trust Series 1996-4, Class A8 (Aaa, AAA) 7.220% 01/15/28 ....................... 820 880,393 Series 1998-1, Class A5 (Aaa, AAA) 6.430% 04/15/16 ....................... 1,980 2,048,293 Fleetwood Credit Corp. Grantor Trust, RV Retail Installment Sale Contracts Series 1997-B, Class A (Aaa, AAA) 6.400% 05/15/13 ....................... 761 770,739 Series 1993-B, Class A (Aaa, AAA) 4.950% 08/15/08 ....................... 361 358,080 Series 1994-B, Class A (Aaa, AAA) 6.750% 03/15/10 ....................... 1,228 1,250,610 Goldome Credit Corp. Home Equity Trust Series 1990-1, Class A (Aa2, AA) 10.000% 07/15/05 ........................ 45 45,338 See Accompanying Notes to Financial Statements. 37 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ---------- ASSET BACKED SECURITIES -- (continued) Green Tree Financial Corp. Manufactured Housing Retail Installment Sales Contracts, Series 1995-6, Class A3 (Aaa, AAA) 6.650% 09/15/26 .......................... $ 2,721 $2,758,521 Series 1995-8, Class A2 (Aaa, AAA) 6.150% 12/15/26 .......................... 6 6,142 Series 1997-3, Class A3 (Aaa, NR) 6.730% 07/15/28 .......................... 700 723,770 Series 1997-6 Class A3 (NR, AAA) 6.320% 01/15/29 .......................... 640 648,000 Series 1998-4 Class A3 (Aaa, NR) 5.980% 08/01/08 .......................... 3,180 3,189,938 Series 1995-5, Class A3 (Aaa, AAA) 6.250% 09/15/26 .......................... 302 304,088 Green Tree Home Equity Loan Trust Home Equity Loan Certificate Series 1998-C, Class A2 (NR, AAA) 6.030% 07/15/29 ............................ 2,945 2,950,062 Green Tree Recreational, Equipment & Consumer Trust, Consumer Products & Equipment Retail Installments Sales Contracts Series 1997-C, Class A1 (NR, AAA) 6.490% 02/15/18 .......................... 690 709,936 Series 1998-B, Class A3 (NR, AAA) 6.050% 10/15/10 .......................... 1,065 1,077,481 Green Tree Securitized Net Interest Margin Trust, REMIC, Series 1994-A, Class A (Baa3, NR) 6.900% 02/15/04 ............................ 857 858,853 IMC Home Equity Loan Trust, Home Equity Loan Certificates Series 1998-3, Class A3 (Aaa, AAA) 6.160% 05/20/14 ............................ 1,055 1,055,824 Merrill Lynch Mortgage Investors, Inc., Manufactured Housing Retail Installment Sales Contracts Series 1991-C, Class A (Aaa, AAA) 9.000% 07/15/11 ............................ 57 57,928 Par (000) Value ---------- ----------- ASSET BACKED SECURITIES -- (continued) New Century Home Equity Loan Trust Mortgage Loan Certificates Series 1997-NC6, Class A4 (Aaa, AAA) 6.730% 07/25/22 ......................... $ 675 $ 695,812 New York City Tax Lien 144A Collateralized Bonds, Series 1996-1, Class C (NR, A) 7.110% 05/25/05 ....................... 171 172,110 Series 1997-1 Class A (Aaa, AAA) 6.460% 05/25/05 ....................... 94 95,056 Oakwood Mortgage Investors Inc. Manufactured Housing Retail Installment Sales Contracts Series 1996-A Class A3 (NR, AAA) 6.600% 05/15/21 ......................... 105 107,792 Southern Pacific Secured Assets Corp. Mortgage Loan Certificates Series 1998-1, Class A2 (Aaa, AAA) 6.270% 03/25/28 ......................... 2,455 2,467,275 UCFC Acceptance Corp. Home Equity Loan Certificates Series 1996-B1, Class A7 (Aaa, AAA) 8.200% 09/15/27 ......................... 745 802,104 Vanderbilt Mortgage Finance, Manufactured Housing Retail Installment Sales Contracts, Series 1995-B, Class A3 (NR) 6.675% 05/07/06 ......................... 325 330,070 World Omni Automobile Lease Securitization Trust, Retail Closed-End Lease Contracts Series 1995-A, Class A (Aaa, AAA) 6.050% 11/25/01 ......................... 48 47,880 ----------- TOTAL ASSET BACKED SECURITIES (Cost $18,247,418) ...................... 26,779,511 ----------- COLLATERALIZED MORTGAGED BACKED SECURITIES -- 3.9% Asset Securitization Corp. .................. Series 1996-MD6, Class A6 (Baa2, BBB) 7.106% 09/13/98 ....................... 760 790,519 Series 1997-D5, Class A1D (Aaa, AAA) 6.850% 02/14/41 ....................... 1,845 1,932,638 See Accompanying Notes to Financial Statements. 38 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- COLLATERALIZED MORTGAGED BACKED SECURITIES -- (continued) Carousel Center Finance Inc. 144A Series 1, Class C, (NR, BBB+) 7.527% 11/15/07 ............................ $ 367 $ 373,771 Collateralized Mortgage Obligation Trust, REMIC, Series 54, Class C (Aaa, AAA) 9.250% 11/01/13 ............................ 1 1,419 G3 Mortgage Reinsurance Ltd. Mortgage Default Recourse Notes, Series 1, Class A (Baa2, BBB) 6.648% 09/25/98 ............................ 950 950,296 General Motors Acceptance Corp. Commercial Mortgage Securities, Inc. Series 1997-C1, Class A2 (Aaa, AAA) 6.853% 09/15/06 ............................ 530 550,703 Kidder Peabody Acceptance Corp. Series 1993-M1, Class A1 (NR, AA2) 7.150% 04/25/25 .......................... 331 330,950 Series 1994-C1, Class A (NR, AAA) 6.650% 02/01/06 .......................... 390 404,638 Series 1994-C1, Class B (NR, AA) 6.850% 02/01/06 .......................... 1,305 1,326,206 PaineWebber Mortgage Acceptance Corp. IV Multifamily Mortgage Pass-Throughs Series 1995-M1, Class A 144A (NR, NR) 6.700% 01/15/07 .......................... 1,430 1,463,683 Class D 144A (NR, NR) 7.300% 01/15/07 .......................... 420 426,021 Salomon Brothers Mortgage Securities VII, 144A Series 1997-TZH, Class A2 (Aa2, NR) 7.174% 03/25/22 .......................... 1,925 2,023,055 REMIC Series 1997-NC4, Class A (NR, AAA) 5.948% 09/25/98 .......................... 67 67,197 Structured Asset Securitization Corp. Series 1996-CFL, Class A1C (NR, AAA) 5.944% 02/25/28 .......................... 883 883,390 Series 1998-C2, Class A (Aaa, NR) 5.826% 09/25/98 .......................... 3,859 3,847,296 ----------- TOTAL COLLATERALIZED MORTGAGED BACKED SECURITIES (Cost $24,591,319) ......................... 15,371,782 ----------- Par (000) Value ---------- ----------- COMMON STOCK -- 0.0% Packaging/Containers -- 0.0% Crown Packaging Enterprises, Ltd ..................................... $ 45,544 $ 455 ------------ TOTAL COMMON STOCK (Cost $0) ............................... 455 ------------ PREFERRED STOCKS -- 1.5% Financial Services -- 0.4% Lehman Brothers Holdings Inc. 5.67% Cumulative, Series ................ 10,800 526,500 Travelers Group Inc. 6.213% Cumulative Series ................ 16,800 919,800 ------------ 1,446,300 ------------ Real Estate -- 1.1% American RE Capital Corp. 8.50% Cumulative, Series A .............. 29,600 778,850 California Federal Preferred Capital Corp. 9.125% Noncum. Exchangeable Series A ................... 86,350 2,280,180 NB Capital Corp. 8.35% Noncum. Exchangeable .............. 46,600 1,252,375 ------------ 4,311,405 ------------ TOTAL PREFERRED STOCKS (Cost $5,634,342) ....................... 5,757,705 ------------ Par (000) ------------ U.S. TREASURY OBLIGATIONS -- 9.0% U.S. Treasury Bills -- 0.1% 4.860% 09/24/98 ......................... 75 74,698 4.870% 09/24/98 ......................... 200 199,286 4.990% 09/24/98 ......................... 55 54,718 ------------ 328,702 ------------ U.S. Treasury Bonds -- 0.4% 8.875% 08/15/17 ......................... 1,250 1,751,984 ------------ U.S. Treasury Notes -- 8.2% 8.500% 02/15/00 ......................... 220 230,439 5.375% 02/15/01 ......................... 13,420 13,540,659 6.625% 06/30/01 ......................... 185 192,674 6.250% 06/30/02 ......................... 8,600 8,957,513 7.500% 02/15/05 ......................... 5 5,656 6.250% 02/15/07 ......................... 8,450 9,086,328 ------------ 32,013,269 ------------ U.S. Treasury Strip Bonds -- 0.3% 0.000% 11/15/16 ......................... 3,430 1,266,191 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $34,588,525) ...................... 35,360,146 ------------ See Accompanying Notes to Financial Statements. 39 BEA U.S. Core Fixed Income Fund (Continued) Par (000) Value ---------- ----------- WARRANTS -- 0.0% Capital Pacific Holdings Group, Inc ..................................... 2,528 $ 1,896 Checkers Drive-In Restaurants ............. 2,642 495 Uniroyal Technology Corp. ................. 10,800 74,250 ------------- TOTAL WARRANTS (Cost $14,178) .......................... 76,641 ------------- SHORT TERM INVESTMENTS -- 23.6% Discount Notes 5.440% 09/11/98 ......................... 93,000 92,859,467 ------------- TOTAL INVESTMENTS -- 122.7% (Cost $483,451,756) ..................... 482,950,922 ------------- LIABILITIES IN EXCESS OF OTHER ASSETS-- 22.7% .................... (89,417,810) ------------- NET ASSETS (Applicable to 25,039,577 BEA Institutional Shares) -- 100.0% ....................... $ 393,533,112 ============= NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($393,533,112 divided by 25,039,577) .... $ 15.72 ============= *Also cost for Federal income tax purposes at August 31, 1998 is $483,461,036. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ........................ $ 5,798,874 Gross Depreciation ........................ (6,308,988) ------------- Net Appreciation .......................... $ (510,114) ============= + Variable rate obligations -- The interest shown is the rate as of August 31, 1998. ++ Step Bond -- The interest rate as of August 31, 1998 is 0% and will reset to interest rate shown at a future date. +++ Securities have no stated maturity date. The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group ratings indicated are the most recent rating available at August 31, 1998 and are unaudited. CURRENCY ABBREVIATIONS GBP ...................................................... United Kingdom Pounds INVESTMENT ABBREVIATIONS FRN ......................................................... Floating Rate Note MACR .............................................. Modified and Combinable Real Estate Investment Conduit PAC ................................................. Planned Amortization Class REMIC .................................. Real Estate Mortgage Investment Conduit TBA ............................................................ To Be Announced At August 31, 1998, Net Assets Consisted Of: Amount ------------ Capital Paid-In ............................................... $386,873,312 Accumulated Net Investment Income ............................. 4,330,226 Accumulated Net Realized Gain on Security and Foreign Exchange Transactions ................. 3,255,148 Net Unrealized Depreciation on Investments and Other ...................................... (925,574) - - - - - -------------------------------------------------------------------------------- NET ASSETS .................................................... $393,533,112 - - - - - -------------------------------------------------------------------------------- See Accompanying Notes to Financial Statements. 40 BEA Strategic Global Fixed Income Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are pleased to report on the results of the BEA Strategic Global Fixed Income Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund was $15.10, compared to an NAV of $15.41 on August 31, 1997. As a result, the Fund's total return (assuming reinvestment of dividends and distributions of $.9387 per share) was 4.19%. By comparison, the unhedged J.P. Morgan Global Government Bond Index (the "Index") gained 9.63% during the same period. Two factors were most responsible for the Fund's underperformance (compared to the Index) during the period. These were its meaningful exposure to "spread product"--debt securities whose market valuation is greatly driven by the differences, known as "spreads," between their yields and those of U.S. Treasury debt--and holdings in emerging market debt instruments. We also note that much of the underperformance occurred in the month of August alone. Market volatility in August was so high, in fact, that many spread product sectors generated their worst-ever, relative returns for a single month. Returns among the various spread product sectors have been negative over the last year, as several classic "flight to quality" reactions caused Treasuries to become the favored asset among fixed income investors. Factors driving the flight to quality included the financial crisis in Emerging Asia, problematic economic and political conditions in Japan, deterioration in the Russian economy and a generalized concern about possible currency devaluations. While Treasuries gained from the flight to quality, spread product fell. Indeed, yield spreads began to grow to their historically widest levels in September 1997, when the Fund's fiscal year started. This was particularly true of emerging debt markets, which, as measured by J.P. Morgan's EMBI+ index, lost 29.9% of their value during the fiscal year. Although the Fund's exposure to the emerging sector was modest throughout the year, the sector's weakness was sufficient to account for much of the Fund's underperformance. As developments occur in the global fixed income markets or at BEA that we believe would be of interest to you, we will be sure to keep you informed. Meanwhile, if you have questions, please feel free to call upon us at any time. Sincerely yours, BEA Fixed Income Management Team Robert J. Moore, Executive Director William P. Sterling, Executive Director Gregg M. Diliberto, Managing Director Mark K. Silverstein, Managing Director Jo Ann Corkran, Senior Vice President Diane C. Damskey, Senior Vice President Ira Edelblum, Senior Vice President Robert W. Justich, Senior Vice President 41 BEA Strategic Global Fixed Income Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA Strategic Global Fixed Income Fund and the JP Morgan Global Government Bond Index (unhedged) from Inception 6/28/94, Period Ended 7/31/94, and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA STRATEGIC JP MORGAN GOVT. BOND INDEX GLOBAL FIXED (UNHEDGED) INCOME FUND ---------------- ------------ 06/28/94 10,000 10,000 07/31/94 10,027 10,115 08/31/94 10,001 10,089 11/30/94 10,045 10,161 02/28/95 10,274 10,659 05/31/95 11,156 11,696 08/31/95 11,072 11,496 11/30/95 11,574 12,003 02/29/96 11,668 11,957 05/31/96 11,831 11,907 08/31/96 12,140 12,283 11/30/96 12,815 12,776 02/28/97 12,531 12,284 05/31/97 12,673 12,408 08/31/97 12,684 12,487 11/30/97 13,006 12,878 02/28/98 13,170 13,089 05/31/98 13,232 13,247 08/31/98 13,215 13,689 ------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) ------------------------ One Year 4.19% Three Years 6.07% From Inception 6.89% ------------------------ Note: Past performance is not predictive of future performance. 42 BEA Strategic Global Fixed Income Fund of The RBB Fund, Inc. Schedule of Investments August 31, 1998 Par (000) Value --------- -------- INTERNATIONAL BONDS -- 54.2% Argentina -- 1.2% Disco S.A. 144A Notes (Ba3, BB) 9.875% 05/15/08 ................................ $ 15 $ 10,913 Republic of Argentina FRB (Ba3, BB) 6.625% 03/31/05 .............................. 124 80,275 Secured Par Bonds, Series L-GP (Ba3, BB) 5.750% 11/30/98 .............................. 255 157,144 Yankee Spread Adjusted Notes (Ba3, BB) 9.150% 11/30/02 .............................. 80 64,400 Structured Notes (Ba3, BB) 8.940% 04/10/05 .............................. 35 29,750 --------- 342,482 --------- Brazil -- 1.0% Banco Nacional de Desenvolvimento Economico e Social 144A Structured Notes (B1, BB-) 10.800% 06/16/08 ............................... 45 43,987 Cia. Petroleo Ipiranga S.A. Sr. Notes (NR, NR) 10.625% 02/25/02 ............................... 65 52,000 Federal Republic of Brazil Global Bonds (B2, BB-) 9.375% 04/07/08 ................................ 65 39,081 MYDFA Trust Certificates (NR, NR) 6.563% 09/15/07 ................................ 235 126,226 Globo Comunicacoes e Participacoes S.A. 144A Sr. Notes (B2, BB-) 10.625% 12/05/08 ................................ 45 30,488 --------- 291,782 --------- Bulgaria -- 0.4% Republic of Bulgaria Discount FRN, Series A (B2, NR) 6.688% 07/28/24 ................................. 205 113,775 --------- Canada -- 1.2% Government of Canada Debentures (Aa1, AAA) 5.500% 02/01/00 ................................. CND 250 159,174 7.000% 12/01/06 ................................. 250 173,395 --------- 332,569 --------- Colombia -- 0.7% Republic of Colombia Global Bonds (Baa3, BBB-) 8.625% 04/01/08 $ 210 163,800 Yankee Notes (Baa3, BBB-) 8.820% 08/13/05 .............................. 40 34,990 --------- 198,790 --------- Finland -- 0.2% Okobank Perpetual Medium Term FRN (A3, NR) 6.188%+++ ....................................... 60 58,800 --------- France -- 3.6% Cie. Financiere de Paribas Sub. Notes (A3, A-) 6.950% 07/22/13 ................................. 100 101,500 Credit Lyonnais Perpetual Sub. VRN, Rule 144A (Baa2, NR) 6.750%+++ ....................................... 90 85,950 L'Auxiliare du Credit Foncier de France Gtd. Notes (Baa3, NR) 5.582% 09/25/02 ................................. 125 120,787 Republic of France Treasury Bonds (Aaa, NR) 7.500% 04/25/05 ................................. FRF 3,600 728,832 ---------- 1,037,069 ---------- Germany -- 17.2% Federal Republic of Germany Eurobonds (Aaa, NR) 6.000% 02/16/06 ................................. DEM 2,630 1,664,489 6.000% 07/04/07 ................................. 5,000 3,221,133 ---------- 4,885,622 ---------- Japan -- 0.3% Fuji Finance (Cayman) Ltd. Perpetual Sub. FRN (Ba1, NR) 6.550% $ 70 50,400 Perpetual Gtd. Medium Term Notes (A3, NR) 7.300%......................................... 50 36,000 ---------- 86,400 ---------- Kazakhstan -- 0.0% Kazkommerts International BV 144A Gtd. Notes (B2, B+) 11.250% 05/08/01 ................................ 10 5,000 ---------- Mexico -- 0.8% Fifth Mexican Acceptance Corp. Rule 144A Gtd. Notes (NR, NR) 8.000% 12/15/98 ................................. 500 141,600 Grupo Transportacion Ferroviaria Mexicana S.A. de C.V. Yankee Gtd. Sr. Discount Notes (B2, B+) 0.000% 06/15/07 ................................. 30 16,050 United Mexican States Sr. Notes (Ba2, BB) 8.625% 03/12/08 ................................. 83 64,792 ---------- 222,442 ---------- See Accompanying Notes to Financial Statements. 43 BEA Strategic Global Fixed Income Fund (Continued)
Par (000) Value ------ ---------- Netherlands -- 4.3% Kingdom of the Netherlands Government Bonds (Aaa, NR) 5.750% 01/15/04 .................................. NLG 2,250 $ 1,223,311 ----------- New Zealand -- 2.7% Government of New Zealand Bonds (Aaa, AAA) 8.000% 02/15/01 .................................. NZD 1,000 511,149 8.000% 04/15/04 .................................. 500 264,640 ----------- 775,789 ----------- Norway -- 0.2% Petroleum Geo-Services ASA Yankee Senior Notes (Baa3, BBB) 7.125% 03/30/28 .................................. $ 60 60,300 ----------- Poland -- 1.5% Republic of Poland Past Due Interest Bonds (Baa3, BBB-) 4.000% 10/27/14 ................................ 445 346,487 RSTA Bonds (Baa3, BBB-) 3.750% 10/27/98 ................................ 45 31,725 Par Bonds (Baa3, BBB-) 3.000% 10/27/24 ................................ 95 58,425 ----------- 436,637 ----------- Russia -- 0.5% AO Sibneft 144A Loan Participation Notes (NR, NR) 9.688% 08/15/00 .................................. 250 94,080 Russian Federation, Ministry of Finance 144A Bonds (B3, CCC-) 12.750% 06/24/28 ................................. 20 5,000 Bank of Foreign Economic Affairs of the USSR (Vneshekonombank) Debentures Series 19 Year FRB (Ca, NR) 6.625% 12/15/15 .................................. 205 33,515 ----------- 132,595 ----------- Supranational -- 7.0% European Investment Bank Eurobonds (Aaa, AAA) 5.000% 04/15/08 .................................. ITL 1,000,000 589,552 International Bank for Reconstruction & Development Japanese Yen Global Bonds (Aaa, AAA) 5.250% 03/20/02 .................................. JPY 170,000 1,392,937 ----------- 1,982,489 ----------- Sweden -- 1.4% ForeningsSparbanken AB Perpetual Sub. FRN (A3, NR) 7.500%+++......................................... $ 40 $ 42,176 Skandinaviska Enskilda Banken AB Perpetual Sub. FRN (NR, NR) 7.500%+++......................................... 350 357,903 ----------- 400,079 ----------- United Kingdom -- 10.0% U.K. Treasury Gilt Bonds (Aaa, NR) 7.500% 12/07/06 .................................. GBP 1,500 2,853,208 ----------- TOTAL INTERNATIONAL BONDS (Cost $15,896,418) ............................... 15,439,139 ----------- DOMESTIC BONDS -- 50.5% CORPORATE BONDS -- 19.2% Banking -- 1.5% Chase Manhattan Corp. Sub. Notes (A1, A) 6.375% 04/01/08 .................................. $ 85 85,850 First Republic Bank Sub. Notes (NR, BB+) 7.750% 09/15/12 .................................. 200 211,500 National Westminster Bank Gtd. Capital Notes (Aa3, AA-) 9.375% 11/15/03 .................................. 15 17,363 Sovereign Bancorp Sr. Notes (NR, BBB-) 6.750% 07/01/00 .................................. 115 116,006 ----------- 430,719 ----------- Broadcasting -- 0.2% Fox/Liberty Networks L.L.C., Sr. Discount Notes (B1, B) 9.750% 08/15/07 ................................ 15 9,150 Sr. Notes (B1, B) 8.875% 08/15/07 ................................ 45 42,413 ----------- 51,563 ----------- Cable -- 0.2% CSC Holdings, Inc. Sr. Notes (Ba2, BB+) 7.875% 12/15/07 .................................. 40 40,250 Diamond Cable Communications plc 144A Yankee Sr. Discount Notes (Caa1, B-) 10.750% 02/15/07 ................................. 25 18,719 ----------- 58,969 ----------- Electronics -- 0.3% Seagate Technology, Inc. Sr. Debentures (Baa3, BBB) 7.450% 03/01/37 .................................. 90 91,013 -----------
See Accompanying Notes to Financial Statements. 44 BEA Strategic Global Fixed Income Fund (Continued) Par (000) Value ---------- ---------- Entertainment -- 2.0% Time Warner, Inc. Debentures (Baa3, BBB-) 8.050% 01/15/16 ....................... $ 140 $ 154,525 Debentures (Ba1, BBB-) 6.850% 01/15/26 ....................... 400 415,500 ---------- 570,025 ---------- Financial Services -- 3.9% AT&T Capital Corp. Medium Term Notes Series 4 (Baa3, BBB) 6.920% 04/29/99 ......................... 320 322,157 BellSouth Capital Funding Corp. Debentures (Aa1, AAA) 6.040% 11/15/26 ......................... 340 350,200 First Nationwide (Parent) Holdings, Inc. Sr. Notes (Ba3, B) 12.500% 04/15/03 ........................ 170 190,825 General Motors Acceptance Corp. Medium Term Notes (A2, A) 6.210% 09/19/00 ......................... 240 243,000 ---------- 1,106,182 ---------- Health Care -- 1.5% Columbia/HCA Healthcare Corp. Debentures (Ba2, BBB) 8.360% 04/15/24 ......................... 55 54,685 Merck & Co., Inc. Medium Term Notes, Series B (Aaa, AAA) 5.760% 05/03/37 ......................... 370 380,175 ---------- 434,860 ---------- Industrial Goods & Materials -- 0.3% Dresser Industries, Inc. Debentures (Aa3, A) 7.600% 08/15/45 ......................... 70 82,338 ---------- Real Estate -- 1.4% EOP Operating L.P. Notes (Baa1, BBB) 6.375% 02/15/03 ......................... 100 101,000 Health and Retirement Properties Trust Remarketed Reset Notes (Baa2, BBB) 6.288% 07/09/07 ......................... 310 308,838 ---------- 409,838 ---------- Retail -- 1.0% KMart Corp. Medium Term Notes, Series C (Ba2, BB) 7.820% 01/02/02 ....................... $ 100 $ 99,250 7.840% 01/02/02 ....................... 100 99,375 Series D (Ba2, BB) 7.770% 07/02/02 ....................... 100 99,125 ---------- 297,750 ---------- Telecommunications -- 2.2% CenCall Communications Corp. Sr. Discount Notes (B2, CCC+) 10.125% 01/15/04 ........................ 15 15,150 CS Wireless Systems, Inc. Sr. Discount Notes Series B (Ca, C) 11.375% 03/01/06 ........................ 70 16,800 GTE Corp. Debentures (Baa1, A) 6.840% 04/15/18 ......................... 225 230,063 MCI Communications Corp. Sr. Notes (Baa2, BBB+) 6.125% 04/15/12 ......................... 45 45,169 Nextel Communications Inc. Sr. Serial Redeemable Discount Notes (B2, CCC+) 10.650% 09/15/07 ........................ 210 127,838 Tele-Communications Inc. Medium Term Notes (Ba2, BB+) 6.340% 02/01/02 ......................... 55 55,825 Wireless One, Inc. Sr. Discount Notes (Ca, CCC+) 13.500% 08/01/06 ........................ 45 4,500 Worldcom Inc., Notes (Baa2, BBB+) 6.950% 08/15/28 ......................... 85 83,300 ---------- 578,645 ---------- Transportation -- 1.7% Continental Airlines, Inc. Sr. Notes (Ba2, B+) 9.500% 12/15/01 ......................... 120 124,200 Norfolk Southern Corp. Notes (Baa1, BBB+) 7.050% 05/01/37 ......................... 75 81,375 Northwest Airlines, Inc. Gtd. Notes (Ba2, BB) 7.625% 03/15/05 ......................... 230 234,888 US Air, Inc. Gtd. Sr. Notes (B1, B) 9.625% 02/01/01 ......................... 50 51,875 -------- 492,338 -------- See Accompanying Notes to Financial Statements. 45 BEA Strategic Global Fixed Income Fund (Continued) Par (000) Value ---------- ---------- Utilities -- 3.0% Beaver Valley Funding Corp. Secured Lease Obligation Bonds (Ba3, BB-) 9.000% 06/01/17 ............................... $ 150 $ 171,188 Connecticut Light and Power Co. First and Ref. Mortgage Bonds, Series 97C (Ba2, BB) 7.750% 06/01/02 ............................. 75 78,094 First and Ref. Mortgage Bonds, Series D (Ba2, BB) 7.875% 10/01/24 ............................. 40 42,100 Long Island Lighting Co. Debentures (Baa3, A-) 8.900% 07/15/19 ............................... 70 74,288 9.000% 11/01/22 ............................... 145 166,750 Niagara Mohawk Power Corp. First Mortgage Bonds (Ba1, BBB-) 8.750% 04/01/22 ............................... 185 200,031 North Atlantic Energy Corp. Secured First Mortgage Notes, Series A (B1, B+) 9.050% 06/01/02 ............................... 130 131,950 ---------- 864,401 ---------- TOTAL CORPORATE BONDS (Cost $5,888,197) ............................. 5,468,641 ---------- MUNICIPAL BONDS -- 1.7% Illinois State G.O. (MBIA Insured) (Aaa, AAA) 4.750% 06/01/23 ............................... 15 14,381 Jacksonville, Florida Electric Authority Electric Revenue Bond Series 3-A (Aa2, AA) 5.000% 10/01/23 ............................... 20 19,850 Massachusetts State Water Resources Authority, General Revenue Bonds Series A (FSA Insured) (Aaa, AAA) 4.750% 08/01/27 ............................... 25 23,844 Massachussetts Bay Transportation Authority General Transportation Systems Revenue Bonds Series A (MBIA Insured) (Aaa, AAA) 4.750% 03/01/21 ............................... 35 33,556 Municipal Electric Authority of Georgia Project One Sub. Lien Revenue Bonds, Series A (Aaa, AAA) 5.000% 01/01/26 ............................... 260 258,375 New Jersey Economic Development Authority, Pension Funding Revenue Bonds, Series A (MBIA Insured) (Aaa, AAA) 7.425% 02/15/29 ............................... $ 105 $ 124,307 New York City Municipal Water Finance Authority, Water and Sewer Systems Revenue Bonds Series D (FGIC TCRS Insured) (Aaa, AAA) 4.750% 06/15/25 ............................... 10 9,638 ---------- TOTAL MUNICIPAL BONDS (Cost $460,940) ............................... 483,951 ---------- ASSET BACKED SECURITIES -- 3.8% ContiMortgage Home Equity Loan Trust Home Equity Loan Certificates Series 1996-4, Class A8 (Aaa, AAA) 7.220% 01/15/28 ............................. 10 10,736 Series 1998-1, Class A5 (Aaa, AAA) 6.430% 04/15/16 ............................. 70 72,414 Fleetwood Credit Corp. Grantor Trust, RV Retail Installment Sales Contracts, Series 1997-B, Class A (Aaa, AAA) 6.400% 05/15/13 ............................... 207 209,145 Green Tree Financial Corp. Manufactured Housing Retail Installment Sales Contracts, Series 1997-6 Class A3 (NR, AAA) 6.320% 01/15/29 ............................... 190 192,375 Series 1998-4 Class A3 (Aaa, NR) 5.980% 08/01/08 ............................... 120 120,375 Green Tree Home Equity Loan Trust, Home Equity Loan Certificates Series 1998-C, Class A2 (NR, AAA) 6.030% 07/15/29 ............................... 100 100,172 Green Tree Recreational, Equipment & Consumer Trust, Consumer Products & Equipment Retail Installment Sales Contracts Series 1998-B, Class A-3 (NR, AAA) 6.050% 10/15/10 ............................... 15 15,176 See Accompanying Notes to Financial Statements. 46 BEA Strategic Global Fixed Income Fund (Continued) Par (000) Value ---------- ----------- ASSET BACKED SECURITIES -- (continued) Green Tree Recreational, Equipment and Consumer Trust, Consumer Products & Equipment Retail Installment Sales Contracts Series 1997-C Class A1 (NR, AAA) 6.490% 02/15/18 ............................... $ 204 $ 210,354 IMC Home Equity Loan Trust, Home Equity Loan Certificates Series 1998-3, Class A3 (Aaa, AAA) 6.160% 05/20/14 ............................... 35 35,027 New Century Home Equity Loan Trust Mortgage Loan Certificates Series 1997-NC6, Class A4 (Aaa, AAA) 6.730% 07/25/22 ............................... 20 20,617 Southern Pacific Secured Assets Corp. Mortgage Loan Certificates Series 1998-1, Class A2 (Aaa, AAA) 6.270% 02/15/18 ............................... 80 80,400 UCFC Acceptance Corp. Home Equity Loan Certificates, Series 1996-B1, Class A7 (Aaa, AAA) 8.200% 09/15/27 ............................... 25 26,916 ----------- TOTAL ASSET BACKED SECURITIES (Cost $950,870) ............................... 1,093,707 ----------- COLLATERALIZED MORTGAGE BACKED SECURITIES -- 0.6% Asset Securitization Corp. Series 1997-D5, Class A1D (Aaa, AAA) 6.850% 02/14/41 ............................... 130 136,175 General Motors Acceptance Corp. Commercial Mortgage Securities, Inc. Series 1997-C1 Class A2 (Aaa, AAA) 6.853% 09/15/06 ............................... 20 20,781 ----------- TOTAL COLLATERALIZED MORTGAGE BACKED SECURITIES (Cost $279,161) ............................... 156,956 ----------- AGENCY OBLIGATIONS -- 14.6% Federal Home Loan Mortgage Corporation -- 5.4% Various Pools: 7.000% 12/01/09 ................................ 389 397,464 15-Year Gtd. TBA 08/01/12 ....................... 605 615,209 6.500% 01/01/13 ................................ 500 506,562 ----------- 1,519,235 ----------- Federal National Mortgage Association -- 9.2% Various Pools: 15-Year TBA 7.000% 06/01/13 ................................ $ 50 $ 51,031 6.000% 08/01/13 ................................ 40 39,925 6.000% 08/01/13 ................................ 208 207,510 30-Year TBA 7.000% 12/31/25 ................................ 235 239,039 6.500% 09/01/27 ................................ 940 944,406 8.000% 06/01/28 ................................ 525 543,375 6.000% 04/01/28 ................................ 114 112,143 6.000% 03/01/28 ................................ 260 261,219 6.000% 08/01/28 ................................ 134 131,645 6.000% 08/01/28 ................................ 30 29,255 REMIC Series 1997-16 Class M Principle Only (Aaa, AAA) 0.000% 02/25/23 ............................... 80 58,438 ----------- 2,617,986 ----------- TOTAL AGENCY OBLIGATIONS (Cost $4,096,519) ............................. 4,137,221 ----------- U.S. TREASURY OBLIGATIONS -- 10.6% U.S. Treasury Bills -- 0.1% 4.990% 09/24/98 ................................ 30 29,904 ------------ U.S. Treasury Bonds --6.2% 6.875% 08/15/25 ................................ 1,485 1,779,693 ----------- U.S. Treasury Notes -- 4.3% 5.375% 02/15/01 ................................ 435 438,911 6.250% 06/30/02 ................................ 195 203,106 6.250% 02/15/07 ................................ 540 580,665 ----------- 1,222,682 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $2,893,330) ............................. 3,032,279 ----------- TOTAL DOMESTIC BONDS (Cost $14,569,017) ............................ 14,372,755 ----------- SHORT-TERM INVESTMENTS -- 0.3% BBH Grand Cayman U.S. Dollar Time Deposit 4.938% 09/01/98 ........................,...... 106 106,000 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $106,000) ............................... 106,000 ----------- See Accompanying Notes to Financial Statements. 47 BEA Strategic Global Fixed Income Fund (Concluded) Par (000) Value ---------- ---------- TOTAL INVESTMENTS -- 105.0% (Cost $30,571,435) ................................. 29,917,894 ------------ OTHER LIABILITIES IN EXCESS OF ASSETS -- (5.0%) ........................... (1,434,510) ------------ TOTAL NET ASSETS -- 100.0% ...................... $ 28,483,384 ============ * Also cost for Federal income tax purposes at August 31, 1998 is $30,580,634. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ................................ $113,330 Gross Depreciation ................................ (776,070) --------- Net Appreciation.................................... $(662,740) ========= *** Non-income producing securities which are in default. + Variable rate obligations -- The interest shown is the rate as of August 31, 1998. ++ Step Bond -- The interest rate as of August 31, 1998 is 0% and will reset to interest rate shown at a future date. +++ Securities have no stated maturity date. ++++ Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr S.A. de C.V. (a) With additional 750,000 rights attached, expiring 06/03/2006, with no market value. The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group ratings indicated are the most recent rating available at August 31, 1998 and are unaudited. CURRENCY ABBREVIATIONS CND .......................................................Canadian Dollars DEM .......................................................German Deutschmarks FRF .......................................................French Francs GBP .......................................................United Kingdom Pounds ITL .......................................................Italian Lira JPY .......................................................Japanese Yen NLG .......................................................Netherland Guilder NZD .......................................................New Zealand Dollar INVESTMENT ABBREVIATIONS FRB .......................................................Floating Rate Bond FRN .......................................................Floating Rate Note See Accompanying Notes to Financial Statements. 48 BEA Strategic Global Fixed Income Fund of The RBB Fund, Inc. Statement of Assets and Liabilities August 31, 1998 ASSETS Investments at value (Cost $30,571,435) ..................... $ 29,917,894 Interest receivable ......................................... 773,839 Investments sold receivable ................................. 702,435 Prepaid expenses ............................................ 33,801 Other assets ................................................ 942,409 ------------ Total Assets .............................................. 32,370,378 LIABILITIES Investments purchased payable ............................... 3,655,374 Forward currency contracts payable .......................... 205,094 Accrued expenses payable .................................... 17,901 Futures margin payable ...................................... 8,625 ------------ Total Liabilities ......................................... 3,886,994 NET ASSETS (Applicable to 1,886,423 BEA Institutional Shares) .. $ 28,483,384 ============ NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($28,483,384 divided by 1,886,423) ....................................... $ 15.10 ============ NET ASSETS CONSISTED OF: Capital Paid-In ............................................. $ 29,133,251 Accumulated Net Investment Loss ............................. (525,810) Accumulated Net Realized Gain on Security and Foreign Exchange Transactions ................ 754,133 Net Unrealized Depreciation on Investments and Other ..................................... (878,190) ------------ NET ASSETS ..................................................... $ 28,483,384 ============ See Accompanying Notes to Financial Statements. 49 BEA High Yield Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are pleased to report on the results of the BEA High Yield Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund's Institutional Class was $16.60, compared to an NAV of $17.08 on August 31, 1997. As a result, the Institutional Class's total return (assuming reinvestment of dividends of $1.4246 per share) was 5.48%. By comparison, the Credit Suisse First Boston High Yield Index (the "Index") gained 1.46% during the same period. The NAV of the Fund's Advisor Class was $16.62 on August 31, 1998, compared to an NAV of $17.08 on August 31, 1997. As a result, the Advisor Class's total return (assuming reinvestment of dividends of $1.3694 per share) was 5.27% versus 1.46% for the Index. The Fund outperformed the Credit Suisse First Boston benchmark over the 12-month period due to the same factors that drove outperformance in the fiscal year's first half: o Overweight in telecommunications. We continue to like telecom because of its potential consolidation opportunities and attractive growth prospects. As has been the case for some time now, it is the portfolio's most heavily weighted sector and one of its most heavily overweighted sectors relative to the benchmark. The Fund thus benefited disproportionately from the announced mergers of WorldCom with MCI and AT&T with Tele-Communications. o Overweight in gaming. Consolidation activity remains the prime attraction for investors in gaming. Our overweight left the Fund well positioned when several deals were announced, such as Hilton's acquisition of Grand Casinos. o Underweight in energy. Prices for the world's major commodities, including oil and gas, have been battered as a result of the severe economic crisis in Asia. We avoided much of the decline in energy-related securities by keeping a low presence in the sector and concentrating on energy service companies. o Domestic focus. Events in Asia had little impact on the Fund, as our largest sector weightings--which account for about half of total assets--were almost exclusively focused on the domestic U.S. market. The portfolio also had relatively low exposure to steel, paper and chemicals, which are the high yield market's cyclical industry groups most negatively affected by the Asian turmoil. As developments occur that we believe would be of interest to you, we will be sure to keep you informed. Meanwhile, if you have questions, please feel free to call upon us at any time. Sincerely yours, BEA High Yield Management Team Richard J. Lindquist, CFA, Executive Director Misia K. Dudley, Senior Vice President Marianne Rossi, CFA, Senior Vice President Mary Ann Thomas, CFA, Senior Vice President John M. Tobin, CFA, Senior Vice President 50 BEA High Yield Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA High Yield Institutional Class and the CS First Boston High Yield Index from Inception 3/1/93 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA HIGH CS FIRST YIELD FUND BOSTON HIGH INSTITUTIONAL YIELD CLASS INDEX ------------- ----------- 3/1/93 10,000 10,000 5/31/93 10,607 10,419 8/31/93 11,294 10,809 11/30/93 11,872 11,209 2/28/94 12,128 11,570 5/31/94 11,484 11,143 8/31/94 11,539 11,201 11/30/94 11,449 11,123 2/28/95 10,961 11,638 5/31/95 12,010 12,370 8/31/95 12,439 12,680 11/30/95 12,784 13,029 2/29/96 13,665 13,516 5/31/96 13,990 13,662 8/31/96 13,984 13,965 11/30/96 14,571 14,547 2/28/97 15,190 15,219 5/31/97 15,350 15,488 8/31/97 16,105 16,119 11/30/97 16,653 16,553 2/28/98 17,514 17,120 5/31/98 17,845 17,387 8/31/98 16,988 16,354 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 5.48% Three Years 10.95% Five Years 8.52% From Inception 10.11% ------------------------------ Comparison of Change in Value of $10,000 Investment in the BEA High Yield Advisor Class and the CS First Boston High Yield Index from Inception 11/1/96 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: BEA HIGH CS FIRST YIELD FUND BOSTON HIGH ADVISOR YIELD CLASS INDEX ---------- ----------- 11/1/96 10,000 10,000 11/30/96 10,110 10,156 2/28/97 10,541 10,625 5/31/97 10,646 10,813 8/31/97 11,164 11,253 11/30/97 11,523 11,556 2/28/98 12,114 11,952 5/31/98 12,333 12,138 8/31/98 11,752 11,417 ------------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 5.27% From Inception 9.13% ------------------------------ Note: Past performance is not predictive of future performance. 51 BEA High Yield Fund of The RBB Fund, Inc. Statement of Net Assets August 31, 1998 Par (000) Value ----------- ---------- CORPORATE BONDS -- 91.6% Aerospace/Defense -- 0.5% K&F Industries, Inc. Sr. Sub. Notes, Series B (B3, B-) 9.250% 10/15/07 ......................... $ 500 $ 495,000 ---------- Automotive -- 4.5% Aetna Industries, Inc. Sr. Notes (B3, B-) 11.875% 10/01/06 ........................ 500 528,125 Cambridge Industries, Inc. Gtd. Sr. Sub. Notes, Series B (B3, B-) 10.250% 07/15/07 ........................ 400 404,000 Collins & Aikman Products Co. Gtd. Sr. Sub. Notes (B2, B) 11.500% 04/15/06 ........................ 450 488,812 Consorcio G Grupo Dina S.A. de C.V./MCII Holdings (U.S.A.), Inc. Sr. Secured Discount Exchange Notes (NR, NR) 9.875% 11/15/02 ......................... 500 476,875 Delco Remy International, Inc. Gtd. Sr. Sub. Notes (B2, B) 10.625% 08/01/06 ........................ 500 530,000 Hayes Wheels International, Inc. Gtd. Sr. Sub. Notes, Series B (B2, B) 9.125% 07/15/07 ......................... 350 336,875 LDM Technologies, Inc. Gtd. Sr. Sub. Notes, Series B (B3, B-) 10.750% 01/05/07 ........................ 400 406,500 Oxford Automotive, Inc. Gtd. Sr. Sub. Notes, Series B (Caa1, B-) 10.125% 06/15/07 ........................ 300 302,250 Oxford Automotive, Inc. 144A Gtd. Sr. Sub. Notes (Caa1, B-) 10.125% 06/15/07 ........................ 200 201,500 Safelite Glass Corp. 144A Sr. Sub. Notes (B3, B) 9.875% 12/15/06 ......................... 350 357,875 Titan Wheel International, Inc. Sr. Sub. Notes (B1, BB-) 8.750% 04/01/07 ......................... 250 246,562 ---------- 4,279,374 ---------- Broadcasting -- 5.1% Allbritton Communications Company Sr. Sub. Notes, Series B (B3, B-) 8.875% 02/01/08 ..................... 250 256,250 Sr. Sub. Debentures, Series B (B3, B-) 9.750% 11/30/07 ..................... 250 263,750 Par (000) Value ----------- ---------- Broadcasting -- (continued) American Radio Systems Corp. Gtd. Sr. Sub. Notes (B2, BB-) 9.000% 02/01/06 ......................... $ 250 $ 262,812 Australis Holdings Pty. Ltd. Yankee Sr. Secured Discount Notes (NR, D) 15.000% 11/01/02+ ....................... 294 14,700 Australis Media Ltd. Yankee Units (C, D) 15.750% 05/15/03+ ....................... 8 120 15.750% 05/15/03+ ....................... 900 13,500 Capstar Broadcasting Partners, Inc. Sr. Discount Notes (NR, B-) 12.750% 02/01/09+ ....................... 500 376,875 Chancellor Media Corp. Gtd. Sr. Sub. Notes (B2, B) 9.375% 10/01/04 ......................... 250 253,750 EchoStar Communications Corp. Gtd. Sr. Discount Notes (B2, B-) 12.875% 06/01/04+ ....................... 350 335,125 Granite Broadcasting Corp. Sr. Sub. Notes (B3, B-) 9.375% 12/01/05 ....................... 450 456,187 144A Sr. Sub. Notes, Series A (B3, B-) 8.875% 05/15/08 ....................... 250 237,500 Jacor Communications Co. Gtd. Sr. Sub. Notes (B2, B) 9.750% 12/15/06 ......................... 250 271,875 Pegasus Communications Corp. Sr. Notes, Series B (B3, B-) 9.625% 10/15/05 ......................... 250 248,125 Sinclair Broadcast Group Sr. Sub. Notes (B2, B) 10.000% 09/30/05 ........................ 400 420,500 Spanish Broadcasting System, Inc. Gtd. Sr. Notes Series B (B2, B) 11.000% 03/15/04 ........................ 300 315,750 TCI Satellite Entertainment, Inc. 144A Sr. Sub. Discount Notes (Caa1, B) 12.250% 02/15/07+ ..................... 200 126,000 144A Sr. Sub. Notes (Caa1, B) 10.875% 02/15/07 ...................... 450 418,500 United International Holdings Inc. Sr. Secured Discount Notes, Series B (B3, B) 10.750% 02/15/08+ ....................... 600 282,000 Young Broadcasting, Inc. Gtd. Sr. Sub. Notes, Series B (B2, B) 9.000% 01/15/06 ......................... 250 259,375 ---------- 4,812,694 ---------- See Accompanying Notes to Financial Statements. 52 BEA High Yield Fund (Continued) Par (000) Value -------- ----------- Business Services -- 0.9% Iron Mountain, Inc. 144A Sr. Sub. Notes (B3, B-) 8.750% 09/30/09 ......................... $ 500 $ 483,750 U.S. Office Products Company 144A Gtd. Sr. Sub. Notes (B3, B-) 9.750% 06/15/08 ......................... 400 339,000 ----------- 822,750 ----------- Cable -- 11.0% Adelphia Communications Corp. Sr. Notes, Series B (B2, NR) 10.500% 07/15/04 ........................ 400 431,000 Century Communications Corp. Sr. Discount Notes, Series B (Ba3, BB-) 0.000% 01/15/08 ......................... 800 363,000 Charter Communications Southeast, L.P. Sr. Notes, Series B (B3, B) 11.250% 03/15/06 ........................ 900 996,750 Comcast U.K. Cable Partners Ltd. Yankee Sr. Debentures (B2, B-) 11.200% 11/15/07 ........................ 750 622,500 CSC Holdings, Inc. Sr. Debentures (B1, BB-) 9.875% 02/15/13 ......................... 500 545,000 Diamond Cable Communications Plc, Yankee Sr Discount Notes (Caa1, B-) 11.750% 12/15/05+ ....................... 500 410,000 DIVA Systems Corp. Units (NR, NR) 13.000% 03/01/08+ ....................... 2,527 909,720 Falcon Holding Group L.P./ Falcon Funding Corp. 144A Sr. Debentures (B2, B) 9.285% 04/15/10 ..................... 500 317,500 144A Sr. Discount Debentures (B2, B) 8.375% 04/15/10 ..................... 250 243,750 Helicon Group L.P. Sr. Secured Notes, Series B (B1, B) 11.000% 11/01/03 ........................ 500 529,375 James Cable Partners L.P./ James Cable Finance Corp. Gtd. Sr. Notes, Series B (B2, B+) 10.750% 08/15/04 ........................ 500 510,000 Jones Intercable, Inc. Notes (Ba2, BB+) 7.625% 04/15/08 ......................... 500 500,625 Lenfest Communications, Inc. Sr. Notes (Ba3, BB+) 8.375% 11/01/05 ......................... 300 313,875 Par (000) Value -------- -------- Cable -- (continued) Marcus Cable L.P. Sr. Discount Notes (B3, B) 14.250% 12/15/05+ ....................... $ 650 $ 610,187 Northland Cable Television, Inc. Gtd. Sr. Sub. Notes (B3, B-) 10.250% 11/15/07 ........................ 600 633,750 NTL, Inc. Sr. Deferred Coupon Notes, Series A (B3, B-) 11.000% 04/15/05+ ....................... 750 645,000 Rifkin Acquisition Partners L.P. Sr. Sub. Notes (B3, B-) 11.125% 01/15/06 ........................ 500 547,500 Rogers Communications, Inc. Yankee Sr. Notes (B2, BB-) 9.125% 01/15/06 ......................... 550 544,500 Telewest Communications plc Yankee Sub. Debentures (B1, B+) 9.625% 10/01/06 ....................... 250 246,250 Yankee Sr. Discount Debentures (B1, B+) 11.000% 10/01/07+ ..................... 600 474,000 ----------- 10,394,282 ----------- Cellular/Wireless Communications -- 4.4% Advanced Radio Telecommunications Corp. Sr. Notes (Caa2, CCC) 14.000% 02/15/07 ........................ 500 402,500 Clearnet Communications, Inc. Yankee Sr. Discount Notes (B3, NR) 14.750% 12/15/05+ ....................... 500 400,000 Comcast Cellular Holdings, Inc. Sr. Notes, Series B (Ba3, BB+) 9.500% 05/01/07+ ........................ 400 388,500 Dobson Communications Corp. 144A Sr. Notes (NR, NR) 11.750% 04/15/07 ........................ 250 264,062 Iridium Operating L.L.C./Iridium Capital Corp. Gtd. Sr. Notes, Series C/EN (B3, B-) 11.250% 07/15/05 ........................ 350 287,000 McCaw International, Ltd. Sr. Discount Notes (Caa1, CCC+) 13.000% 04/15/07 ........................ 500 295,625 Microcell Telecommunications Inc. Yankee Sr. Discount Notes, Series B (B3, NR) 14.000% 06/01/06 ........................ 500 335,625 Nextel Communications, Inc. Sr. Discount Notes (B2, CCC+) 9.750% 08/15/04+ ........................ 500 485,625 See Accompanying Notes to Financial Statements. 53 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- Cellular/Wireless Communications -- (continued) Price Communications Wireless, Inc. Sr. Sub. Notes, Series B (B3, CCC) 11.750% 07/15/07 ........................ $ 250 $ 267,813 Price Communications Cellular Holdings, Inc. Sr. Exchangeable PIK Notes (Caa1, NR) 11.250% 08/15/08 ........................ 250 252,500 Sprint Spectrum L.P./ Sprint Spectrum Finance Corp. Sr. Notes (Ba2, B+) 11.000% 08/15/06 ........................ 500 563,125 Vanguard Cellular Systems, Inc. Sr. Debentures (B1, B+) 9.375% 04/15/06 ......................... 250 261,250 ---------- 4,203,625 ---------- Chemicals -- 1.7% ClimaChem, Inc. Gtd. Sr. Notes, Series B (B3, B) 10.750% 12/01/07 ........................ 500 511,250 Pioneer Americas Acquisition Corp. Gtd. Sr. Secured Notes Series B (NR, B+) 9.250% 06/15/07 ......................... 250 219,375 Radnor Holdings Corp. Gtd. Sr. Notes, Series B (B2, BB-) 10.000% 12/01/03 ........................ 500 506,875 Sterling Chemical Holdings, Inc. Sr. Secured Discount Notes (Caa1, B+) 13.500% 08/15/08+ ....................... 700 350,000 ---------- 1,587,500 ---------- Computers, Software & Services -- 0.6% Verio, Inc. 144A Units (B3, NR) 13.500% 06/15/04 ...................... 350 388,500 144A Sr. Notes (B3, B-) 10.375% 04/01/05 ...................... 200 205,000 ---------- 593,500 ---------- Construction & Building Materials -- 2.1% Koppers Industries, Inc. Sr. Sub. Notes (B2, B-) 9.875% 12/01/07 ......................... 500 504,375 Omega Cabinets, Ltd. Sr. Sub. Notes (B3, NR) 10.500% 06/15/07 ........................ 400 398,500 Southdown, Inc. Sr. Sub. Notes, Series B (Baa3, BBB-) 10.000% 03/01/06 ........................ 500 543,125 Par (000) Value ---------- ---------- Construction & Building Materials -- (continued) Waxman Industries, Inc. ................... Sr. Notes, Series B (Caa1, CCC+) 12.750% 06/01/04+ ....................... $ 600 $ 564,000 ---------- 2,010,000 ---------- Consumer Products & Services -- 1.5% Coinstar, Inc. Sr. Discount Notes (NR, NR) 13.000% 10/01/06+ ....................... 525 428,531 Holmes Products Corp. Gtd. Sr. Sub. Notes, Series B (B3, B-) 9.875% 11/15/07 ......................... 250 252,500 Packaged Ice Inc. 144a Gtd. Sr. Notes (B3, B) 9.750% 02/01/05 ......................... 250 247,500 Signature Brands USA, Inc. Sr. Sub. Notes (B3, B-) 13.000% 08/15/02 ........................ 250 279,687 Werner Holding Co., Inc. Gtd. Sr. Sub. Notes, Series A (B2, B-) 10.000% 11/15/07 ........................ 250 255,312 ---------- 1,463,530 ---------- Electronics -- 0.9% Elgar Holdings, Inc. 144A Gtd. Sr. Notes (B2, NR) 9.875% 02/01/08 ......................... 500 425,000 Unisys Corporation Sr. Notes, Series B (Ba3, BB-) 12.000% 04/15/03 ........................ 400 447,500 ---------- 872,500 ---------- Energy -- 3.6% Bellwether Exploration Company Gtd. Sr. Sub. Notes (B3, B-) 10.875% 04/01/07 ........................ 250 248,437 Cliffs Drilling Company Gtd. Sr. Notes, Series D (B1, B+) 10.250% 05/15/03 ........................ 350 372,750 Dailey International Inc. Gtd. Sr. Notes, Series B (B2, B-) 9.500% 02/15/08 ......................... 400 351,500 Forcenergy, Inc. Sr. Sub. Notes (B2, B-) 9.500% 11/01/06 ......................... 250 234,687 HS Resources Inc. Gtd. Sr. Sub. Notes (B2, B) 9.250% 11/15/06 ......................... 400 390,500 KCS Energy Inc. Gtd. Sr. Sub. Notes (B3, B-) 8.875% 01/15/08 ......................... 250 200,000 Kelley Oil & Gas Corp. Gtd. Sr. Sub. Notes, Series B (B3, B-) 10.375% 10/15/06 ........................ 400 380,000 See Accompanying Notes to Financial Statements. 54 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- Energy -- (continued) Nuevo Energy Company Gtd. Sr. Sub. Notes (B1, B+) 9.500% 04/15/06 ......................... $ 250 $ 242,500 Plains Resources, Inc. Gtd. Sr. Sub. Notes, Series B (B2, B-) 10.250% 03/15/06 ........................ 250 249,375 Pride Petroleum Services, Inc. Sr. Notes (Ba3, BB) 9.375% 05/01/07 ......................... 300 298,875 Southwest Royalties, Inc. Gtd. Sr. Notes, Series B (Caa2, B-) 10.500% 10/15/04 ........................ 300 225,000 Wiser Oil Co. Gtd. Sr. Sub. Notes (B2, B-) 9.500% 05/15/07 ......................... 250 209,375 ---------- 3,402,999 ---------- Entertainment -- 3.1% American Skiing Co. Sr. Sub. Notes, Series B (B3, CCC+) 12.000% 07/15/06 ........................ 400 427,000 AMF Bowling Worldwide, Inc. Gtd. Sr. Sub. Notes, Series B (B2, B) 10.875% 03/15/06 ...................... 350 332,500 Gtd. Sr. Sub. Discount Notes, Series B (B2, B) 12.250% 03/15/06 ...................... 459 312,120 Booth Creek Ski Holdings, Inc. Gtd. Sr. Sub. Notes, Series B (Caa1, B-) 12.500% 03/15/07 ........................ 400 401,000 Hollywood Theaters, Inc. Gtd. Sr. Sub. Notes (B3, B-) 10.625% 08/01/07 ........................ 500 509,375 KSL Recreation Group, Inc. Sr. Sub. Notes, Series B (B3, B-) 10.250% 05/01/07 ........................ 350 372,312 Premier Parks, Inc. Sr. Notes (B3, B-) 9.250% 04/01/06 ....................... 250 235,000 Gtd. Sr. Notes (B1, B) 9.750% 01/15/07 ....................... 250 258,125 ---------- 2,847,432 ---------- Financial Services -- 0.3% Fifth Mexican Acceptance Corp. 144A Gtd. Notes (NR, NR) 8.000% 12/15/98 ......................... 1,040 294,528 ---------- Food & Beverage -- 2.4% AmeriServ Food Distribution, Inc. Gtd. Sr. Notes (B1, B+) 8.875% 10/15/06 ......................... 500 466,875 Par (000) Value ---------- ---------- Food & Beverage -- (continued) Archibald Candy Corp. Gtd. Sr. Secured Notes (B2, B) 10.250% 07/01/04 ........................ $ 300 $ 312,000 Delta Beverage Group, Inc. Sr. Notes (B2, B+) 9.750% 12/15/03 ......................... 250 257,812 Eagle Family Foods, Inc. Gtd. Sr. Sub. Notes, Series B (B3, B-) 8.750% 01/15/08 ......................... 350 330,750 Fleming Companies, Inc. Gtd. Sr. Sub. Notes, Series B (B3, B+) 10.500% 12/01/04 ........................ 150 151,125 International Home Foods, Inc. Gtd. Sr. Sub. Notes (B2, B-) 10.375% 11/01/06 ........................ 250 270,625 Premium Standard Farm Inc. Sr. Secured Notes (NR, NR) 11.000% 09/17/03 ........................ 450 472,500 ---------- 2,261,687 ---------- Health Care -- 2.8% Beverly Enterprises, Inc. Gtd. Sr. Notes (Ba3, B+) 9.000% 02/15/06 ......................... 400 395,500 InSight Health Services Corp. 144A Gtd. Sr. Sub. Notes (B3, B-) 9.625% 06/15/08 ......................... 400 387,000 Integrated Health Services, Inc. Sr. Sub. Notes, Series A (B2, B-) 9.500% 09/15/07 ......................... 250 230,625 Mariner Health Group, Inc. Sr. Sub. Notes, Series B (B2, B-) 9.500% 04/01/06 ......................... 250 258,750 Oxford Health Plans, Inc. 144A Sr. Notes (Caa1, B-) 11.000% 05/15/05 ........................ 400 328,000 Paracelsus Healthcare Corp. Sr. Sub. Notes (B3, B-) 10.000% 08/15/06 ........................ 250 240,000 Quest Diagnostics, Inc. Gtd. Sr. Sub. Notes (B2, B+) 10.750% 12/15/06 ........................ 500 548,125 Tenet Healthcare Corp. Sr. Sub. Notes (Ba3, BB-) 8.625% 01/15/07 ......................... 250 258,125 ---------- 2,646,125 ---------- Industrial Goods & Materials -- 2.4% Anchor Lamina Inc./Anchor Lamina America, Inc. 144A Sr. Sub. Notes (B3, B-) 9.875% 02/01/08 ......................... 500 477,500 See Accompanying Notes to Financial Statements. 55 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- Industrial Goods & Materials -- (continued) Derlan Manufacturing, Inc. Yankee Sr. Notes (B3, B+) 10.000% 01/15/07 ........................ $ 250 $ 255,312 International Utility Structures Inc. 144A Sr. Sub. Notes (NR, NR) 13.000% 02/01/08 ........................ 350 360,500 Jordan Industries Inc. Sr. Notes, Series B (B3, B+) 10.375% 08/01/07 ........................ 500 488,750 Morris Material Handling, Inc. 144A Gtd. Sr. Notes (B2, B) 9.500% 04/01/08 ......................... 400 339,000 Motors and Gears, Inc. Sr. Notes, Series D (B3, B) 10.750% 11/15/06 ........................ 250 247,812 Thermadyne Holdings Corp. 144A Sr. Discount Debentures (Caa1, CCC+) 12.500% 06/01/08+ ....................... 250 125,000 ---------- 2,293,874 ---------- Metals & Mining -- 2.9% Gulf States Steel, Inc. First Mortgage Notes (B1, B-) 13.500% 04/15/03 ........................ 400 351,500 Haynes International, Inc. Sr. Notes (B3, B-) 11.625% 09/01/04 ........................ 500 550,625 Ivaco, Inc. Yankee Sr. Notes (B1, B+) 11.500% 09/15/05 ........................ 250 269,375 Metallurg, Inc. Sr. Notes, Series B (B3, B-) 11.000% 12/01/07 ........................ 500 515,625 NS Group, Inc. Gtd. Sr. Secured Notes (Ba2, B+) 13.500% 07/15/03 ........................ 240 261,300 Weirton Steel Corporation Sr. Notes (B2, B) 11.375% 07/01/04 ........................ 350 357,000 WHX Corporation Sr. Exchange Notes (B3, B) 10.500% 04/15/05 ........................ 500 446,250 ---------- 2,751,675 ---------- Office Equipment & Supplies -- 0.4% Knoll, Inc. Sr. Sub. Notes (B1, B+) 10.875% 03/15/06 ........................ 325 362,375 ---------- Packaging/Containers -- 1.7% BPC Holding Corporation Sr. Secured Notes, Series B (Caa3, NR) 12.500% 06/15/06 ........................ 500 539,375 Par (000) Value ---------- ---------- Packaging & Containers -- (continued) Crown Packaging Enterprises Ltd. Yankee Sr. Secured Discount Notes (Ca, NR) 14.000% 08/01/06+ ....................... $ 775 $ 8,719 Four M Corp. Gtd. Sr. Secured Notes, Series B (B3, B) 12.000% 06/01/06 ........................ 250 245,625 Plastic Containers, Inc. Sr. Secured Notes, Series B (B1, B+) 10.000% 12/15/06 ........................ 500 521,250 Stone Container Finance Co. Yankee Gtd. Sr. Notes (B2, B) 11.500% 08/15/06 ........................ 250 264,063 ---------- 1,579,032 ---------- Paper & Forest Products -- 2.8% Ainsworth Lumber Co. Ltd. Yankee Sr. Secured PIK Notes (B3, B) 12.500% 07/15/07 ........................ 400 423,000 Bear Island Paper Company, L.L.C./ Bear Island Finance Company II Sr. Secured Notes, Series B (B2, B) 10.000% 12/01/07 ........................ 400 400,000 Crown Paper Co. Sr. Sub. Notes (B3, B) 11.000% 09/01/05 ........................ 400 352,000 FiberMark, Inc. Sr. Notes (B1, BB-) 9.375% 10/15/06 ......................... 250 256,563 MAXXAM Group Holdings Inc. 144A Sr. Secured Notes, Series B (B3, CCC+) 12.000% 08/01/03 ........................ 400 438,500 Printpack Inc. Sr. Sub. Notes, Series B (B3, B+) 10.625% 08/15/06 ........................ 350 369,250 Uniforet, Inc. Yankee Gtd. Sr. Secured Notes (B2, B) 11.125% 10/15/06 ........................ 500 401,250 ---------- 2,640,563 ---------- Pharmaceuticals -- 0.4% ICN Pharmaceutical Inc. 144A Sr. Notes (Ba3, BB) 8.750% 11/15/08 ......................... 400 384,000 ---------- Publishing & Information Services -- 3.9% Ampex Corp. Sr. Notes, Series B (NR, B+) 12.000% 03/15/03 ........................ 500 507,500 Gray Communications Systems, Inc. Gtd. Sr. Sub. Notes (B3, B-) 10.625% 10/01/06 ........................ 200 213,500 See Accompanying Notes to Financial Statements. 56 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- Publishing & Information Services -- (continued) Hollinger International Publishing Inc. Gtd. Sr. Sub. Notes (B1, BB-) 9.250% 03/15/07 ......................... $ 250 $ 253,125 InterAct Systems Inc. 144A Sr. Discount Notes (NR, NR) 14.000% 08/01/03+ ....................... 700 273,000 Level 3 Communications, Inc. 144A Sr. Notes (B3, B) 9.125% 05/01/08 ......................... 400 358,000 Liberty Group Publishing, Inc. Sr. Discount Debentures (Caa1, CCC+) 11.625% 02/01/09+ ....................... 300 172,125 Mentus Media Corp. 144A Sr. Secured Notes (NR, NR) 12.000% 02/01/03 ........................ 527 527,000 Nebraska Book Co., 144A Sr. Sub. Notes (B3, B-) 8.750% 02/15/08 ......................... 250 235,313 Orbital Imaging Corp. 144A Units (NR, NR) 11.625% 03/01/05 ........................ 500 501,250 Sun Media Corp. Yankee Sr. Sub. Notes (B3, B-) 9.500% 02/15/07 ......................... 194 193,758 9.500% 05/15/07 ......................... 65 64,919 Tri-State Outdoor Media Group, Inc. 144A Sr. Notes (NR, NR) 11.000% 05/15/08 ........................ 400 400,000 ---------- 3,699,490 ---------- Real Estate -- 0.3% HMH Properties, Inc. Gtd. Sr. Notes, Series A (Ba2, BB) 7.875% 08/01/05 ......................... 250 238,750 ---------- Restaurants, Hotels & Gaming -- 8.4% American Restaurant Group Inc. 144A Sr. Secured Notes, Series A (B3, B) 11.500% 02/15/03 ........................ 500 475,000 AmeriKing, Inc. Gtd. Sr. Notes (B3, B-) 10.750% 12/01/06 ........................ 400 416,500 Ameristar Casinos, Inc. Gtd. Sr. Sub. Notes, Series B (B3, B-) 10.500% 08/01/04 ........................ 500 515,625 CapStar Hotel Co. Sr. Sub. Notes (Ba3, B) 8.750% 08/15/07 ......................... 250 240,000 Casino America, Inc. Gtd. Sr. Notes (B1, B+) 12.500% 08/01/03 ........................ 500 552,500 Par (000) Value ---------- ---------- Restaurants, Hotels & Gaming -- (continued) Casino Magic of Louisiana Corp. Gtd. First Mortgage Notes, Series B (B3, B-) 13.000% 08/15/03 ........................... $ 600 $ 688,500 Coast Hotels and Casinos, Inc. Gtd. First Mortgage Notes, Series B (B2, B+) 13.000% 12/15/02 ........................... 350 394,188 Friendly Ice Cream Corp. Gtd Sr. Notes (B1, B) 10.500% 12/01/07 ........................... 250 223,125 Grand Casinos, Inc. Gtd. Sr. Notes, Series B (B2, B+) 9.000% 10/15/04 ............................ 250 265,938 Hard Rock Hotel, Inc. 144A Sr. Sub. Notes (B3, B-) 9.250% 04/01/05 ............................ 400 407,000 Horseshoe Gaming L.L.C Gtd. Sr. Sub. Notes, Series B (B3, B+) 9.375% 06/15/07 ............................ 500 501,250 Mohegan Tribal Gaming Authority Sr. Secured Notes, Series B (Ba1, BB+) 13.500% 11/15/02 ........................... 400 516,500 Players International, Inc. Sr. Notes (Ba3, BB-) 10.875% 04/15/05 ........................... 250 265,938 Prime Hospitality Corp. Secured First Mortgage Notes (Ba2, BB) 9.250% 01/15/06 ............................ 250 257,500 Red Roof Inns, Inc. Sr. Exchange Notes (B2, B) 9.625% 12/15/03 ............................ 250 252,813 Showboat Marina Casino Partnership/Showboat Marine Finance Corp. First Mortgage Notes, Series B (B2, BB-) 13.500% 03/15/03 ........................... 450 527,625 Sun International Hotels Ltd. Yankee Gtd. Sr. Sub. Notes (Ba3, B+) 9.000% 03/15/07 ............................ 400 404,000 The Majestic Star Casino L.L.C. Sr. Exchange Secured Notes (B2, B) 12.750% 05/15/03 ........................... 500 533,750 Waterford Gaming L.L.C./ Waterford Gaming Finance Corp. Sr. Notes (NR, NR) 12.750% 11/15/03 ........................... 473 514,979 ---------- 7,952,731 ---------- See Accompanying Notes to Financial Statements. 57 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- Retail Trade -- 3.2% County Seat Stores, Inc. 144A Units (NR, NR) 12.750% 11/01/04 ........................ $ 500 $ 522,500 Finlay Enterprises, Inc. Sr. Secured Debentures (B2, B) 9.000% 05/01/08 ......................... 500 428,750 Jitney-Jungle Stores of America, Inc. Gtd. Sr. Notes (B2, B+) 12.000% 03/01/06 ........................ 250 272,500 K Mart Corp. Debentures (Ba2, BB) 7.750% 10/01/12 ......................... 500 488,125 Mrs. Fields' Original Cookies Inc. Gtd. Sr. Notes, Series B (B2, NR) 10.125% 12/01/04 ...................... 350 336,875 144A Gtd. Sr. Notes, Series A (B2, B+) 10.125% 12/01/04 ...................... 150 144,375 Mrs. Fields' Holding Co., Inc. 144A Units (Caa2, B-) 14.000% 12/01/05+ ....................... 200 111,500 Pantry, Inc. Gtd. Sr. Sub. Notes (B3, B-) 10.250% 10/15/07 ........................ 250 244,688 Pathmark Stores, Sr. Sub Notes (Caa1, CCC+) 9.625% 05/01/03 ......................... 500 481,250 ---------- 3,030,563 ---------- Telecommunications -- 14.4% Bell Technology Group Ltd. 144A Units (NR, NR) 13.000% 05/01/05 ........................ 300 286,500 Dobson Wireline Company 144A Sr. Notes (NR, NR) 12.250% 06/15/08 ........................ 400 368,000 DTI Holdings, Inc. 144A Sr. Discount Notes (NR, NR) 12.500% 03/01/08+ ....................... 600 244,500 E. Spire Communications, Inc. Sr. Discount Notes (NR, NR) 13.000% 11/01/05+ ....................... 700 525,875 Focal Communications Corp. 144A Sr. Discount Notes (NR, NR) 12.125% 02/15/08 ........................ 550 297,000 Global Crossing Holdings Ltd. 144A Sr. Notes (NR, NR) 9.625% 05/15/08 ......................... 150 143,250 Globalstar, L.P./Globalstar Capital Corp. Sr. Notes (B3, B) 10.750% 11/01/04 ........................ 100 80,000 Par (000) Value ---------- ---------- Telecommunications -- (continued) GST Equipment Funding, Inc. Sr. Secured Exchange Notes (NR, NR) 13.250% 05/01/07 ........................... $ 250 $ 282,500 GST USA, Inc. Gtd. Sr. Discount Exchange Notes (NR, NR) 13.875% 12/15/05+ .......................... 500 383,125 Hermes Europe Railtel BV Yankee Sr. Notes (B3, B) 11.500% 08/15/07 ........................... 250 259,688 Hyperion Telecommunications, Inc. Sr. Discount Notes, Series B (B3, B+) 13.000% 04/15/03+ ........................ 500 345,000 Sr. Secured Notes, Series B (B3, B+) 12.250% 09/01/04 ......................... 250 245,000 ICG Services, Inc. 144A Sr. Discount Notes (NR, NR) 10.000% 02/15/08+ .......................... 500 283,125 ICG Holdings, Inc. Gtd. Sr. Exchangeable Discount Notes (NR, NR) 12.500% 05/01/06+ .......................... 800 624,000 Intermedia Communications Inc. Sr. Discount Notes, Series B (B2, B) 11.250% 07/15/07+ .......................... 500 345,000 ITC DeltaCom, Inc. Sr. Notes (B2, B) 11.000% 06/01/07 ........................... 163 182,560 Jordan Telecommunication Products, Inc. Sr. Discount Notes, Series B (NR, B+) 11.750% 08/01/07+ .......................... 400 316,500 KMC Telecom Holdings, Inc. Sr. Discount Notes (NR, NR) 12.500% 02/15/08+ .......................... 500 286,250 L-3 Communications Corp. Gtd. Sr. Sub. Notes (B2, B) 8.500% 05/15/08 ............................ 250 245,000 McLeodUSA, Inc. Sr. Notes (B2, B+) 9.250% 07/15/07 .......................... 300 291,750 Sr. Discount Notes (B2, B+) 10.500% 03/01/07+ ........................ 500 348,125 MetroNet Communications Corp. Sr. Discount Notes (B3, B) 9.250% 11/01/07 .......................... 400 268,500 Sr. Notes (B3, B) 12.000% 08/15/07 ......................... 400 453,000 See Accompanying Notes to Financial Statements. 58 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- Telecommunications -- (continued) MJD Communications Inc. 144A Sr. Sub. Notes (B3, B-) 9.500% 05/01/08 .......................... $ 400 $ 405,000 NEXTLINK Communications, Inc. Sr. Discount Notes (B3, NR) 9.450% 04/15/08+ ....................... 500 270,625 NEXTLINK Communications LLC/NEXTLINK Capital Inc. Sr. Notes (B3, B) 12.500% 04/15/06 ....................... 250 278,125 Orion Network Systems, Inc. Gtd. Sr. Notes (B2, B+) 11.250% 01/15/07 ......................... 300 330,375 Pagemart Nationwide, Inc. Sr. Discount Notes (B3, NR) 15.000% 02/01/05+ ........................ 750 660,000 People's Telephone Co., Inc. Sr. Notes, Series B (B2, B-) 12.250% 07/15/02 ......................... 250 281,875 PLD Telekom, Inc. 144A Units (NR, NR) 14.000% 06/01/04 ....................... 1,010 959,500 144A, Conv. Sub. Notes (NR, NR) 9.000% 06/01/06 ........................ 230 289,800 Qwest Communications International, Inc. Sr. Discount Notes (Ba1, BB+) 9.470% 10/15/07+ ....................... 750 547,500 Sr. Notes, Series B (Ba1, BB+) 10.875% 04/01/07 ....................... 200 225,000 RCN Corp. Sr. Notes, Series B (B3, NR) 10.000% 10/15/07 ....................... 400 368,500 Sr. Discount Notes, Series B (B3, NR) 9.800% 02/15/08+ ....................... 300 171,750 Rhythms Netconnections 144A Units (NR, NR) 13.500% 05/15/08 ......................... 750 307,500 Startec Global Communications Corp. 144A Units (NR, NR) 12.000% 05/15/08 ......................... 400 384,000 Teligent Inc. Sr. Notes (Caa1, CCC) 11.500% 12/01/07 ......................... 500 460,000 WinStar Communications, Inc. Sr. Discount Notes (Caa, CCC+) 14.000% 10/15/05+ ........................ 1,000 677,500 ----------- 13,721,298 ----------- Par (000) Value ---------- ---------- Textiles & Apparel -- 1.8% Collins & Aikman Floorcoverings, Inc. Sr. Sub. Notes, Series B (B3, B-) 10.000% 01/15/07 ........................ $ 250 $ 257,812 Hosiery Corp. of America, Inc. Sr. Sub. Notes (B3, B-) 13.750% 08/01/02 ........................ 400 434,000 Maxim Group, Inc. Gtd. Sr. Sub. Notes, Series B (B2, B) 9.250% 10/15/07 ......................... 500 506,875 William Carter Company Sr. Sub. Notes, Series A (B3, B-) 10.375% 12/01/06 ........................ 450 468,563 ----------- 1,667,250 ----------- Transportation -- 2.5% AirTran Airlines, Inc. Sr. Secured Notes (B2, B-) 10.500% 04/15/01 ........................ 250 249,375 Atlantic Express Transportation Corp. Gtd. Sr. Secured Notes (B2, B) 10.750% 02/01/04 ........................ 250 261,250 Canadian Airlines Corp. Yankee Sr. Notes (Caa2, CCC-) 12.250% 08/01/06 ........................ 250 242,500 Golden Ocean Group Ltd. Gtd. Sr. Notes (B3, CCC+) 10.000% 08/31/01 ........................ 657 395,842 Kitty Hawk, Inc. Sr. Secured Notes (B1, B+) 9.950% 11/15/04 ......................... 250 254,375 Pegasus Shipping (Hellas) Ltd. 144A Gtd. First Preferred Ship Mortgage Notes, Series A (Caa1, B) 11.875% 11/15/04 ........................ 500 490,000 Trans World Airlines, Inc. Sr. Notes (Caa1, CC) 11.375% 03/01/06 ........................ 500 487,500 ----------- 2,380,842 ----------- Waste Management -- 1.1% Allied Waste North America, Inc. Gtd. Sr. Sub. Notes (B2, B+) 10.250% 12/01/06 ........................ 450 484,875 Waste Systems International, Inc. 144a Conv. Sub. Notes (NR, CCC+) 7.000% 05/13/05 ......................... 500 517,500 ----------- 1,002,375 ----------- TOTAL CORPORATE BONDS (Cost $87,969,696) ...................... 86,692,344 ----------- See Accompanying Notes to Financial Statements. 59 BEA High Yield Fund (Continued) Par (000) Value ---------- ---------- ASSET BACKED SECURITIES -- 0.7% Airplanes Pass Through Trust Series 1, Class D (Ba2, BB) 10.875% 03/15/19 ........................ $ 600 $662,459 -------- TOTAL ASSET BACKED SECURITIES (Cost $600,000) ......................... 662,459 -------- Shares -------- RIGHTS/WARRANTS -- 1.4% Broadcasting -- 0.0% Australis Holdings Pty. Ltd. .............. 294 3 -------- Cable -- 0.6% DIVA Systems Corp. ........................ 2,250 517,500 -------- Cellular Wireless Communications -- 0.0% Microcell Telecommunications, Inc. ........ 1,600 40,800 Microcell Telecommunications, Inc. ........ 1,600 216 -------- 41,016 -------- Chemicals -- 0.3% Uniroyal Technology Corp. ................. 43,500 299,063 -------- Computers, Software & Services -- 0.1% Verio, Inc. ............................... 2,800 89,600 -------- Construction & Building Materials -- 0.0% Capital Pacific Holdings Group, Inc. ............................. 12,640 9,480 -------- Consumer Products & Services -- 0.0% Coinstar, Inc. ............................ 3,671 26,844 Signature Brands USA, Inc. ................ 250 -- -------- 26,844 -------- Publishing & Information Services -- 0.0% InterAct Systems, Inc. .................... 700 -- Mentus Media Corp. 144A ................... 1,391 14 Source Media Inc. ......................... 5,587 37,716 -------- 37,730 -------- Telecommunications -- 0.4% Advanced Radio Telecommunications Corp. ................ 7,500 44,100 Ampex Corp. 144A .......................... 17,000 19,125 DTI Holdings, Inc. 144A ................... 3,000 3,000 E. Spire Communications, Inc. 144A .................................... 1,500 165,000 Globalstar, L.P. .......................... 200 8,000 KMC Telecom Holdings, Inc. ................ 500 3,625 McCaw International, Ltd. ................. 500 2,500 MetroNet Communications Corp. ............. 400 1,600 Orbital Imaging Corp. ..................... 500 20,000 Orion Network Systems, Inc. ............... 300 4,800 Price Communications Corp. ................ 2,752 50,224 -------- 321,974 -------- Shares Value ---------- ---------- RIGHTS/WARRANTS (Continued) Transportation -- 0.0% Golden Ocean Group, Ltd. .................. 438 $ 4,161 ---------- TOTAL RIGHTS/WARRANTS (Cost $543,433) ......................... 1,347,371 ---------- COMMON STOCKS -- 0.0% Packaging/Containers -- 0.0% Crown Packaging Enterprises, Ltd. .................................... 100,847 1,008 ---------- Telecommunications -- 0.0% Intermedia Communications, Inc. .................................... 731 18,184 ---------- TOTAL COMMON STOCKS (Cost $16,345) .......................... 19,192 ---------- PREFERRED STOCKS -- 4.5% Aerospace/Defense -- 1.1% GPA Group plc Conv. Cum. Second Preference Shares ....................... 1,750,000 980,000 ---------- Cable -- 0.1% DIVA Systems Corp. Series C ................................ 5,945 67,773 ---------- Cellular/Wireless Communications -- 0.3% Rural Cellular Corp. 144A 11.375% Sr. Exchangeable PIK, Series B ........................... 2,570 251,860 ---------- Publishing & Information Services -- 0.3% Source Media, Inc. 13.50% Sr. PIK .......................... 10,687 267,175 ---------- Restaurants, Hotels & Gaming -- 0.2% AmeriKing, Inc. 13.00% Cum. Exchangeable ................ 5,864 134,872 ---------- Telecommunications -- 2.5% E. Spire Communications, Inc. 12.75% Jr. Redeemable PIK ............... 878 965,813 Hyperion Telecommunications, Inc. 12.875% Sr. Exch. Redeemable, Series B ................................ 218 253,832 Intermedia Communications Inc. 144A 7.00% Jr. Convertible, Series E ................................ 20,000 517,400 Nextel Communications, Inc. 13.00% Exchangeable, Series D PIK ............................ 281 309,359 NEXTLINK Communications, Inc. 144A 14% Sr. Exchangeable Redeemable PIK .......................... 7,376 407,524 ---------- 2,453,928 ---------- TOTAL PREFERRED STOCKS (Cost $3,357,210) ....................... 4,155,608 ---------- See Accompanying Notes to Financial Statements. 60 BEA High Yield Fund (Concluded) Value ------------ TOTAL INVESTMENTS -- 98.2% (Cost $92,486,684*) ........................ $92, 876,974 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.8% ..................... 1,736,738 ------------ NET ASSETS (Applicable to 5,665,050 BEA Institutional Shares and 34,272 BEA Advisor Shares)-- 100.0% ................... $94,613,712 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($94,044,132 divided by 5,665,050) ......... $ 16.60 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA ADVISOR SHARE ($569,580 divided by 34,272) ............... $ 16.62 =========== * Also cost for Federal income tax purposes at August 31, 1998. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation ................ $ 5,462,212 Gross Depreciation ................ (5,071,922) ----------- Net Appreciation .................. $ 390,290 =========== + Step Bond -- The interest rate as of August 31, 1998 is 0% and will reset to interest rate shown at a future date. The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group ratings indicated are the most recent rating available at August 31, 1998 and are unaudited. INVESTMENT ABBREVIATIONS PIK ............................... Pay In Kind At August 31, 1998, Net Assets Consisted Of: Amount ------------- Capital Paid-In ........................................... $ 107,704,405 Accumulated Net Investment Income ......................... 1,895,526 Accumulated Net Realized Loss on Security and Foreign Exchange Transactions ............. (15,376,509) Net Unrealized Appreciation on Investments and Other .................................. 390,290 - - - - - ------------------------------------------------------------------------------- NET ASSETS ................................................ $ 94,613,712 - - - - - ------------------------------------------------------------------------------- See Accompanying Notes to Financial Statements. 61 BEA Municipal Bond Fund Portfolio Managers' Letter September 24, 1998 Dear Shareholders: We are pleased to report on the results of the BEA Municipal Bond Fund (the "Fund") for the fiscal year ended August 31, 1998. At August 31, 1998, the net asset value ("NAV") of the Fund was $15.12, compared to an NAV of $14.84 on August 31, 1997. As a result, the Fund's total return (assuming reinvestment of dividends and distributions of $.8233 per share) was 7.62%. By comparison, the Lehman Brothers Municipal Bond Index gained 8.65% during the same period. The Fund's performance lagged that of the Lehman benchmark due to its exposure to taxable corporate bonds. Most "spread product" (i.e., debt securities whose market valuation is greatly driven by the spreads between their yields and those of U.S. Treasury debt), which includes corporates, underperformed over the last year as a combination of global factors triggered several classic "flight to quality" rallies. Market volatility in the month of August, in fact, was such that many spread product sectors generated their worst-ever, relative returns for a single month. Looking ahead, our outlook for corporates remains favorable, however, as their fundamental valuations are compellingly low. Within the Fund's core municipal holdings, returns continue to be supported by our substantial positions in non-callable securities. As we have mentioned in previous reports, the presence of non-callables in a portfolio tends to enhance performance both in up and down markets, because their credit ratings and coupon yields typically are higher than those of callables. About 28% of the Fund's assets were invested in non-callables at August 31st, compared to 12% of the Lehman benchmark. We remain positive on the muni market's prospects over the next few months. The key ingredient in our view is valuation, as the yield on long-term AAA-rated munis currently is about 97% of the yield on comparable Treasury bonds, an all-time high. What this means is that investors can get nearly the same yield tax-free that they can get on a taxable basis; in other words, munis are extraordinarily cheap relative to taxables. As developments occur in the fixed income markets or at BEA that we believe would be of interest to you, we will be sure to keep you informed. Meanwhile, if you have questions, please feel free to call upon us at any time. Sincerely yours, BEA Fixed Income Management Team Robert J. Moore, Executive Director William P. Sterling, Executive Director Gregg M. Diliberto, Managing Director Mark K. Silverstein, Managing Director Jo Ann Corkran, Senior Vice President Diane C. Damskey, Senior Vice President Ira Edelblum, Senior Vice President Robert W. Justich, Senior Vice President 62 BEA Municipal Bond Fund Portfolio Managers' Letter (Concluded) Comparison of Change in Value of $10,000 Investment in the BEA Municipal Bond Fund and the Lehman Brothers Municipal Bond Index from Inception 6/20/94, Period Ended 7/31/94 and at each Quarter End. (Unaudited) [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points. BEA LEHMAN BROTHERS MUNICIPAL BOND MUNICIPAL BOND FUND INDEX -------------- --------------- 6/20/94 10,000 10,000 7/31/94 10,040 10,038 8/31/94 10,040 10,073 11/30/94 9,647 9,571 2/28/95 10,350 10,354 5/31/95 10,846 10,820 8/31/95 10,886 10,965 11/30/95 11,193 11,079 02/29/96 11,216 11,498 05/31/96 10,937 11,314 8/31/96 11,134 11,539 11/30/96 11,643 12,049 2/28/97 11,731 12,132 5/31/97 11,835 12,252 8/31/97 12,218 12,606 11/30/97 12,508 12,914 2/28/98 12,812 13,242 5/31/98 12,971 13,402 8/31/98 13,149 13,697 ------------------------ AVERAGE ANNUAL TOTAL RETURN (UNAUDITED) One Year 7.62% Three Years 6.50% From Inception 6.72% ------------------------ Note: Past performance is not predictive of future performance. 63 BEA Municipal Bond Fund of The RBB Fund, Inc. Statement of Net Assets August 31, 1998 Par (000) Value ---------- ---------- MUNICIPAL BONDS -- 80.9% California -- 10.2% California State GO (A1, A+) 6.300% 09/11/11 ........................... $ 670 $ 790,600 California State GO (Aaa, AAA) 5.125% 10/01/17 ........................... 825 832,219 Los Angeles CA, Department of Water & Power Water RB (Aa, AA) 4.500%? 05/15/23 .......................... 705 643,312 ---------- 2,266,131 ---------- Colorado -- 3.0% Colorado Springs CO, Utility RB (Aaa, AAA) 5.875% 11/15/17 ........................... 595 669,375 ---------- Florida -- 6.6% Jacksonville FL, Electric Authority RB, 2nd Installment (Aaa, AAA) 6.000% 07/01/12 ........................... 610 677,100 Tallahassee FL, Electric RB, First Lien (Aaa, AAA) 6.100% 10/01/06 ........................... 730 793,875 ---------- 1,470,975 ---------- Illinois -- 6.3% Chicago Illinois GO, Series 1993 (FGIC Insured) (Aaa, AAA) 5.250% 01/01/18 ........................... 705 709,406 Illinois State Sales Tax RB, Series Q (Aa2, AAA) 5.750% 06/15/14 ........................... 650 681,687 ---------- 1,391,093 ---------- Indiana -- 0.1% Indianapolis IN, Public Improvement Board RB, Series A (Aaa, AAA) 6.000% 01/10/18 ........................... 25 26,875 ---------- Louisiana -- 3.2% New Orleans LA, Home Mortgage Authority SOB (Aaa, AAA) 6.250% 01/15/11 ........................... 635 719,931 ---------- Maryland -- 4.6% Maryland State Transportation Authority Project RB (Aaa, AAA) 6.800% 07/01/16 ........................... 850 1,018,937 ---------- Massachusetts -- 3.1% Massachusetts State Water Resources Authority, General RB, Series 92A (A1, A) 6.500% 07/15/19 ........................... 20 24,025 Par (000) Value ---------- ---------- Massachusetts -- (continued) Massachusetts State Water Resources Authority RB Series B (MBIA Insured) (Aaa, AAA) 5.000% 12/01/25 ........................... $ 660 $655,050 -------- 679,075 -------- New York -- 28.5% Metropolitan Transit Authority Commuter Facilities RB, Series A (Aaa, AAA) 5.000% 07/01/23 ........................... 600 599,250 New York, N.Y. Municipal Water Finance Authority, Water & Sewer System RB, Series D (MBIA Insured) (Aaa, AAA) 4.875% 06/15/21 ........................... 400 395,000 New York State Dormitory Authority RB (Elizabeth Church Manor Nursing Home) (NR, AA) 5.400% 08/01/23 ........................... 60 61,650 New York State Dormitory Authority RB (Episcopal Health Services) (GNMA Coll.) (NR, AAA) 7.550% 08/01/29 ........................... 435 462,187 New York State Dormitory Authority RB (Judicial Facilities Lease) (Aaa, AAA) 7.375% 07/01/16 ........................... 40 50,250 New York State Dormitory Authority RB (Park Ridge Housing Inc. Project) (FHA Insured) (GNMA Coll.) (NR, AAA) 7.850% 02/01/29 ........................... 530 547,776 New York State Local Government Assistance Corp. RB Series B (MBIA Insured) (Aaa, AAA) 4.875% 04/01/20 ........................... 580 568,400 New York State Medical Care Facility Finance Agency, Hospital & Nursing Home RB (FHA Insured) RB (NR, AAA) 5.500% 02/15/22 ........................... 730 758,287 New York State Power Authority General Purpose RB (Aaa, AAA) 7.000% 01/01/10 ........................... 360 439,200 New York State Throughway Authority, General RB Series B (MBIA Insured) (Aaa, AAA) 5.000% 01/01/20 ........................... 30 29,962 New York, NY Prefunded GO, Series D (Aaa, A-) 8.000% 08/01/01 ........................... 540 609,525 See Accompanying Notes to Financial Statements. 64 BEA Municipal Bond Fund (Continued) Par (000) Value ---------- ---------- New York -- (continued) New York, NY Prefunded GO, Series D (A3, A-) 6.000% 02/15/05 ........................... $ 10 $ 11,112 New York, NY Unrefunded Balance GO, Series D (A3, A-) 8.000% 08/01/03 ........................... 110 123,062 6.000% 02/15/25 ........................... 5 5,344 New York, NY Prerefunded GO, Series H (NR, A-) 7.200% 02/01/13 ........................... 530 592,937 New York, NY Unrefunded Balance GO, Series H (A3, A-) 7.200% 02/01/13 ........................... 70 77,087 New York, NY Municipal Water Finance Authority, Water & Sewer System RB Series B (FGIC Insured) (Aaa, AAA) 5.125% 06/15/30 ........................... 295 295,737 New York, NY Transitional Finance Authority RB (Future Tax Secured) Series B (Aa3, AA) 4.750% 11/15/14 ........................... 35 34,694 Suffolk County NY Water Authority, Waterworks RB, Series V (NR, AAA) 6.750% 06/01/12 ........................... 580 677,150 ---------- 6,338,610 ---------- Puerto Rico -- 4.2% Commonwealth of Puerto Rico GO (Baa1, A) 5.400% 07/01/07 ........................... 730 781,100 Puerto Rico Electric Power Authority, Unrefunded Balance RB Series N (Baa1, BBB+) 7.125% 07/01/14 ........................... 135 141,066 ---------- 922,166 ---------- South Dakota -- 0.1% Heartland Consumers Power District SD Electric RB (Aaa, AAA) 6.375% 01/01/16 ........................... 25 28,406 ---------- Tennessee -- 0.1% Metropolitan Government of Nashville and Davidson County TN Water and Sewer RB (FGIC Insured) Series A (Aaa, AAA) 4.750% 01/01/22 ........................... 30 29,025 ---------- Virgin Islands -- 3.3% Virgin Islands Public Finance Authority RB (NR, AAA) 7.700% 10/01/04 ........................... 690 734,650 ---------- Par (000) Value ---------- ---------- Virginia -- 3.6% Fairfax County VA Redevelopment & Housing Authority, Mortgage RB (Island Walk Proj.) (FHA Insured) (NR, AAA) 7.100% 04/01/19 ........................... $ 630 $ 804,038 ----------- Washington -- 4.0% King County WA GO, Series A (Aa1, AA+) 6.200% 01/01/24 ........................... 40 43,550 Seattle WA Municipal Light & Power RB (Aa2, AA) 5.125% 07/01/22 ........................... 100 100,875 Seattle WA Water System RB (Aa2, AA) 5.250% 12/01/23 ........................... 735 747,863 ----------- 892,288 ----------- TOTAL MUNICIPAL BONDS (Cost $16,497,737) ........................ 17,991,575 ----------- CORPORATE BONDS -- 9.7% Banking -- 2.3% Cie. Financiere de Paribas Sub. Notes (A3, A-) 6.950% 07/22/13 ........................... 145 146,813 Chase Manhattan Corp. Sub. Notes (A1, A) 6.375% 04/01/08 ........................... 165 166,650 Export-Import Bank of Korea, Global Bonds (Ba2, BB+) 6.500% 02/10/02 ........................... 25 19,344 Export-Import Bank of Korea, Yankee Notes (Ba2, BB+) 6.500% 05/15/00 ........................... 50 43,563 First Republic Bank Corp. Sub. Notes (NR, BB+) 7.750% 09/15/12 ........................... 25 26,438 Fuji Finance (Cayman) Ltd. Perpetual Sub. Notes (Ba1, NR) 6.550%++................................... 100 72,000 National Westminster Bank Gtd. Capital Notes (Aa3, AA-) 9.375% 11/15/03 ........................... 30 34,725 ----------- 509,533 ----------- Broadcasting -- 0.4% Fox/Liberty Networks L.L.C., Sr. Notes (B1, B) 8.875% 08/15/07 ......................... 85 80,113 Sr. Discount Notes (B1, B) 9.750% 08/15/07 ......................... 30 18,300 ----------- 98,413 ----------- See Accompanying Notes to Financial Statements. 65 BEA Municipal Bond Fund (Continued) Par (000) Value -------- ---------- Cable -- 0.4% CSC Holdings, Inc. Sr. Notes (Ba2, BB+) 7.875% 12/15/07 ............................. $ 70 $ 70,438 Diamond Cable Communications plc Yankee Sr. Discount Notes (Caa1, B-) 10.750% 02/15/07 ............................ 40 29,950 ---------- 100,388 ---------- Financial Services -- 1.3% First Nationwide (Parent) Holdings, Inc. Sr. Notes (Ba3, B) 12.500% 04/15/03 ............................ 260 291,850 ---------- Food & Beverage -- 0.1% Arisco Produtos Alimenticios S.A. Gtd. Notes (NR, NR) 10.750% 05/22/05 ............................ 20 17,000 ---------- Health Care -- 0.4% Columbia/HCA Healthcare Corp. Debentures (Ba2, BBB) 8.360% 04/15/24 ............................. 85 78,860 ---------- Paper and Forest Products -- 0.0% P.T. Indah Kiat Pulp & Paper Corp. Sr. Secured Notes (Caa, CCC+) 8.875% 11/01/00 ............................. 15 8,550 ---------- Retail -- 0.4% K Mart Corp. Notes (Ba2, BB) 7.950% 02/01/23 ............................. 25 24,219 K Mart Corp. Pass-Through Certificates Series 1995 Class K3 (Ba2, BB) 8.540% 01/02/15 ............................. 59 62,873 ---------- 87,092 ---------- Telecommunications -- 0.7% CenCall Communications Corp. Sr. Discount Notes (B2, CCC+) 10.125% 01/15/04 ............................ 25 25,250 CS Wireless Systems, Inc. Sr. Discount Notes Series B (Ca, C) 11.375% 03/01/06 ............................ 30 7,200 Nextel Communications Inc. Sr. Serial Redeemable Discount Notes (B2, CCC+) 10.650% 09/15/07 ............................ 190 115,663 Wireless One, Inc. Sr. Discount Notes (Ca, CCC+) 13.500% 08/01/06 ............................ 35 3,500 ---------- 151,613 ---------- Par (000) Value -------- ---------- Transportation -- 1.7% Continental Airlines, Inc. Sr. Notes (Ba2, B+) 9.500% 12/15/01 ............................. $ 90 $ 93,150 Grupo Transportacion Ferroviaria Mexicana, S.A. de C.V. Gtd. Sr. Discount Notes (B2, B+) 11.750% 06/15/09 ............................ 50 26,750 Northwest Airlines,Inc. Gtd. Notes (Ba2, BB) 7.625% 03/15/05 ............................. 200 204,250 US Air, Inc. Gtd. Sr. Notes (B1, B) 9.625% 02/01/01 ............................. 45 46,688 ---------- 370,838 ---------- Utilities -- 2.0% Beaver Valley Funding Corp. Secured Lease Obligation Bonds (Ba3, BB-) 9.000% 06/01/17 ............................. 140 159,775 Connecticut Light and Power Co. First and Ref. Mortgage Bonds, Series 97C (Ba2, BB) 7.750% 06/01/02 ........................... 85 88,506 Series D (Ba2, BB) 7.875% 10/01/24 ........................... 10 10,525 Long Island Lighting Co. Debentures (Baa3, A-) 9.000% 11/01/22 ............................. 80 92,000 North Atlantic Energy Corp. Secured First Mortgage Notes, Series A (B1, B+) 9.050% 06/01/02 ............................. 93 94,395 ---------- 445,201 ---------- TOTAL CORPORATE BONDS (Cost $2,198,408) ........................... 2,159,338 ---------- FOREIGN GOVERNMENT BONDS -- 2.8% Republic of Argentina Structured Notes (Ba3, BB) 8.940% 04/10/05 ............................. 65 55,250 Republic of Poland Past Due Interest Bonds (Baa3, BBB-) 4.000% 10/27/14 ............................. 435 337,125 United Mexican States Par Bonds, Series W-A (Ba2, BB) 6.250% 12/31/19 ............................. 300 219,188 ---------- TOTAL FOREIGN BONDS (Cost $677,894) ............................. 611,563 ---------- See Accompanying Notes to Financial Statements. 66 BEA Municipal Bond Fund (Concluded) Par (000) Value ----------- ----------- SHORT TERM INVESTMENTS -- 5.3% BBH U.S. Dollar Grand Cayman Time Deposit 4.938% 09/01/98 ....................... $ 1,168 $ 1,168,000 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $1,168,000) ..................... 1,168,000 ----------- TOTAL INVESTMENTS -- 98.7% (Cost $20,542,039*) ................... 21,930,476 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.3% ................ 298,156 ----------- NET ASSETS (Applicable to 1,470,225 BEA Institutional Shares) -- 100.0% ..................... $22,228,632 =========== NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER BEA INSTITUTIONAL SHARE ($22,228,632 divided by 1,470,225) .... $ 15.12 =========== * Cost for Federal income tax purposes at August 31, 1998 is $20,555,741. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation .................................. $ 1,581,909 Gross Depreciation .................................. (207,174) ----------- Net Appreciation .................................... $ 1,374,735 =========== +++ Securities have no stated maturity date. The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group ratings indicated are the most recent rating available at August 31, 1998 and are unaudited. INVESTMENT ABBREVIATIONS GO .....................................................General Obligations RB .....................................................Revenue Bond SOB ....................................................Special Obligations Bond At August 31, 1998, Net Assets Consisted Of: Amount ----------- Capital Paid-In ............................................. $20,509,825 Accumulated Net Investment Gain ............................. 47,844 Accumulated Net Realized Gain on Security and Foreign Exchange Transactions ............... 217,004 Net Unrealized Appreciation on Investments and Other .................................... 1,453,959 ----------- NET ASSETS .................................................. $22,228,632 ----------- See Accompanying Notes to Financial Statements. 67 The BEA Funds of The RBB Fund, Inc. Statements of Operations For the Year Ended August 31, 1998
BEA International BEA Emerging BEA U.S. BEA Global BEA Select Equity Markets Equity Core Equity Telecommunications Economic Value Fund Fund Fund Fund Equity Fund ----------------- -------------- ------------ ------------------ -------------- Investment Income Dividends ................................. $ 10,658,537 $ 1,074,296 $ 997,966 $ 10,295 $ 37,148 Interest .................................. 1,316,620 276,422 211,625 4,568 837 Securities lending ........................ 283,497 32,536 8,244 807 -- Foreign taxes withheld .................... (699,553) (95,309) -- (831) -- ------------ ------------ ------------ ------------ ------------ Total Investment Income ................. 11,559,101 1,287,945 1,217,835 14,839 37,985 ------------ ------------ ------------ ------------ ------------ Expenses Investment advisory fees .................. 4,971,749 609,034 739,710 9,174 14,867 Administration service fees ............... 932,203 91,355 147,942 459 2,974 Administration fees ....................... 776,835 76,129 123,285 1,147 2,478 Custodian fees ............................ 570,852 327,094 54,324 24,211 1,169 Audit fees ................................ 57,088 8,484 12,281 40 244 Miscellaneous fees ........................ 21,075 15,033 2,740 3,573 421 Printing fees ............................. 105,290 35,117 23,966 4,614 187 Registration fees ......................... (26,563) 24,948 15,974 15,210 2,339 Legal fees ................................ 62,809 5,682 9,137 50 187 Transfer agent fees ....................... 132,437 19,703 22,099 1,745 479 Insurance expense ......................... 11,883 2,693 2,075 366 188 Directors fees ............................ 11,703 2,097 2,068 102 187 Organization expense ...................... 849 3,841 5,194 -- -- Distribution fees ......................... 3,606 352 -- 2,293 -- ------------ ------------ ------------ ------------ ------------ 7,631,816 1,221,562 1,160,795 62,984 25,720 Less fees waived and reimbursed ........... (532,364) (307,718) (174,516) (47,847) (5,896) ------------ ------------ ------------ ------------ ------------ Total Expenses .......................... 7,099,452 913,844 986,279 15,137 19,824 ------------ ------------ ------------ ------------ ------------ Net Investment Income (Loss) ................. 4,459,649 374,101 231,556 (298) 18,161 ------------ ------------ ------------ ------------ ------------ Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions: Net realized gain (loss) from: Security transactions ................... 63,909,753 (11,385,395) 31,964,087 187,100 (37,684) Foreign exchange transactions ........... (3,492,286) (111,014) -- 343 -- ------------ ------------ ------------ ------------ ------------ 60,417,467 (11,496,409) 31,964,087 187,443 (37,684) ------------ ------------ ------------ ------------ ------------ Net unrealized appreciation (depreciation): Investments ............................. 17,461,521 (13,521,918) (24,866,062) (45,995) (3,134,742) Translation of assets and liabilities in foreign currencies .... 255,847 10,880 -- 598 -- ------------ ------------ ------------ ------------ ------------ 17,717,368 (13,511,038) (24,866,062) (45,397) (3,134,742) ------------ ------------ ------------ ------------ ------------ Net Gain (Loss) On Investments And Foreign Currency Transactions ........... 78,134,835 (25,007,447) 7,098,025 142,046 (3,172,426) ------------ ------------ ------------ ------------ ------------ Net Increase (Decrease) In Net Assets Resulting From Operations ............... $ 82,594,484 $(24,633,346) $ 7,329,581 $ 141,748 $ (3,154,265) ============ ============ ============ ============ ============
See Accompanying Notes to Financial Statements. 68 The BEA Funds of The RBB Fund, Inc. Statements of Operations For the Year Ended August 31, 1998
BEA Long-Short BEA U.S. Core BEA Strategic Market Neutral Fixed Income Global Fixed BEA High BEA Municipal Fund Fund Income Fund Yield Fund Bond Fund -------------- ------------ ------------- ------------ ------------- Investment Income Dividends ................................. $ 5,656 $ 306,190 $ -- $ 40,434 $ -- Interest .................................. 25,436 14,371,573 2,065,179 8,700,613 1,186,877 Securities lending ........................ -- -- -- -- -- Foreign taxes withheld .................... -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total Investment Income ................. 31,092 14,677,763 2,065,179 8,741,047 1,186,877 ------------ ------------ ------------ ------------ ------------ Expenses Investment advisory fees .................. 7,419 867,842 170,631 693,346 145,287 Administration service fees ............... 742 347,137 51,189 148,574 31,133 Administration fees ....................... 618 235,924 48,431 123,812 30,402 Custodian fees ............................ 1,099 83,810 65,445 44,332 27,195 Audit fees ................................ 16 21,826 4,946 12,606 1,456 Miscellaneous fees ........................ 312 14,516 5,304 22,608 5,922 Printing fees ............................. 19 35,909 22,312 32,235 17,648 Registration fees ......................... 2,339 25,970 8,693 7,522 14,161 Legal fees ................................ 1,169 17,968 2,525 6,000 385 Transfer agent fees ....................... 115 44,259 12,023 29,092 6,888 Insurance expense ......................... 10 4,002 743 990 193 Directors fees ............................ 4 5,701 891 1,663 195 Organization expense ...................... -- 4,125 5,395 5,274 7,413 Distribution fees ......................... -- -- -- 5,317 -- Dividend expense .......................... 11,484 -- -- -- -- ------------ ------------ ------------ ------------ ------------ 25,346 1,708,989 398,528 1,133,371 288,278 Less fees waived .......................... (3,970) (612,693) (142,581) (434,709) (80,726) ------------ ------------ ------------ ------------ ------------ Total Expenses .......................... 21,376 1,096,296 255,947 698,662 207,552 ------------ ------------ ------------ ------------ ------------ Net Investment Income ........................ 9,716 13,581,467 1,809,232 8,042,385 979,325 ------------ ------------ ------------ ------------ ------------ Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions: Net realized gain (loss) from: Security transactions ................... (106,990) 3,839,460 931,576 1,492,405 235,346 Foreign exchange transactions ........... -- (59,994) (2,077,002) -- -- Futures Transactions .................... -- (73,209) (39,137) -- -- ------------ ------------ ------------ ------------ ------------ (106,990) 3,706,257 (1,184,563) 1,492,405 235,346 ------------ ------------ ------------ ------------ ------------ Net unrealized appreciation (depreciation): Investments ............................. 208,133 (2,001,588) 489,984 (4,546,923) 305,974 Translation of assets and liabilities in foreign currencies .... -- (437,541) 446,728 -- -- ------------ ------------ ------------ ------------ ------------ 208,133 (2,439,129) 936,712 (4,546,923) 305,974 ------------ ------------ ------------ ------------ ------------ Net Gain (Loss) On Investments And Foreign Currency Transactions ........... 101,143 1,267,128 (247,851) (3,054,518) 541,320 ------------ ------------ ------------ ------------ ------------ Net Increase (Decrease) In Net Assets Resulting From Operations ............... $ 110,859 $ 14,848,595 $ 1,561,381 $ 4,987,867 $ 1,520,645 ============ ============ ============ ============ ============
See Accompanying Notes to Financial Statements. 69 The BEA Funds of The RBB Fund, Inc. Statements of Changes in Net Assets
BEA International BEA Emerging Markets Equity Fund Equity Fund -------------------------------- -------------------------------- For the Year For the Year For the Year For the Year Ended Ended Ended Ended August 31, 1998 August 31, 1997 August 31, 1998 August 31, 1997 --------------- --------------- --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ..................................... $ 4,459,649 $ 4,728,247 $ 374,101 $ 994,882 Net gain (loss) on investments and foreign currency transactions ................................... 78,134,835 93,551,154 (25,007,447) 7,065,927 ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ............................... 82,594,484 98,279,401 (24,633,346) 8,060,809 ------------- ------------- ------------- ------------- Dividends and Distributions to shareholders: Dividends to shareholders from net investment income: BEA Institutional shares ................................ -- (8,629,576) (732,736) (348,763) BEA Advisor shares ...................................... -- (35) (83) (9) Distributions to shareholders from net realized capital gains: BEA Institutional shares ................................ (73,424,625) -- (649,941) -- BEA Advisor shares ...................................... (167,102) -- (115) -- Distributions to shareholders from capital: BEA Institutional shares ................................ -- -- (3,255,728) -- BEA Advisor shares ...................................... -- -- (580) -- ------------- ------------- ------------- ------------- Total distributions to shareholders .......................... (73,591,727) (8,629,611) (4,639,183) (348,772) ------------- ------------- ------------- ------------- Net capital share transactions ............................... 47,441,934 (203,262,817) (28,889,378) (39,387,274) ------------- ------------- ------------- ------------- Total increase (decrease) in net assets ...................... 56,444,691 (113,613,027) (58,161,907) (31,675,237) Net Assets: Beginning of period ....................................... 568,657,774 682,270,801 83,015,972 114,691,209 ------------- ------------- ------------- ------------- End of period ............................................. $ 625,102,465 $ 568,657,774 $ 24,854,065 $ 83,015,972 ============= ============= ============= =============
See Accompanying Notes to Financial Statements. 70 The BEA Funds of The RBB Fund, Inc. Statements of Changes in Net Assets
BEA U.S. Core BEA Global BEA Select Economic Equity Fund Telecommunications Fund Value Equity Fund -------------------------------- ----------------------------------- ------------------- For the Year For the Year For the Year For the Period For the Period Ended Ended Ended December 4, 1997* August 3, 1998* August 31, 1998 August 31, 1997 August 31, 1998 to August 31, 1997 to August 31, 1998 --------------- --------------- --------------- ------------------ ------------------ Increase (decrease) in net assets: Operations: Net investment income (loss) ......... $ 231,556 $ 505,555 $ (298) $ 618 $ 18,161 Net gain (loss) on investments and foreign currency transactions ...... 7,098,025 23,232,367 142,046 60,316 (3,172,426) ------------ ------------ ------------ ------------ ----------- Net increase (decrease) in net assets resulting from operations .......... 7,329,581 23,737,922 141,748 60,934 (3,154,265) ------------ ------------ ------------ ------------ ----------- Dividends and Distributions to shareholders: Dividends to shareholders from net investment income: BEA Institutional shares ........... (472,680) (657,991) -- -- -- BEA Advisor shares ................. -- -- (138) -- -- Distributions to shareholders from net realized capital gains: BEA Institutional shares ........... (12,679,702) (4,630,225) -- -- -- BEA Advisor shares ................. -- -- (37,787) -- -- ------------ ------------ ------------ ------------ ----------- Total distributions to shareholders ..... (13,152,382) (5,288,216) (37,925) -- -- ------------ ------------ ------------ ------------ ----------- Net capital share transactions .......... (16,844,975) 8,716,601 44,798 508,538 25,813,705 ------------ ------------ ------------ ------------ ----------- Total increase (decrease) in net assets ........................... (22,667,776) 27,166,307 148,621 569,472 22,659,440 Net Assets: Beginning of period .................. 86,181,741 59,015,434 569,472 -- -- ------------ ------------ ------------ ------------ ----------- End of period ........................ $ 63,513,965 $ 86,181,741 $ 718,093 $ 569,472 $22,659,440 ============ ============ ============ ============ ===========
* Commencement of Operations. See Accompanying Notes to Financial Statements. 71 The BEA Funds of The RBB Fund, Inc. Statements of Changes in Net Assets
BEA Long-Short Market BEA U.S. Core Fixed BEA Strategic Global Neutral Fund Income Fund Fixed Income Fund -------------------- ---------------------------------- ---------------------------------- For the Period For the Year For the Year For the Year For the Year August 3, 1998* Ended Ended Ended Ended to August 31, 1998 August 31, 1998 August 31, 1997 August 31, 1998 August 31, 1997 ------------------ --------------- --------------- --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ............... $ 21,200 $ 13,581,467 $ 9,002,632 $ 1,809,232 $ 2,209,653 Net gain (loss) on investments and foreign currency transactions ..... 89,659 1,267,128 6,297,781 (247,851) (456,286) ------------- ------------- ------------- ------------- ------------- Net increase (decrease) in net assets resulting from operations ......... 110,859 14,848,595 15,300,413 1,561,381 1,753,367 ------------- ------------- ------------- ------------- ------------- Dividends and Distributions to shareholders: Dividends to shareholders from net investment income: BEA Institutional shares .......... -- (11,454,482) (8,690,856) (1,133,693) (1,800,833) BEA Advisor shares ................ -- -- -- -- -- Distributions to shareholders from net realized capital gains: BEA Institutional shares .......... -- (2,782,277) (1,019,928) (1,162,260) (772,491) BEA Advisor shares ................ -- -- -- -- -- ------------- ------------- ------------- ------------- ------------- Total distributions to shareholders .... -- (14,236,759) (9,710,784) (2,295,953) (2,573,324) ------------- ------------- ------------- ------------- ------------- Net capital share transactions ......... 6,191,423 215,702,694 53,032,678 (15,067,445) 6,757,858 ------------- ------------- ------------- ------------- ------------- Total increase (decrease) in net assets .......................... 6,302,282 216,314,530 58,622,307 (15,802,017) 5,937,901 Net Assets: Beginning of period ................. -- 177,218,582 118,596,275 44,285,401 38,347,500 ------------- ------------- ------------- ------------- ------------- End of period ....................... $ 6,302,282 $ 393,533,112 $ 177,218,582 $ 28,483,384 $ 44,285,401 ============= ============= ============= ============= =============
* Commencement of Operations ........... See Accompanying Notes to Financial Statements. 72 The BEA Funds of The RBB Fund, Inc. Statements of Changes in Net Assets
BEA High BEA Municipal Yield Fund Bond Fund --------------------------------- --------------------------------- For the Year For the Year For the Year For the Year Ended Ended Ended Ended August 31, 1998 August 31, 1997 August 31, 1998 August 31, 1997 --------------- --------------- --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ..................................... $ 8,042,385 $ 7,559,270 $ 979,325 $ 946,746 Net gain (loss) on investments and foreign currency transactions ................................... (3,054,518) 5,031,026 541,320 867,592 ------------ ------------ ------------ ------------ Net increase (decrease) in net assets resulting from operations ............................... 4,987,867 12,590,296 1,520,645 1,814,338 ------------ ------------ ------------ ------------ Dividends and Distributions to shareholders: Dividends to shareholders from net investment income: BEA Institutional shares ................................ (7,732,581) (7,131,514) (976,336) (944,821) BEA Advisor shares ...................................... (169,975) (4,682) -- -- Distributions to shareholders from net realized capital gains: BEA Institutional shares ................................ -- -- (154,615) (594,155) BEA Advisor shares ...................................... -- -- -- -- ------------ ------------ ------------ ------------ Total distributions to shareholders .......................... (7,902,556) (7,136,196) (1,130,951) (1,538,976) ------------ ------------ ------------ ------------ Net capital share transactions ............................... 4,811,589 11,414,154 2,028,820 (46,498) ------------ ------------ ------------ ------------ Total increase (decrease) in net assets ...................... 1,896,900 16,868,254 2,418,514 228,864 Net Assets: Beginning of period ....................................... 92,716,812 75,848,558 19,810,118 19,581,254 ------------ ------------ ------------ ------------ End of period ............................................. $ 94,613,712 $ 92,716,812 $ 22,228,632 $ 19,810,118 ============ ============ ============ ============
See Accompanying Notes to Financial Statements. 73 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA International Equity Fund ---------------------------------------------------------------------------------------- For the For the For the For the For the Year Ended Year Ended Year Ended Year Ended Year Ended August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994 --------------- --------------- --------------- --------------- ---------------- Institutional Institutional Institutional Institutional Institutional --------------- --------------- --------------- --------------- ---------------- Net asset value, beginning of period .......... $ 22.22 $ 19.41 $ 18.24 $ 20.73 $ 18.73 -------- -------- -------- -------- -------- Income from investment operations Net investment income ................... 0.15 0.18 0.19 0.06 0.05 Net gain (loss) on investments and foreign currency transactions (realized and unrealized)........... 3.26 2.89 1.05 (1.75) 2.60 -------- -------- -------- -------- -------- Total from investment operations................ 3.41 3.07 1.24 (1.69) 2.65 -------- -------- -------- -------- -------- Less Distributions Dividends from net investment income ........ -- (0.26) (0.07) -- (0.05) Distributions from capital gains............. (2.93) -- -- (0.80) (0.60) -------- -------- -------- -------- -------- Total distributions ........ (2.93) (0.26) (0.07) (0.80) (0.65) -------- -------- -------- -------- -------- Net asset value, end of period................. $ 22.70 $ 22.22 $ 19.41 $ 18.24 $ 20.73 ======== ======== ======== ======== ======== Total return................... 16.74% 15.93% 6.81%(d) (8.06)%(d) 14.23%(d) Ratio/Supplemental Data Net assets, end of period (000's)....... $623,482 $568,510 $682,271 $773,255 $767,190 Ratio of expenses to average net assets.......... 1.14%(a) 1.16%(a) 1.19%(a) 1.25%(a) 1.25%(a) Ratio of net investment income (loss) to average net assets....... 0.72% 0.71% 0.84% 0.35% 0.33% Fund turnover rate............ 141% 126% 86% 78% 104%
---------------------------------------- For the For the Period Year Ended November 1, 1996* to August 31, 1998 August 31, 1997 --------------- ------------------- Advisor Advisor --------------- ------------------- Net asset value, beginning of period .......... $ 22.17 $ 19.67 ------- ------- Income from investment operations Net investment income ................... 0.03 0.36 Net gain (loss) on investments and foreign currency transactions (realized and unrealized)........... 3.29 2.40 ------- ------- Total from investment operations................ 3.32 2.76 ------- ------- Less Distributions Dividends from net investment income ........ -- (0.26) Distributions from capital gains............. (2.93) -- ------- ------- Total distributions ........ (2.93) (0.26) ------- ------- Net asset value, end of period................. $ 22.56 $ 22.17 ======= ======= Total return................... 16.33% 14.14%(c) Ratio/Supplemental Data Net assets, end of period (000's)....... $ 1,620 $ 147 Ratio of expenses to average net assets.......... 1.40%(a) 1.43%(a)(b) Ratio of net investment income (loss) to average net assets....... 0.58% 1.15%(b) Fund turnover rate............ 141% 126%(c)
(a) Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA International Institutional Class would have been 1.23%, 1.25%, 1.22%, 1.26% and 1.30% for the years ended August 31, 1998, 1997, 1996, 1995 and 1994, respectively. Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA International Advisor Class would have been 1.48 % for the year ended August 31, 1998 and 1.53% annualized for the period ended August 31, 1997. (b) Annualized. (c) Not Annualized. (d) Redemption fees not reflected in total return. * Commencement of operations. See Accompanying Notes to Financial Statements. 74 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA Emerging Markets Equity Fund ---------------------------------------------------------------------------------------- For the For the For the For the For the Year Ended Year Ended Year Ended Year Ended Year Ended August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994 --------------- --------------- --------------- --------------- ---------------- Institutional Institutional Institutional Institutional Institutional --------------- --------------- --------------- --------------- ---------------- Net asset value, beginning of period .......... $ 19.64 $ 18.20 $ 17.67 $ 24.58 $ 18.38 ------- -------- -------- -------- -------- Income from investment operations Net investment income (loss) ............ 0.12 0.21 0.10 0.02 (0.03) Net gain (loss) on investments and foreign currency transactions (realized and unrealized)........... (8.08) 1.30 0.48 (5.94) 6.64 ------- ------- -------- -------- -------- Total from investment operations ............... (7.96) 1.51 0.58 (5.92) 6.61 ------- ------- -------- -------- -------- Less Distributions Dividends from net investment income ........ (0.20) (0.07) (0.05) (0.07) (0.09) Distributions from capital gains ............ (0.17) -- -- (0.92) (0.32) Return of capital .......... (0.87) -- -- -- -- ------- ------- -------- -------- -------- Total distributions ........ (1.24) (0.07) (0.05) (0.99) (0.41) ------- ------- -------- -------- -------- Net asset value, end of period ................ $ 10.44 $ 19.64 $ 18.20 17.67 $ 24.58 ======= ======= ======== ======== ======== Total return ................... (42.96)% 8.31% 3.33%(d) (24.42)%(d) 35.99%(d) Ratio/Supplemental Data Net assets, end of period (000's) ...... $24,217 $83,012 $114,691 $128,323 $140,675 Ratio of expenses to average net assets ......... 1.50%(a) 1.49%(a) 1.49%(a) 1.50%(a) 1.50%(a) Ratio of net investment income (loss) to average net assets ...... 0.61% 0.99% 0.63% 0.02% (0.02)% Fund turnover rate ........... 179% 147% 79% 79% 54%
---------------------------------------- For the For the Period Year Ended November 1, 1996* to August 31, 1998 August 31, 1997 --------------- ------------------- Advisor Advisor --------------- ------------------- Net asset value, beginning of period .......... $ 19.60 $18.08 ------- ------ Income from investment operations Net investment income (loss) ............ 0.03 0.18 Net gain (loss) on ------- ------ investments and foreign currency transactions (realized and unrealized)........... (7.99) 1.40 ------- ------ Total from investment operations ............... (7.96) 1.58 ------- ------ Less Distributions Dividends from net investment income ........ (0.12) (0.06) Distributions from capital gains ............ (0.17) -- Return of capital .......... (0.87) -- ------- ------ Total distributions ........ (1.16) (0.06) ------- ------ Net asset value, end of period ................ $ 10.48 $19.60 ======= ====== Total return ................... (42.86)% 8.76%(c) Ratio/Supplemental Data Net assets, end of period (000's) ...... $ 636 $ 4 Ratio of expenses to average net assets ......... 1.75%(a) 1.75%(a)(b) Ratio of net investment income (loss) to average net assets ...... 1.08% 0.88%(b) Fund turnover rate ........... 179% 147%
(a) Without the voluntary waiver of advisory fees and administration fees and without the reimbursement of operating expenses, the ratios of expenses to average net assets for the BEA Emerging Markets Institutional Class would have been 2.01%, 1.63%, 1.62%, 1.61% and 2.01% for the years ended August 31, 1998, 1997, 1996, 1995 and 1994, respectively. Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA Emerging Markets Advisor Class would have been 2.33% for the year ended August 31, 1998 and 1.88% for the period ended August 31, 1997. (b) Annualized (c) Not Annualized (d) Redemption fees not reflected in total return * Commencement of operations. See Accompanying Notes to Financial Statements. 75 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA U.S. Core Equity Fund ------------------------------------------------------------------------------------- For the For the For the For the Period Year Ended Year Ended Year Ended September 1, 1994* to August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 --------------- --------------- --------------- --------------------- Institutional Institutional Institutional Institutional --------------- --------------- --------------- --------------------- Net asset value, beginning of period....... $ 24.40 $ 19.05 $ 17.86 $ 15.00 ------- ------- ------- ------- Income from investment operations Net investment income (loss)......... 0.01 0.14 0.20 0.22 Net gain (loss) on investments and foreign currency transactions (realized and unrealized)....... 0.88 6.82 2.81 2.72 ------- ------- ------- ------- Total from investment operations............ 0.89 6.96 3.01 2.94 -------- ------- ------- ------- Less Distributions Dividends from net investment income..... (0.13) (0.20) (0.21) (0.08) Distributions from capital gains......... (3.43) (1.41) (1.61) -- -------- ------- ------- ------- Total distributions..... (3.56) (1.61) (1.82) (0.08) -------- ------- ------- ------- Net asset value, end of period............. $ 21.73 $ 24.40 $ 19.05 $ 17.86 ======== ======= ======= ======= Total return................. 3.18% 38.32% 17.59% 19.75% Ratio/Supplemental Data Net assets, end of period (000's)............... $63,514 $86,182 $59,015 $31,644 Ratio of expenses to average net assets.... 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) Ratio of net investment income (loss) to average net assets.... 0.23% 0.67% 1.25% 1.59% Fund turnover rate...... 164% 93% 127% 123%
BEA Global Telecommunications Fund -------------------------------------------- For the For the Period Year Ended December 4, 1996* to August 31, 1998 August 31, 1997 --------------- -------------------- Advisor Advisor --------------- -------------------- Net asset value, beginning of period....... $17.30 $15.00 ------ ------ Income from investment operations Net investment income (0.01) 0.02 Net gain (loss) on investments and foreign currency transactions (realized and unrealized)....... 4.29 2.28 ------ ------ Total from investment operations............ 4.28 2.30 ------ ------ Less Distributions Dividends from net investment income..... -- -- Distributions from capital gains......... (1.04) -- ------ ------ Total distributions..... (1.04) -- ------ ------ Net asset value, end of period............. $20.54 $17.30 ====== ====== Total return................. 25.38% 15.33%(c) Ratio/Supplemental Data Net assets, end of period (000's)............... $ 718 $ 569 Ratio of expenses to average net assets.... 1.65%(a) 1.65%(a)(b) Ratio of net investment income (loss) to average net assets.... (0.03)% 0.16%(b) Fund turnover rate...... 169% 43%(c)
(a) Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA U.S. Core Equity Fund would have been 1.18%, 1.18%, 1.34% for the years ended August 31, 1998, 1997 and 1996, respectively, and 1.51% annualized for the period ended August 31, 1995. Without the voluntary waiver of advisory fees and administration fees and without the reimbursement of operating expenses, the ratios of expenses to average net assets for the BEA Global Telecommunications Fund Advisor Class would have been 6.86% for the year ended August 31, 1998 and 8.38% annualized for the period ended August 31, 1997. (b) Annualized. (c) Not annualized. * Commencement of operations. See Accompanying Notes to Financial Statements. 76 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA Select BEA Economic Long-Short Value Market Equity Fund Neutral Fund BEA U.S. Core Fixed Income Fund ----------------- ------------------- ----------------------------------------- For the Period For the Period For the For the August 3, 1998* to August 3, 1998* to Year Ended Year Ended August 31, 1998 August 31, 1998 August 31, 1998 August 31, 1997 ------------------ ------------------- --------------- --------------- Institutional Institutional Institutional Institutional ------------------ ------------------- --------------- --------------- Net asset value, beginning of period ................ $ 15.00 $15.00 $ 15.65 $ 15.06 ------- ------ -------- -------- Income from investment operations Net investment income ............ 0.01 0.05 0.84 0.92 Net gain (loss) on investments and foreign currency transactions (realized and unrealized) ...... (1.84) 0.22 0.33 0.76 ------- ------ -------- -------- Total from investment operations ..................... (1.83) 0.27 1.17 1.68 ------- ------ -------- -------- Less Dividends and Distributions Dividends from net investment income .............. -- -- (0.87) (0.97) Distributions from capital gains .................. -- -- (0.23) (0.12) ------- ------ -------- -------- Total distributions .............. -- -- (1.10) (1.09) ------- ------ -------- -------- Net asset value, end of period ...................... $ 13.17 $15.27 $ 15.72 $ 15.65 ======= ====== ======== ======== Total return ..................... (12.20)%(a)(c) 1.80%(a)(c) 7.77% 11.53% Ratio/Supplemental Data Net assets, end of period (000's) .......... $22,659 $6,302 $393,533 $177,219 Ratio of expenses to average net assets (including dividend expense) ....................... -- 4.32% -- -- Ratio of expenses to average net assets (excluding dividend expense) .............. 1.00%(a)(b) 2.00%(a)(b) 0.47%(a) 0.50%(a) Ratio of net investment income (loss) to average net assets ..................... 0.92% 1.96% 5.87% 6.31% Fund turnover rate ............... 52%(c) 130% 372% 372%
BEA U.S. Core Fixed Income Fund ------------------------------------------------------- For the For the For the Period Year Ended Year Ended April 1, 1994* to August 31, 1996 August 31, 1995 August 31, 1994 --------------- --------------- ------------------ Institutional Institutional Institutional --------------- --------------- ------------------ Net asset value, beginning of period ................ $ 15.42 $ 14.77 $ 15.00 -------- ------- ------- Income from investment operations Net investment income ............ 0.95 0.88 0.42 Net gain (loss) on investments and foreign currency transactions (realized and unrealized) ...... (0.16) 0.61 (0.40) -------- ------- ------- Total from investment operations ..................... 0.79 1.49 0.02 -------- ------- ------- Less Dividends and Distributions Dividends from net investment income .............. (0.93) (0.84) (0.25) Distributions from capital gains .................. (0.22) -- -- -------- ------- ------- Total distributions .............. (1.15) (0.84) (0.25) -------- ------- ------- Net asset value, end of period ...................... $ 15.06 $ 15.42 $ 14.77 ======== ======= ======= Total return ..................... 5.23% 10.60% 0.17%(c) Ratio/Supplemental Data Net assets, end of period (000's) .......... $118,596 $99,250 $30,016 Ratio of expenses to average net assets (including dividend expense) ....................... -- -- -- Ratio of expenses to average net assets (excluding dividend expense) .............. 0.50%(a) 0.50%(a) 0.50(a)(b) Ratio of net investment income (loss) to average net assets ..................... 6.43% 6.47% 6.04%(b) Fund turnover rate ............... 201% 304% 186%(c)
(a) Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Select Economic Value Fund Institutional Class would have been 1.30% annualized for the period ended August 31, 1998. Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Long-Short Market Neutral Fund Institutional Class would have been 5.12% (excluding dividend expense) and 7.44% (including dividend expense) annualized for the period ended August 31, 1998. Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA U.S. Core Fixed Income Fund Institutional Class would have been .74%, .78%, .78% and .84% for the years ended August 31, 1998, 1997, 1996 and 1995, respectively, and .99% annualized for the period ended August 31, 1994. (b) Annualized. (c) Not annualized. * Commencement of operations. See Accompanying Notes to Financial Statements. 77 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA Strategic Global Fixed Income Fund -------------------------------------------------------------------------------------------- For the For the For the For the For the Period Year Ended Year Ended Year Ended Year Ended June 28, 1994* to August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994 ---------------- --------------- --------------- --------------- -------------------- Institutional Institutional Institutional Institutional Institutional ---------------- --------------- --------------- --------------- -------------------- Net asset value, beginning of period ............... $ 15.41 $ 15.75 $ 15.67 $ 15.00 $15.00 ------- ------- ------- ------- ------ Income from investment operations Net investment income ........... 0.87 0.85 0.87 1.06 0.15 Net gain (loss) on investments and foreign currency transactions (realized and unrealized) ................... (0.25) (0.16) 0.58 0.49 (0.15) ------- ------- ------- ------- ------ Total from investment operations .................... 0.62 0.69 1.45 1.55 -- ------- ------- ------- ------- ------ Less Distributions Dividends from net investment income ............. (0.45) (0.71) (1.22) (0.88) -- Distributions from capital gains ................. (0.48) (0.32) (0.15) -- -- ------- ------- ------- ------- ------ Total distributions ............. (0.93) (1.03) (1.37) (0.88) -- ------- ------- ------- ------- ------ Net asset value, end of period ..................... $ 15.10 $ 15.41 $ 15.75 $ 15.67 $15.00 ======= ======= ======= ======= ====== Total return ......................... 4.19% 4.48% 9.65% 10.72% 0.00%(c) Ratio/Supplemental Data Net assets, end of period (000's) ......... $28,483 $44,285 $38,348 $19,565 $6,300 Ratio of expenses to average net assets ............ 0.75%(a) 0.75%(a) 0.75%(a) 0.75%(a) 0.75%(a)(b) Ratio of net investment income (loss) to average net assets ......... 5.30% 5.31% 7.37% 7.26% 5.64%(b) Fund turnover rate .............. 283% 98% 87% 91% 0%(c)
(a) Without the voluntary waiver of advisory fees and administration fees and without the reimbursement of operating expenses, the ratios of expenses to average net assets for the BEA Strategic Global Fixed Income Fund Institutional Class would have been 1.17%, 0.98%, 1.07% and 1.29% for the years ended August 31, 1998, 1997, 1996, and 1995, respectively and 1.92% annualized for the period ended August 31, 1994. (b) Annualized. (c) Not annualized. * Commencement of operations. See Accompanying Notes to Financial Statements. 78 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA International Equity Fund ---------------------------------------------------------------------------------------- For the For the For the For the For the Year Ended Year Ended Year Ended Year Ended Year Ended August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994 --------------- --------------- --------------- --------------- ---------------- Institutional Institutional Institutional Institutional Institutional --------------- --------------- --------------- --------------- ---------------- Net asset value, beginning of period ........ $ 17.08 $ 16.09 $ 15.72 $ 15.94 $ 16.94 ------- ------- ------- -------- -------- Income from investment operations Net investment income .... 1.43 1.37 1.47 1.42 1.20 Net gain (loss) on investments and foreign currency transactions (realized and unrealized) ........ (0.49) 0.96 0.40 (0.30) (0.77) ------- ------- ------- -------- -------- Total from investment operations ............. 0.94 2.33 1.87 1.12 0.43 ------- ------- ------- -------- -------- Less Distributions Dividends from net investment income ...... (1.42) (1.34) (1.50) (1.34) (1.43) Distributions from capital gains .......... -- -- -- -- -- ------- ------- ------- -------- -------- Total distributions ...... (1.42) (1.34) (1.50) (1.34) (1.43) ------- ------- ------- -------- -------- Net asset value, end of period ................... $ 16.60 $ 17.08 $ 16.09 $ 15.72 $ 15.94 ======= ======= ======= ======== ======== Total return ................. 5.48% 15.17% 12.42% 7.79%(d) 2.24%(d) Ratio/Supplemental Data Net assets, end of period (000's)... $94,044 $92,630 $75,849 $153,621 $143,517 Ratio of expenses to average net assets ..... 0.70%(a) 0.70%(a) 0.88%(a) 1.00%(a) 1.00%(a) Ratio of net investment income (loss) to average net assets .. 8.12% 8.44% 8.92% 9.37% 7.73% Fund turnover rate ....... 60% 84% 143% 70% 121%
---------------------------------------- For the For the Period Year Ended November 1, 1996* to August 31, 1998 August 31, 1997 --------------- ------------------- Advisor Advisor --------------- ------------------- Net asset value, beginning of period ........ $17.08 $16.21 Income from investment operations Net investment income .... 1.36 0.93 Net gains (losses) on investments and foreign currency transactions (realized and unrealized) ........ (0.45) 0.87 ------ ------ Total from investment operations ............. 0.91 1.80 ------ ------ Less Distributions Dividends from net investment income ...... (1.37) (0.93) Distributions from capital gains .......... -- -- ------ ------ Total distributions ...... (1.37) (0.93) ------ ------ Net asset value, end of period ................... $16.62 $17.08 ====== ====== Total return ................. 5.27% 11.49%(c) Ratio/Supplemental Data Net assets, end of period (000's)... $ 570 $ 86 Ratio of expenses to average net assets ..... 0.95%(a) 0.96%(a)(b) Ratio of net investment income (loss) to average net assets .. 7.96% 8.13%(b) Fund turnover rate ....... 60% 84%(c)
(a) Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA High Yield Fund Institutional Class would have been 1.14%, 1.13%, 1.11% , 1.08%, 1.13% for the years ended August 31, 1998, 1997, 1996, 1995, 1994, respectively. Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the BEA High Yield Fund Advisor Class would have been 1.39% for the year ended August 31,1998 and 1.47% annualized for the period ended August 31, 1997. (b) Annualized. (c) Not annualized. (d) Redemption fees not reflected in total return * Commencement of operations. See Accompanying Notes to Financial Statements. 79 The BEA Funds of The RBB Fund, Inc. Financial Highlights (For a Share Outstanding Throughout each Period)
BEA Municipal Bond Fund ---------------------------------------------------------------------------------------- For the For the For the For the For the Period Year Ended Year Ended Year Ended Year Ended June 20, 1994* to August 31, 1998 August 31, 1997 August 31, 1996 August 31, 1995 August 31, 1994 --------------- --------------- --------------- --------------- --------------- Institutional Institutional Institutional Institutional Institutional --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of period .................. $ 14.84 $ 14.65 $ 15.46 $ 15.06 $ 15.00 ------- ------- ------- ------- ------- Income from investment operations Net investment income .............. 0.70 0.72 0.73 0.71 0.09 Net gain (loss) on investments and foreign currency transactions (realized and unrealized) ...................... 0.40 0.65 (0.37) 0.50 (0.03) ------- ------- ------- ------- ------- Total from investment operations ....................... 1.10 1.37 0.36 1.21 0.06 ------- ------- ------- ------- ------- Less Distributions Dividends from net investment income ................ (0.71) (0.72) (0.74) (0.76) -- Distributions from capital gains .................... (0.11) (0.46) (0.43) (0.05) -- ------- ------- ------- ------- ------- Total distributions ................ (0.82) (1.18) (1.17) (0.81) -- ------- ------- ------- ------- ------- Net asset value, end of period .......... $ 15.12 $ 14.84 $ 14.65 $ 15.46 $ 15.06 ======= ======= ======= ======= ======= Total return ............................ 7.62% 9.74% 2.27% 8.42% 0.40%(c) Ratio/Supplemental Data Net assets, end of period (000's) ............ $22,229 $19,810 $19,581 $48,978 $42,310 Ratio of expenses to average net assets ............... 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a)(b) Ratio of net investment income (loss) to average net assets ....................... 4.72% 4.88% 4.62% 4.76% 3.27%(b) Fund turnover rate ................. 57% 43% 34% 25% 9%(c)
(a) Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Municipal Bond Fund Institutional Class would have been 1.39%, 1.37%, 1.42% and 1.19% for the years ended August 31, 1998, 1997, 1996 and 1995, respectively, and 1.34% annualized for the period ended August 31, 1994. (b) Annualized. (c) Not annualized. * Commencement of operations. 80 See Accompanying Notes to Financial Statements. The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements Note 1. Summary of Significant Accounting Policies The RBB Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund was incorporated in Maryland on February 29, 1988, and currently has twenty-six investment Portfolios, ten of which are included in these financial statements. The Fund has authorized capital of thirty billion shares of common stock of which 16.27 billion are currently classified into ninety-seven classes. Each class represents an interest in one of twenty-six investment portfolios of RBB. The classes have been grouped into fifteen separate "families", nine of which have begun investment operations. The BEA Family represents interests in ten Funds which are 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, Fund securities are valued at the mean between the last reported bid and asked prices. All other securities and assets are valued as determined in good faith by the Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost which approximates market value. B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in foreign currencies are recorded in the Fund's records at the current prevailing exchange rates. Asset and liability accounts that are denominated in a foreign currency are adjusted daily to reflect current exchange rates. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. It is not practical to isolate that portion of both realized and unrealized gains and losses on investments in the statement of operations that result from fluctuations in foreign currency exchange rates. The Fund reports certain foreign currency related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income (loss) for Federal income tax purposes. C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Certain expenses are class specific and vary by class. Expenses not directly attributable to a specific Fund or class are allocated based on relative net assets of each Fund and class, respectively. D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income and net realized capital gains will be declared and paid at least annually. The character of distributions made during the year for net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes due to generally accepted accounting principles (GAAP) and tax differences in the character of income and expense recognition. These differences are primarily due to differing treatments for net operating losses, mortgage-backed securities, passive foreign investment companies, and forward foreign currency contracts. E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes as it is the Fund's intention to have each Fund qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholders which will be sufficient to relieve it from Federal income and excise taxes. F) USE OF ESTIMATES -- The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. G) REPURCHASE AGREEMENTS -- Money market instruments may be purchased from banks and non-bank dealers subject to the seller's agreement to repurchase them at an agreed upon date and price. Collateral for repurchase agreements may have longer maturities than the maximum permissible remaining maturity of portfolio 81 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) investments. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement to equal at least 102% of the repurchase price including accrued interest. The agreements are conditional upon the collateral being deposited under the Federal Reserve book-entry system or held in a separate account by the Fund's custodian or an authorized securities depository. Listed below is the collateral associated with the repurchase agreement with Bear Stearns outstanding at August 31, 1998 for the BEA Long-Short Market Neutral Fund:
Market Accrued Total Security Maturity Par Value Interest Value -------- -------- -------- ------- -------- ------- Federal National Mortgage Association Strip PO 07/01/26 965,000 612,407 1,717 614,124
H) FINANCIAL FUTURES TRANSACTIONS -- The Fund invests in financial futures contracts solely for the purpose of hedging its existing portfolio securities, or securities that the Fund intends to purchase, against fluctuations in fair value caused by changes in prevailing market interest rates. Certain portfolios of the Fund may enter into futures contracts subject to certain limitations. Upon entering into a futures contract, the Fund is required to deposit cash or pledge U.S. Government securities of an initial margin. Subsequent payments, which are dependent on the daily fluctuations in the value of the underlying security or securities, are made or received by the Fund each day (daily variations margin) and are recorded as unrealized gains or losses until the contracts are closed. When the contracts are closed, the Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contracts. Risks of entering into futures contracts include the possibility that there will be an imperfect price correlation between the futures contracts and the underlying securities. Second, it is possible that a lack of liquidity for futures contracts could exist in the secondary market, resulting in an inability to close a futures position prior to its maturity date. Third, the purchase of a futures contract involves the risk that a Fund could lose more than the original margin deposit required to initiate a futures transaction. As of August 31, 1998, U.S. Core Fixed Income Fund held the following futures contracts:
Futures Expiration Contract Contract Unrealized Contracts Date Amount Value Gain/Loss --------- ---------- -------------- -------------- ----------- 5-Year Treasury Notes Future 12/21/98 $ 16,239,313 $ 16,365,688 $ 126,375 U.S. Treasury Notes Future 12/21/98 $ (36,334,016) $ (36,787,063) $ (453,047) Treasury Bond Future 12/21/98 $ 22,679,780 $ 22,981,344 $ 301,564 Japan 10-Year BondFuture 09/09/98 $ (12,160,000) $ (12,403,175) $ (243,175)
As of August 31, 1998, Strategic Global Fixed Income Fund held the following futures contracts:
Futures Expiration Contract Contract Unrealized Contracts Date Amount Value Gain/Loss --------- ---------- -------------- -------------- ----------- U.S. Treasury Notes Future 12/21/98 $(3,239,906) $(3,280,375) $(40.469) U.S. Treasury Notes Future 12/21/98 $ 375,914 $ 380,906 $ 4,992
I) TBA PURCHASE COMMITMENTS -- The Funds may enter into "TBA" (to be announced) purchases commitments to purchase securities for a fixed price at a future date, typically not exceeding 45 days. TBA purchase commitments are considered securities and involve a risk of loss if the value of the security to be purchased declines prior to settlement date, which risk is in addition to the risk of decline in the Fund's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, according to the procedures described under "Security Valuation" above. 82 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 1. Summary of Significant Accounting Policies (Continued) J) SECURITIES LENDING -- Loans of the securities are required at all times to be secured by collateral at least equal to 102% of the market value of domestic securities on loan including any accrued interest thereon and 105% of the market value of foreign securities on loan including any accrued interest thereon. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. The market value of securities on loan to brokers and the value of collateral held by the Fund with respect to such loans (including right to draw on letter of credit) at August 31, 1998, is as follows
Markets Value of Value of Fund Securities Loaned Collateral Recorded ------------------------------------------ ----------------- -------------------- BEA International Equity Fund $84,245,397 $88,971,334 BEA Emerging Markets Equity Fund 3,141,896 3,331,400 BEA U.S. Core Equity Fund 9,319,263 9,567,600 BEA Select Economic Equity Fund Value 463,125 475,000
K) SHORT SALES -- When the Adviser anticipates that a security is overvalued, it may sell the security short by borrowing the same security from a broker or other institution and selling the security. A Fund will incur a loss as a result of a short sale if the price of the borrowed security increases between the date of the short sale and the date on which the Fund replaces such security. A Fund will realize a gain if there is a decline in price of the security between those dates, which decline exceeds the costs of the borrowing the security and other transaction costs. There can be no assurance that a Fund will be able to close out a short position at any particular time or at an acceptable price. Although a Fund's gain is limited to the amount at which it sold a security short, its potential loss is limited only by the maximum attainable price of the security less the price at which the security was sold. Until a Fund replaces a borrowed security, it will maintain at all times cash, U.S. Government securities, or other liquid securities in an amount which, when added to any amount deposited with a broker as collateral will at least equal the current market value of the security sold short. Depending on arrangements made with brokers, a Fund may not receive any payments (including interest) on collateral deposited with them. The Funds will not make a short sale if, after giving effect to such sale, the market value of all securities sold short exceeds 100% of the value of a Fund's net assets. L) OTHER -- Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in exchange rates. Some countries in which the Funds invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a country's balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by the Funds may be inhibited. In addition, a significant proportion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets are held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by the Fund. Lower-rated debt securities (commonly known as "junk bonds") possess speculative characteristics and are subject to greater market fluctuations and risk of lost income and principal than higher-rated debt securities for a variety of reasons. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress which would adversely affect their ability to service their principal and interest payment obligations, to meet projected business goals and to obtain additional financing. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of lower-rated debt securities and a Fund's net asset value. 83 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 2. Transactions with Affiliates and Related Parties Pursuant to Investment Advisory Agreements, BEA Associates ("BEA"), an indirect, wholly-owned subsidiary of Credit Suisse Group, serves as investment advisor for each of the ten Funds described herein. For its advisory services, BEA is entitled to receive the following fees, computed daily and payable quarterly on a Fund's average daily net assets:
Fund Annual Rate ---------------------------------------- --------------------------------- BEA International Equity Fund 0.80% of average daily net assets BEA Emerging Markets Equity Fund 1.00% of average daily net assets BEA U.S. Core Equity Fund 0.75% of average daily net assets BEA Global Telecommunications Fund 1.00% of average daily net assets BEA Select Economic Value Equity Fund 0.75% of average daily net assets BEA Long-Short Market Neutral Fund 1.50% of average daily net assets BEA U.S. Core Fixed Income Fund 0.375% of average daily net assets BEA Strategic Global Fixed Income Fund 0.50% of average daily net assets BEA High Yield Fund 0.70% of average daily net assets BEA Municipal Bond Fund 0.70% of average daily net assets
BEA may, at its discretion, voluntarily waive all or any portion of its advisory fee for any of the Funds. For the year ended August 31, 1998, advisory fees and waivers for each of the ten investment Funds were as follows:
Gross Net Advisory Fee Waiver Advisory Fee ------------ --------- ------------ BEA International Equity Fund $4,971,749 $ (27,976) $4,943,773 BEA Emerging Markets Equity Fund 609,034 (234,633) 374,401 BEA U.S. Core Equity Fund 739,710 (36,437) 703,273 BEA Global Telecommunications Fund 9,174 (9,174) -- BEA Select Economic Value Equity Fund 14,867 (643) 14,224 BEA Long-Short Market Neutral Fund 7,419 (2,758) 4,661 BEA U.S. Core Fixed Income Fund 867,842 (288,699) 579,143 BEA Strategic Global Fixed Income Fund 170,631 (89,310) 81,321 BEA High Yield Fund 693,346 (271,277) 422,069 BEA Municipal Bond Fund 145,287 (51,669) 93,618
BEA reimbursed the BEA Global Telecommunications Fund $37,067 for the year ended August 31, 1998. Boston Financial Data Services, Inc. (BFDS), a 50% owned subsidiary of State Street Bank and Trust Company, serves as each Fund's transfer and dividend disbursing agent. 84 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 2. Transactions with Affiliates and Related Parties (Continued) PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp., serves as administrator for each of the ten Funds. PFPC's administration fee is computed daily and payable quarterly at an annual rate of .125% of each Fund's average daily net assets. PFPC may, at its discretion, voluntarily waive all or any portion of its administration fee for any of the Funds. For the year ended August 31, 1998, administration fees for each of the ten investment Funds were as follows:
Gross Net Administration Fee Waiver Administration Fee ------------------ --------- ------------------ BEA International Equity Fund $776,835 $ (7,213) $769,622 BEA Emerging Markets Equity Fund 76,129 -- 76,129 BEA U.S. Core Equity Fund 123,285 -- 123,285 BEA Global Telecommunications Fund 1,147 (1,147) -- BEA Select Economic Value Equity Fund 2,478 (2,478) -- BEA Long-Short Market Neutral Fund 618 (618) -- BEA U.S. Core Fixed Income Fund 235,924 -- 235,924 BEA Strategic Global Fixed Income Fund 48,431 (5,494) 42,937 BEA High Yield Fund 123,812 (24,762) 99,050 BEA Municipal Bond Fund 30,402 -- 30,402
Provident Distributors, Inc. ("PDI") serves as administrative services agent. An administrative service fee is computed daily and payable quarterly at an annual rate of .15% of each Fund's average daily net assets. The administrative agent may at its discretion, voluntarily waive all or any portion of its administrative service fee for any of the Funds. For the year ended August 31, 1998, administrative service fees for each of the ten investment funds were as follows:
Gross Administrative Net Administrative Service Fee Waiver Service Fee -------------------- ---------- ------------------ BEA International Equity Fund $932,203 $(497,175) $435,028 BEA Emerging Markets Equity Fund 91,355 (73,084) 18,271 BEA U.S. Core Equity Fund 147,942 (138,079) 9,863 BEA Global Telecommunications Fund 459 (459) -- BEA Select Economic Value Equity Fund 2,973 (2,775) 198 BEA Long-Short Market Neutral Fund 742 (594) 148 BEA U.S. Core Fixed Income Fund 347,137 (323,994) 23,143 BEA Strategic Global Fixed Income Fund 51,189 (47,777) 3,412 BEA High Yield Fund 148,574 (138,669) 9,905 BEA Municipal Bond Fund 31,133 (29,057) 2,076
The BEA International Equity Fund, BEA Emerging Markets Equity Fund, BEA Global Telecommunications Fund, and the BEA High Yield Fund had each entered into Distribution Agreements with Counsellors Securities, Inc. ("Counsellors Securities") pursuant to their Distribution Plans under Rule 12b-1 of the 1940 Act. In consideration of services, the Distribution agreement provides that the Funds will each pay the distributor a fee calculated to an annual rate of 0.25% of the average daily net assets of the Advisor Shares of the Funds. Expenses include legal fees paid to counsel to the Company, a partner of which is secretary of the Company. Expenses include Administrative and 12b-1 fees paid to Counsellors, whose secretary is also a director of the Company. 85 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 3. Purchases and Sales of Securities For the year ended August 31, 1998, purchases and sales of investment securities (other than short-term investments) were as follows:
Investment Securities U.S. Government Obligations Short Securities ----------------------------- ----------------------------- ---------------- Purchases Sales Purchases Sales Sales ------------ ------------ ------------- ------------ ---------------- BEA International Equity Fund $832,050,010 $872,931,809 $ -- $ -- $ -- BEA Emerging Markets Equity Fund 99,922,836 129,951,583 -- -- -- BEA U.S. Core Equity Fund 151,566,833 188,161,919 -- -- -- BEA Global Telecommunications Fund 1,339,708 1,418,962 -- -- -- BEA Select Economic Equity Fund 36,493,041 11,416,525 -- -- -- BEA Long-Short Market Neutral Fund 6,985,683 734,861 -- -- 6,360,722 BEA U.S. Core Fixed Income Fund 241,703,217 160,761,216 1,179,740,152 910,268,176 -- BEA Strategic Global Fixed Income Fund 38,651,846 36,581,131 68,102,884 79,533,855 -- BEA High Yield Fund 71,838,211 68,120,582 -- -- -- BEA Municipal Bond Fund 6,969,526 6,453,747 4,499,548 5,116,564 --
Note 4. Capital Shares Transactions in capital shares for each period were as follows:
BEA International Equity Fund -------------------------------------------------------------------------------------------------- For the Year Ended For the Year Ended For the Year Ended August 31, 1998 August 31, 1997 August 31, 1998 ----------------------------- ------------------------------ ------------------------------- Institutional Institutional Advisor ----------------------------- ------------------------------ ------------------------------- Shares Value Shares Value Shares Value ------------ ------------- ------------- ------------- -------------- ------------- Shares sold 4,245,007 $ 102,490,297 2,106,657 $ 43,959,322 211,487 $ 4,990,229 Shares issued in reinvestment of dividends 3,354,933 68,910,317 407,411 8,213,395 8,163 167,087 Shares repurchased (5,715,329) (125,473,547) (12,069,824) (255,570,149) (154,474) (3,642,448) ------------ ------------- ------------- ------------- ------------- ------------- Net increase (decrease) 1,884,611 $ 45,927,067 (9,555,756) $(203,397,432) 65,176 $ 1,514,868 ============ ============= ============= ============= ============= ============= BEA Shares Authorized 500,000,000 500,000,000 100,000,000 ============ ============= ============= --------------------------------- For the Period November 1, 1996* Through August 31, 1997 -------------------------------- Advisor ------------------------------ Shares Value ------------- ------------- Shares sold 7,020 $ 142,126 Shares issued in reinvestment of dividends 2 33 Shares repurchased (375) (7,544) ------------- ------------- Net increase (decrease) 6,647 $ 134,615 ============= ============= BEA Shares Authorized 100,000,000 =============
BEA Emerging Markets Equity Fund -------------------------------------------------------------------------------------------------- For the Year Ended For the Year Ended For the Year Ended August 31, 1998 August 31, 1997 August 31, 1998 ----------------------------- ------------------------------ ------------------------------- Institutional Institutional Advisor ----------------------------- ------------------------------ ------------------------------- Shares Value Shares Value Shares Value ------------ ------------- ------------- ------------- -------------- ------------- Shares sold 102,528 $ 1,830,455 300,734 $ 6,118,794 93,287 $ 1,457,394 Shares issued in reinvestment of dividends 245,801 4,154,034 11,536 216,755 46 775 Shares repurchased (2,256,500) (35,760,759) (2,385,604) (45,726,259) (32,820) (571,277) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) (1,908,171) $ (29,776,270) (2,073,334) $ (39,370,710) 60,513 $ 886,892 ============= ============= ============= ============= ============= ============= BEA Shares Authorized 500,000,000 500,000,000 100,000,000 ============= ============= ============= --------------------------------- For the Period November 1, 1996* Through August 31, 1997 -------------------------------- Advisor ------------------------------ Shares Value ------------- ------------- Shares sold 580 $ 6,252 Shares issued in reinvestment of dividends -- 9 Shares repurchased (397) (2,825) ------------- ------------- Net increase (decrease) 183 $ 3,436 ============= ============= BEA Shares Authorized 100,000,000 =============
*Commencement of operations. 86 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 4. Capital Shares (Continued)
BEA U.S. Core Equity Fund BEA Global --------------------------------------------------------------- ------------------------------- For the Year Ended For the Year Ended For the Year Ended August 31, 1998 August 31, 1997 August 31, 1998 ----------------------------- ------------------------------ ------------------------------- Institutional Institutional Advisor ----------------------------- ------------------------------ ------------------------------- Shares Value Shares Value Shares Value ------------ ------------- ------------- ------------- -------------- ------------- Shares sold 682,212 $ 16,949,211 629,948 $ 13,787,908 18,229 $ 414,135 Shares issued in reinvestment of dividends 568,713 12,778,985 247,726 4,994,154 2,037 37,921 Shares repurchased (1,859,405) (46,573,171) (443,835) (10,065,462) (18,228) (407,258) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) (608,480) $ (16,844,975) 433,839 $ 8,716,600 2,038 $ 44,798 ============= ============= ============= ============= ============= ============= BEA Shares Authorized 50,000,000 50,000,000 100,000,000 ============= ============= ============= Telecommunications Fund --------------------------------- For the Period December 4, 1996* Through August 31, 1997 -------------------------------- Advisor ------------------------------ Shares Value ------------- ------------- Shares sold 35,439 $ 550,788 Shares issued in reinvestment of dividends -- -- Shares repurchased (2,513) (42,249) ------------- ------------- Net increase (decrease) 32,926 $ 508,539 ============= ============= BEA Shares Authorized 100,000,000 =============
BEA Select Economic Value Equity Fund BEA Long-Short Market Neutral Fund ----------------------------------------------------------------------- For the Period August 3, 1998* For the Period August 3, 1998* Through August 31, 1998 Through August 31, 1998 ------------------------------- ------------------------------- Institutional Institutional ------------------------------- ------------------------------- Shares Value Shares Value ----------- ----------- ----------- ----------- Shares sold 1,721,030 $25,813,705 412,744 $ 6,191,423 Shares issued in reinvestment of dividends -- -- -- -- Shares repurchased -- -- -- -- ----------- ----------- ----------- ----------- Net increase (decrease) 1,721,030 $25,813,705 412,744 $ 6,191,423 =========== =========== =========== =========== BEA Shares Authorized 50,000,000 50,000,000 =========== ===========
BEA U.S. Core Fixed Income Fund BEA Strategic Global ---------------------------------------------------------------- ------------------------------- For the Year Ended For the Year Ended For the Year Ended August 31, 1998 August 31, 1997 August 31, 1998 ------------------------------ ------------------------------ ------------------------------- Institutional Institutional Advisor ------------------------------ ------------------------------ ------------------------------- Shares Value Shares Value Shares Value ------------- ------------- ------------- ------------- -------------- ------------- Shares sold 15,080,236 $ 237,240,219 3,766,118 $ 57,492,720 227,215 $ 3,505,185 Shares issued in reinvestment of dividends 906,263 14,074,352 635,289 9,648,554 147,509 2,200,318 Shares repurchased (2,268,321) (35,611,876) (953,578) (14,608,596) (1,361,892) (20,772,949) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) 13,718,178 $ 215,702,695 3,447,829 $ 53,032,678 (987,168) $ (15,067,446) ============= ============= ============= ============= ============= ============= BEA Shares Authorized 50,000,000 50,000,000 50,000,000 ============= ============= ============= Fixed Income Fund ------------------------------ For the Year Ended August 31, 1997 ------------------------------ Institutional ------------------------------ Shares Value ------------- ------------- Shares sold 583,542 $ 9,015,150 Shares issued in reinvestment of dividends 155,630 2,420,275 Shares repurchased (300,343) (4,677,567) ------------- ------------- Net increase (decrease) 438,829 $ 6,757,858 ============= ============= BEA Shares Authorized 50,000,000 =============
*Commencement of operations. 87 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 4. Capital Shares (Continued)
BEA High Yield Fund --------------------------------------------------------------------------------------------------- For the Year Ended For the Year Ended For the Year Ended August 31, 1998 August 31, 1997 August 31, 1998 ------------------------------ ------------------------------ ------------------------------- Institutional Institutional Advisor ------------------------------ ------------------------------ ------------------------------- Shares Value Shares Value Shares Value ------------- ------------- ------------- ------------- ------------- ------------- Shares sold 2,248,712 $ 38,970,312 1,921,993 $ 31,537,039 266,018 $ 4,697,209 Shares issued in reinvestment of dividends 416,842 7,175,130 425,311 6,905,890 9,315 162,504 Shares repurchased (2,423,467) (41,922,050) (1,638,080) (27,112,004) (246,118) (4,271,516) ------------- ------------- ------------- ------------- ------------- ------------- Net increase (decrease) 242,087 $ 4,223,392 709,224 $ 11,330,925 29,215 $ 588,197 ============= ============= ============= ============= ============= ============= BEA Shares Authorized 500,000,000 500,000,000 100,000,000 ============= ============= ============= -------------------------------- For the Period November 1, 1996* Through August 31, 1997 -------------------------------- Advisor -------------------------------- Shares Value ------------- ------------- Shares sold 5,206 $ 85,650 Shares issued in reinvestment of dividends 9 148 Shares repurchased (158) (2,569) ------------- ------------- Net increase (decrease) 5,057 $ 83,229 ============= ============= BEA Shares Authorized 100,000,000 =============
BEA Municipal Bond Fund ------------------------------------------------------------------ For the Year Ended For the Year Ended August 31, 1998 August 31, 1997 ------------------------------ ------------------------------ Institutional Institutional ------------------------------ ------------------------------ Shares Value Shares Value ------------- ------------ ------------- ------------ Shares sold 217,663 $ 3,269,230 7,719 $ 111,603 Shares issued in reinvestment of dividends 70,888 1,064,203 101,853 1,488,998 Shares repurchased (153,265) (2,304,613) (111,453) (1,647,099) ------------ ------------ ------------ ------------ Net increase (decrease) 135,286 $ 2,028,820 (1,881) $ (46,498) ============ ============ ============ ============ BEA Shares Authorized 50,000,000 50,000,000 ============ ============
*Commencement of operations. On August 31, 1998, two shareholders held approximately 12% of the outstanding shares of the BEA International Equity Institutional Class, three shareholders held approximately 94% of the BEA International Advisor Class, four shareholders held approximately 90% of the outstanding shares of the BEA Emerging Markets Equity Institutional Class, seven shareholders held approximately 84% of the outstanding shares of the BEA U.S. Core Equity Institutional Class, one shareholder held approximately 98% of the BEA Emerging Markets Advisor Class, two shareholders held approximately 98% of the outstanding shares of the BEA Select Economic Value Equity Fund, one shareholder held approximately 96% of the outstanding shares of the BEA Long-Short Market Neutral Fund, four shareholders held approximately 64% of the outstanding shares of the BEA Global Telecommunications Advisor Class, four shareholders held approximately 76% of the outstanding shares of the BEA U.S. Core Fixed Income Institutional Class, three shareholders held approximately 96% of the outstanding shares of the BEA Strategic Global Fixed Income Institutional Class, five shareholders held approximately 56% of the outstanding shares of the BEA High Yield Institutional Class, two shareholders held approximately 98% of the BEA High Yield Advisor Class and four shareholders held approximately 63% of the outstanding shares of the BEA Municipal Bond Institutional Class. 88 The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Continued) Note 5. Restricted Securities Certain of the BEA International Equity Fund's investments are restricted as to resale and are valued at the direction of the Fund's Board of Directors in good faith, at fair value, after taking into consideration appropriate indications of value available. The table below shows the number of shares held, the acquisition date, value as of August 31, 1998, percentage of net assets which the securities comprise, aggregate cost and unit value of the securities.
Number of Acquisition 08/31/98 Percentage of Security Value Per Shares Date Fair Value Net Assets Cost Unit --------- ------------ ---------- ------------- ---------- --------- Sodigas Pampeana 558,962 1/14/93 $ 844,809 0.1% $ 566,038 $1.511 Sodigas del Sur 403,923 1/14/93 745,416 0.1% 384,038 1.845 Geotek Communications, Inc. 600 5/26/95 -- 0.0% 6,000,000 0.000 ---------- ---------- $1,590,225 $6,950,076 ========== ==========
Note 6. Forward Foreign Currency Contracts The Funds will generally enter into forward foreign currency exchange contracts as a way of managing foreign exchange rate risk. A Fund may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. A Fund may also use these contracts to hedge the U.S. dollar value of securities it already owns denominated in foreign currencies. The fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either transactions or portfolio positions. Forward foreign currency contracts are valued at the forward rate, and are marked-to-market daily. The change in market value is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The Fund's policy is to include this portion of realized and unrealized gains and losses on investments that result from foreign currency changes with other foreign currency gains and losses on the Statement of Operations. The use of forward foreign currency contracts does not eliminate fluctuations in the underlying prices of the Fund's Fund Securities, but it does establish a rate of exchange that can be achieved in the future. Although forward foreign currency contracts limit the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might result should the value of the currency increase. In addition, the Funds could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts. During the year ended August 31, 1998, the BEA Strategic Global Fixed Income Fund and the BEA U.S. Core Fixed Income Fund entered into forward foreign currency contracts. The BEA Strategic Global Fixed Income Fund's open Forward Foreign Currency Contracts at August 31, 1998 were as follows:
Foreign Unrealized Forward Currency Expiration Currency Contract Contract Foreign Exchange Contract Date To Be Sold Amount Value Gain/(Loss) - - - - - -------------------- ---------- ------------- ----------- ----------- ---------------- German Deutschemarks 09/11/98 895,990 $ 500,000 $ 509,056 $ (9,056) Great Britain Pounds 09/11/98 306,410 500,000 513,087 (13,087) Italian Lira 09/11/98 1,002,974,222 566,331 576,225 (9,894) Japanese Yen 09/11/98 275,580,000 1,961,423 1,956,598 4,825 ----------- ----------- ----------- $ 3,527,754 $3,554,966 $ (27,212) =========== =========== =========== 89
The BEA Funds of The RBB Fund, Inc. Notes to Financial Statements (Concluded) Note 6. Forward Foreign Currency Contracts (Continued)
Foreign Unrealized Forward Currency Expiration Currency Contract Contract Foreign Exchange Contract Date To Be Purchased Amount Value Gain/(Loss) ----------------------- ---------- --------------- ---------- ---------- --------------- Australian Dollars 09/11/98 844,380 $ 500,000 $ 483,188 $ (16,812) Australian Dollars 09/11/98 490,396 300,000 280,624 (19,376) Canadian Dollars 09/11/98 1,061,764 728,723 677,279 (51,444) German Deutschemarks 09/11/98 443,888 250,000 252,195 2,195 German Deutschemarks 09/11/98 447,712 249,958 254,367 4,409 German Deutschemarks 09/11/98 4,070,413 2,370,900 2,369,418 (1,482) German Deutschemarks 09/11/98 888,000 500,000 504,517 4,517 German Deutschemarks 09/11/98 1,781,740 1,000,000 1,012,295 12,295 Japanese Yen 09/11/98 108,800,000 800,000 772,472 (27,528) Japanese Yen 09/11/98 68,480,000 500,000 486,203 (13,797) Japanese Yen 09/11/98 281,367,137 2,046,604 1,997,686 (48,918) Swedish Krona 09/11/98 4,939,860 623,012 611,755 (11,257) ---------- ---------- --------- $9,869,197 $9,701,999 $(167,198) ========== ========== =========
The BEA U.S. Core Fixed Income Fund's open Forward Foreign Currency Contracts at August 31, 1998 were as follows:
Foreign Unrealized Forward Currency Expiration Currency Contract Contract Foreign Exchange Contract Date To Be Sold Amount Value Gain/(Loss) ----------------------- ---------- ---------- -------- -------- ---------------- Great British Pounds 09/17/98 3,708,378 $6,037,240 $6,209,716 $(172,476)
Note 7. Capital Loss Carryover At August 31, 1998, Capital loss carryovers were available to offset future realized gains as follows: $9,398,340 in the Emerging Markets Equity Fund which expires in 2004, $23,637 in the Select Economic Value Equity Fund which expires in 2006, $95,077 in Long-Short Market Neutral Fund which expires in 2006 and $15,376,507 in the BEA High Yield Fund of which $7,035,737 expires in 2000, $4,986,021 expires in 2003, and $3,354,749 expires in 2005. Note 8. Reorganization On July 29,1998, the Board of Directors of the RBB Fund, Inc., on behalf of the BEA International Equity Fund, BEA Emerging Markets Equity Fund, BEA U.S. Core Equity Fund, BEA U.S. Core Fixed Income Fund, BEA Strategic Global Fixed Income Fund, BEA High Yield Fund, BEA Municipal Bond Fund, BEA Global Telecommunications Fund, BEA Long-Short Market Neutral Fund, BEA Long-Short Equity Fund, and BEA Select Economic Value Equity Fund (each, an "Existing Fund") approved proposed reorganizations (each, a "Reorganization") pursuant to which the assets of each Existing Fund would be acquired by a new fund (each, a "New Fund") organized to accomplish the applicable Reorganization. Upon completion of each Reorganization, each shareholder of an Existing Fund would become a shareholder of the corresponding New Fund and receive shares of the same class of the New Fund with a value equal to the value of the shareholder's investment in the Existing Fund. Each proposed Reorganization is subject to the fulfillment of certain conditions, including the approval of shareholders of such Existing Fund. Proxy materials describing the proposed reorganizations were mailed to shareholders of each Existing Fund in anticipation of a special meeting of shareholders which is scheduled for October 16, 1998. If approved by shareholders, each Reorganization will occur as soon thereafter as practicable. Completion of the Reorganizations is expected to occur on or about October 23, 1998. 90 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of The RBB Fund,Inc.: In our opinion, the accompanying statements of assets and liabilities, including the schedule of investments, of the BEA International Equity Fund, BEA Emerging Markets Equity Fund, BEA U.S.Core Equity Fund, BEA Strategic Global Fixed Income Fund, BEA Global Telecommunications Fund, and BEA Long-Short Market Neutral Fund of The RBB Fund,Inc.(the "Fund") and the accompanying statements of net assets of the BEA High Yield Fund, BEA Select Economic Value Equity Fund, BEA U.S. Core Fixed Income Fund and BEA Municipal Bond Fund of The RBB Fund,Inc., and the related statements of operations and changes in net assets, and the financial highlights present fairly, in all material respects, the financial position of the BEA International Equity Fund, BEA Emerging Markets Equity Fund, BEA U.S. Core Equity Fund, BEA Strategic Global Fixed Income Fund, BEA Global Telecommunications Fund, BEA High Yield Fund, BEA Select Economic Value Equity Fund, BEA Long-Short Market Neutral Fund, BEA U.S. Core Fixed Income Fund and BEA Municipal Bond Fund of The RBB Fund,Inc. at August 31, 1998, the results of their operations for the year (or period) then ended, changes in their net assets for each of the two years (or periods) in the period then ended, and the financial highlights for each of the periods presented, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities owned at August 31, 1998 by correspondence with the custodian and brokers, provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP 2400 ElevenPennCenter Philadelphia, Pennsylvania October 22, 1998 91 Tax Information Letters Important Tax Information for Shareholders of BEA Emerging Markets Equity Fund (Unaudited) During the fiscal year ended August 31, 1998, the Emerging Markets Equity Fund - Institutional Class distributed $800,456 of foreign source income on which the Fund paid foreign taxes of $152,238. This information is being furnished to you pursuant to notice requirements of Sections 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder. During the fiscal year ended August 31, 1998, the Emerging Markets Equity Fund - Advisor Class distributed $93 of foreign source on which the Fund paid foreign taxes of $27. This information is being furnished to you pursuant to notice requirements of Sections 853(a) and 855(d) of the Internal Revenue Code, as amended, and the Treasury Regulations thereunder. Important Tax Information for Corporate Shareholders of BEA U.S. Core Equity Fund (Unaudited) Corporate shareholders should note that for the fiscal year ended August 31, 1998, 23.7% of the Fund's investment income (i.e., net investment income plus short-term capital gains) qualifies for the intercorporate dividends received deduction. Important Tax Information for Shareholders of BEA Municipal Bond Fund (Unaudited) In the twelve months ended August 31, 1998 (the end of the fiscal year), 79% of the dividends paid by the Fund were exempt-interest dividends for the purposes of federal income taxes and free from such taxes. In addition, none of such dividends was attributable to interest on private activity bonds which must be included in federal alternative minimum taxable income for purposes of determining liability for federal alternative minimum tax. In January 1999, you will be furnished with a schedule showing the yearly percentage breakdown by State or U.S. possession of the source of interest earned by the Fund in 1998. It is suggested that you consult your tax adviser concerning the applicability of State and local taxes to dividends paid by the Fund during the year. Important Tax Information for Shareholders (Unaudited) During the year ended August 31, 1998, the BEA Funds declared the following dividends from realized capital gains:
Short-term Mid-term Long-term capital gain capital gain capital gain per share per share per share ------------ ------------ ------------ BEA International Equity Fund -- $2.29 $0.64 BEA Emerging Markets Equity Fund -- -- 1.04 BEA U.S. Core Equity Fund $1.01 1.27 1.15 BEA Global Telecommunications Fund 1.04 -- -- BEA U.S. Core Fixed Income Fund 0.17 0.04 0.02 BEA Strategic Global Fixed Income Fund 0.28 0.14 0.07 BEA Municipal Bond Fund 0.09 0.01 0.01
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