N-CSR 1 g11765rbb_ncsr04.txt RBB N-CSR 8-31-04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05518 ------------------------- The RBB Fund, Inc. ------------------------------------------------------------------- (Exact name of registrant as specified in charter) 300 East Lombard Street Baltimore, MD 21202 ------------------------------------------------------------------- (Address of principal executive offices) (Zip code) The Corporation Trust Incorporated 300 East Lombard Street Baltimore, MD 21202 ------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 302-792-2555 ------------- Date of fiscal year end: August 31, 2004 ---------------- Date of reporting period: August 31, 2004 ---------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. ================================================================================ THE BEDFORD CLASS OF THE RBB FUND, INC. MONEY MARKET PORTFOLIO ANNUAL REPORT AUGUST 31, 2004 ================================================================================ THE RBB FUND, INC. MONEY MARKET PORTFOLIO PRIVACY NOTICE (UNAUDITED) The RBB Fund, Inc. MONEY MARKET PORTFOLIO (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (800) 533-7719. October 2004 NOT PART OF THE ANNUAL REPORT THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, redemption fees; and (2) ongoing costs, including management fees; distribution fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
MONEY MARKET PORTFOLIO - BEDFORD CLASS ---------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,001.50 $4.73 Hypothetical (5% return before expenses) 1,000.00 1,020.32 4.78 MONEY MARKET PORTFOLIO - SANSOM STREET CLASS --------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,005.30 $1.01 Hypothetical (5% return before expenses) 1,000.00 1,024.08 1.02
* Expenses are equal to the Fund's annualized expense ratio of 0.94% for the Bedford Class shares and 0.20% for the Sansom Street Class shares, which includes waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period. 2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE (UNAUDITED) SECURITY % OF NET TYPE ASSETS VALUE -------- -------- ------------ Short Term Investments: Certificates of Deposit ........................ 23.2% $ 49,399,439 Commercial Paper ............................... 18.9% 40,351,733 Variable Rate Obligations ...................... 14.2% 30,195,000 Agency Obligations ............................. 9.6% 20,493,893 Master Notes ................................... 0.0% 100,000 Repurchase Agreements .......................... 34.0% 72,600,000 Other Assets in Excess of Liabilities ............................. 0.1% 232,522 ------ ------------ Net Assets -- 100.0% .............................. 100.0% $213,372,587 ====== ============ 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2004 PAR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--23.2% BANKS--6.8% Wells Fargo Bank, N.A. 1.530%, 09/13/04 ............................... $14,400 $ 14,400,000 ------------ DOMESTIC CERTIFICATES OF DEPOSIT--12.2% Citibank, N.A. 1.525%, 10/04/04 ............................... 14,000 14,000,192 Washington Mutual Bank 1.640%, 11/03/04 ............................... 12,000 12,000,000 ------------ 26,000,192 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--4.2% Foreningssparbanken AB (Swedbank) 1.440%, 03/01/05 ............................... 6,000 5,999,555 Societe Generale 1.440%, 05/09/05 ............................... 3,000 2,999,692 ------------ 8,999,247 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $49,399,439) ......................... 49,399,439 ------------ COMMERCIAL PAPER--18.9% ASSET BACKED SECURITIES--15.9% Emerald Certificates 1.650%, 10/27/04 ............................... 12,000 11,969,200 Lockhart Funding LLC 1.630%, 11/08/04 ............................... 10,000 9,969,211 Solitaire Funding LLC 1.560%, 10/07/04 ............................... 12,000 11,981,280 ------------ 33,919,691 ------------ INSURANCE--3.0% Irish Life & Permanent P.L.C. 1.540%, 10/18/04 ............................... 6,445 6,432,042 ------------ TOTAL COMMERCIAL PAPER (Cost $40,351,733) ......................... 40,351,733 ------------ PAR (000) VALUE ------- ------------ VARIABLE RATE OBLIGATIONS--14.2% ASSET BACKED SECURITIES--1.0% Racers Trust 2004-6-MM++ 1.610%, 09/22/04 ............................... $ 1,000 $ 1,000,000 SMM Trust 2004-G++ 1.327%, 09/03/04 ............................... 1,195 1,195,000 ------------ 2,195,000 ------------ BANKS--5.6% HBOS Treasury Services P.L.C.++ 1.579%, 09/24/04 ............................... 10,000 10,000,000 Westpac Banking Corp.++ 1.408%, 09/13/04 ............................... 2,000 2,000,000 ------------ 12,000,000 ------------ LIFE INSURANCE--2.4% MetLife Global Funding++ 1.680%, 09/28/04 ............................... 5,000 5,000,000 ------------ SECURITY BROKERS & DEALERS--5.2% Merrill Lynch & Co., Inc.++ 1.550%, 10/05/04 ............................... 11,000 11,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $30,195,000) ......................... 30,195,000 ------------ AGENCY OBLIGATIONS--9.6% Federal Home Loan Bank 1.344%, 09/13/04 ............................... 8,000 7,995,044 1.425%, 04/04/05 ............................... 2,500 2,500,000 Federal National Mortgage Association 1.640%, 11/18/04 ............................... 10,000 9,998,849 ------------ TOTAL AGENCY OBLIGATIONS (Cost $20,493,893) ......................... 20,493,893 ------------ See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONCLUDED) AUGUST 31, 2004 PAR (000) VALUE ------- ------------ MASTER NOTES--0.0% Morgan Stanley Mortgage Capital 1.733%, 09/01/04 ............................... $ 100 $ 100,000 ------------ TOTAL MASTER NOTES (Cost $100,000) ............................ 100,000 ------------ REPURCHASE AGREEMENTS--34.0% Goldman, Sachs & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $30,001,325 collateralized by $30,060,360 Federal Home Loan Mortgage Corporation Bonds at a rate of 4.50% to 6.00%, due 11/15/28 to 04/15/32. Market Value of collateral is $30,900,000.) 1.590%, 09/01/04 ............................... 30,000 30,000,000 Morgan Stanley & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $2,600,113 collateralized by $2,614,000 U.S. Treasury Notes at a rate of 4.25%, due 11/15/13 Market Value of collateral is $2,666,000.) 1.560%, 09/01/04 ............................... 2,600 2,600,000 Morgan Stanley & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $40,001,767 collateralized by $41,887,394 Federal National Mortgage Association Bonds at a rate of 5.00%, due 08/01/34. Market Value of collateral is $41,603,802.) 1.590%, 09/01/04 ............................... 40,000 40,000,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $72,600,000) ......................... 72,600,000 ------------ VALUE ------------ TOTAL INVESTMENTS AT VALUE--99.9% (Cost $213,140,065) ............................ $213,140,065 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% ........................... 232,522 ------------ NET ASSETS (Applicable to 72,001,861 Bedford shares and 141,372,745 Sansom Street shares)--100.0% ......................... $213,372,587 ============ NET ASSET VALUE, Offering and Redemption Price Per Share ($213,372,587 / 213,374,606) ................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Bedford Share ($72,000,732 / 72,001,861) ..................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Sansom Street Share ($141,371,855 / 141,372,745) ................... $1.00 ===== ++ Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2004 and the maturity date shown is the next interest rate readjustment date or the maturity date. See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004 Investment Income Interest ............................................. $2,989,573 ---------- Expenses Investment advisory and administration fees .......... 1,170,757 Distribution and service fees ........................ 519,349 Transfer agent fees .................................. 120,175 Printing fees ........................................ 97,001 Custodian fees ....................................... 60,794 Legal fees ........................................... 43,764 Directors' and Officer's fees ........................ 36,533 Audit fees ........................................... 36,275 Insurance fees ....................................... 10,152 Registration fees .................................... 8,500 Service organization fees ............................ 6,300 Miscellaneous ........................................ 4,353 ---------- Total Expenses .................................. 2,113,953 Less fees waived ..................................... (911,521) Less expense reimbursement by advisor ................ (78,531) ---------- Net total expenses .............................. 1,123,901 ---------- Net investment income ................................... 1,865,672 ---------- Realized loss on investments ............................ (2,019) ---------- Net increase in net assets resulting from operations .... $1,863,653 ========== See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income .................................................... $ 1,865,672 $ 2,499,023 Net gain/(loss) on investments ........................................... (2,019) 3,622 ------------ ------------ Net increase in net assets resulting from operations ..................... 1,863,653 2,502,645 ------------ ------------ Distributions to shareholders: Dividends to shareholders from Net Investment Income: Bedford shares ......................................................... (202,921) (377,857) Sansom Street shares ................................................... (1,662,751) (2,121,166) Distributions to shareholders from Net realized short-term gains: Bedford shares ......................................................... (1,077) (42,292) Sansom Street shares ................................................... (2,545) (96,036) ------------ ------------ Total distributions to shareholders .................................. (1,869,294) (2,637,351) ------------ ------------ Net capital share transactions (See Note 3) ................................ (65,400,496) (18,176,747) ------------ ------------ Total decrease in net assets ............................................... (65,406,137) (18,311,453) Net Assets: Beginning of year ........................................................ 278,778,724 297,090,177 ------------ ------------ End of year .............................................................. $213,372,587 $278,778,724 ============ ============
See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
THE BEDFORD CLASS -------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- Income from investment operations: Net investment income .................. 0.0025 0.0046 0.0157 0.0460 0.0512 Net gains on securities ................ -- 0.0005 -- -- -- ------- -------- -------- -------- -------- Total from investment operations ......................... 0.0025 0.0051 0.0157 0.0460 0.0512 ------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .............................. (0.0025) (0.0046) (0.0157) (0.0460) (0.0512) Distributions (from capital gains) ..... -- (0.0005) -- -- -- ------- -------- -------- -------- -------- Total distributions .................. (0.0025) (0.0051) (0.0157) (0.0460) (0.0512) ------- -------- -------- -------- -------- Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======== ======== ======== ======== Total Return .............................. 0.25% 0.53% 1.59% 4.70% 5.24% Ratios /Supplemental Data Net assets, end of year (000) .......... $72,001 $ 80,406 $ 52,878 $676,964 $423,977 Ratios of expenses to average net assets(a) ........................ .94% .98% 1.00% 1.00% .97% Ratios of net investment income to average net assets ................ .24% .46% 1.75% 4.46% 5.15% (a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been 1.34%, 1.30%, 1.25%, 1.19% and 1.05% for the years ended August 31, 2004, 2003, 2002, 2001 and 2000, respectively.
See Accompanying Notes to Financial Statements. 8 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
THE SANSOM STREET CLASS -------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income .................. 0.0100 0.0114 0.0209 0.0511 0.0560 Net gains on securities ................ -- 0.0005 -- -- -- -------- -------- -------- -------- -------- Total net income from investment operations ......................... 0.0100 0.0119 0.0209 0.0511 0.0560 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .............................. (0.0100) (0.0114) (0.0209) (0.0511) (0.0560) Distributions (from capital gains) ..... -- (0.0005) -- -- -- -------- -------- -------- -------- -------- Total distributions .................. (0.0100) (0.0119) (0.0209) (0.0511) (0.0560) -------- -------- -------- -------- -------- Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ......................... 1.00% 1.21% 2.11% 5.23% 5.75% Ratios/Supplemental Data Net assets, end of year (000) .......... $141,372 $198,373 $244,212 $201,632 $326,745 Ratios of expenses to average net assets(a) ........................ .20% .30% .49% .49% .49% Ratios of net investment income to average net assets ................... .98% 1.14% 2.10% 5.23% 5.42% (a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been .59%, .57%, .64%, .61% and .61% for the years ended August 31, 2004, 2003, 2002, 2001 and 2000, respectively.
See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2004 NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988, and is registered under the Investment Company Act of 1940, as amended, (the "1940 Act") as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the 1940 Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has fourteen active investment portfolios, including the Money Market Portfolio ("Portfolio"), which comprises the RBB family of funds. RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion shares are currently classified into ninety-seven classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. A) SECURITY VALUATION -- Securities held in the Portfolio are valued under the amortized cost method, which approximates current market value. Under this method, securities are valued at cost when purchased and thereafter a constant proportionate amortization of any discount or premium is recorded until maturity of the security. Regular review and monitoring of the valuation is performed to ensure that cost continues to approximate market value and to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain net asset value per share at $1.00. B) SECURITY TRANSACTIONS, INVESTMENT INCOME, AND EXPENSES -- 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 accrued when earned. Certain expenses, such as distribution, transfer agency and printing, are class specific expenses and vary by class. Expenses not directly attributable to a specific portfolio or class are allocated based on relative net assets of each portfolio and class, respectively. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all portfolios within the RBB family of funds (such as director or professional fees) are charged to all portfolios in proportion to their average net assets. C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. All distributions from net investment income are taxed as ordinary income. Any net realized capital gains are distributed at least annually. Income subject to distributions and capital gain subject to distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. D) FEDERAL INCOME TAXES -- No provision is made for federal income taxes. It is the Fund's intention to have each portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholders which will be sufficient to relieve it from Federal income and excise taxes. E) REPURCHASE AGREEMENTS -- Money market instruments may be purchased subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the underlying securities falls below 102% of the value of the repurchase price plus accrued interest, the 10 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Portfolio will require the seller to deposit additional collateral by the next Portfolio business day. In the event that the seller under the agreement defaults on its repurchase obligation or fails to deposit sufficient collateral, the Portfolio has the contractual right, subject to the requirements of applicable bankruptcy and insolvency laws, to sell the underlying securities and may claim any resulting loss from the seller. The agreements are conditioned upon the collateral being deposited under the Federal Reserve Book Entry System or with the Portfolio's custodian or a third party sub-custodian. F) USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent 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. NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Pursuant to Investment Advisory Agreements, BlackRock Institutional Management Corp. ("BIMC"), an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser and as administrator for the Portfolio. BIMC and PFPC Inc. ("PFPC") have entered into a delegation agreement on behalf of the Portfolio, wherein PFPC has agreed to perform Administration and Accounting services for an annual fee of .10% of the average net assets of the Portfolio, paid out of the fee paid to BIMC. For its advisory services, BIMC is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average daily net assets: PORTFOLIO ANNUAL RATE -------------------------- --------------------------------------------- Money Market Portfolio .45% of first $250 million of net assets; .40% of next $250 million of net assets; .35% of net assets in excess of $500 million. BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for this Portfolio. For each class of shares within the Portfolio, the net advisory fee charged to each class is the same on a relative basis. For the year ended August 31, 2004, advisory fees and waivers for the investment portfolio were as follows: GROSS NET ADVISORY ADVISORY FEE WAIVER FEE ---------- ---------- -------- Money Market Portfolio $1,129,619 $(911,521) $218,098 As of August 31, 2004, the Portfolio owed BIMC $17,525 in advisory fees. For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by RBB and PFPC. This agreement commenced on June 1, 2003. This fee is allocated among all funds in proportion to their net assets of the RBB funds. The Portfolio's portion of this fee for the period September 1, 2003 to August 31, 2004 was $41,138. 11 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) The investment advisor/administrator may voluntarily waive and/or reimburse the Portfolio for the amount, if any, by which the total operating and management expenses exceed the expense cap. For the year ended August 31, 2004, the expense caps were as follows: PORTFOLIO CLASS OF SHARES EXPENSE CAP --------- --------------- ----------- Money Market Portfolio Bedford 0.97% Sansom Street 0.20% PFPC Distributors, Inc. (the "Distributors") has voluntarily agreed to temporarily waive distribution and service (12b-1) fees of the Portfolio to the extent necessary so that the Portfolio's current yield quotation on any day will not be less than 0.20% of average daily net assets. Reimbursed expenses for the year ended August 31, 2004 were $78,531 for the Portfolio. The Fund, on behalf of each class of shares within the investment portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The Fund has entered into a Distribution Contract with PFPC Distributors, Inc. ("PFPC Distributors"). PFPC Distributors is a wholly-owned subsidiary of PFPC Worldwide Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. The Plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to .65% on an annualized basis for the Bedford Class and up to .20% on an annualized basis for the Sansom Street Class. The Sansom Street Class did not make any payments for the year. For the fiscal year ended August 31, 2004, distribution fees paid to PFPC Distributors for each class were as follows: DISTRIBUTION FEE ------------ Money Market Portfolio Bedford Class $519,349 Sansom Street Class -- -------- Total Money Market Portfolio $519,349 ======== PFPC serves as the transfer and dividend disbursing agent for each class. Both PFPC Trust Co. and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. PFPC may, at its discretion, voluntarily waive all or any portion of its transfer agency fee for any class of shares. For the year ended August 31, 2004, transfer agency fees for each class of shares within the investment portfolio were as follows: TRANSFER AGENCY FEE --------------- Money Market Portfolio Bedford Class $ 87,300 Sansom Street Class 32,875 -------- Total Money Market Portfolio $120,175 ======== 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) PFPC Trust Co. provides certain custodial services to the Portfolio. As compensation for such custodial services, PFPC Trust Co. is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average gross assets: PORTFOLIO ANNUAL RATE ------------------------ ------------------------------------------------ Money Market Portfolio .025% of first $50 million of gross assets; .020% of next $50 million of gross assets; .015% of gross assets in excess of $100 million. The Fund has entered into service agreements with banks affiliated with PNC who render support services to customers who are the beneficial owners of the Sansom Street Class in consideration of the payment of .10% of the daily net asset value of such shares. For the year ended August 31, 2004, service organization fees were $6,300 for the Money Market Portfolio. As of August 31, 2004, the Portfolio owed PFPC and its affiliates $62,006 for their services. NOTE 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- VALUE VALUE --------------- --------------- Shares sold: Bedford Class $ 386,514,072 $ 312,708,677 Sansom Street Class 1,920,438,260 1,864,927,379 --------------- --------------- Total Shares Sold 2,306,952,332 2,177,636,056 Shares issued on reinvestment of dividends: Bedford Class 198,103 430,446 Sansom Street Class 77,190 172,379 --------------- --------------- Total Shares Reinvested 275,293 602,825 Shares repurchased: Bedford Class (395,118,572) (285,586,385) Sansom Street Class (1,977,508,749) (1,910,829,243) --------------- --------------- Total Shares Repurchased (2,372,627,321) (2,196,415,628) Refund of deposit of capital for intent of share purchase:* (800) -- --------------- --------------- Net decrease $ (65,400,496) $ (18,176,747) =============== =============== Bedford Shares authorized 1,500,000,000 1,500,000,000 =============== =============== Sansom Street Shares authorized 1,500,000,000 1,500,000,000 =============== =============== * This class of shares was never operational and is now closed.
13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2004 NOTE 4. NET ASSETS At August 31, 2004, net assets consisted of the following: MONEY MARKET PORTFOLIO ------------ Paid-in capital $213,374,606 Accumulated net realized gain/(loss) on investments (2,019) ------------ Total net assets $213,372,587 ============ 14 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of net assets of Money Market Portfolio, a series of The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2004 and the related statement of operations, statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended August 31 2003 and the financial highlights of the Portfolio for the periods ended August 31, 2000, August 31, 2001, August 31, 2002 and August 31, 2003 were audited by other auditors whose report, dated October 27, 2003, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2004, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolio as of August 31, 2004, the results of its operations, the changes in its net assets, and its financial highlights for the respective stated period, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 18, 2004 15 ADDITIONAL INFORMATION (UNAUDITED) 1. CHANGE OF REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP ("PwC") withdrew as the registered public accounting firm of the Portfolio of RBB on December 11, 2003 due to PwC's business relationship with certain affiliates of BIMC. As a result of PwC's engagement to provide certain contemplated services to BIMC affiliates in the future, PwC will no longer be independent with respect to the Portfolio of RBB. On December 11, 2003, RBB by action of the Board of Directors and upon the recommendation of its Audit Committee engaged Deloitte & Touche LLP to serve as the independent registered public accounting firm to audit RBB's financial statements with respect to the Portfolio for the fiscal year ending August 31, 2004. PwC's reports on RBB's financial statements for the fiscal year ended August 31, 2003 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During RBB's fiscal year ended August 31, 2003, (i) there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the Registrant's financial statements for such years, and (ii) there were no "reportable events" of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. During RBB's fiscal year ended August 31, 2003, neither RBB, its funds nor anyone on their behalf has consulted Deloitte & Touche LLP on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on RBB's financial statements or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as described in paragraph (a)(1)(v) of said Item 304). The above information is required to be included in our shareholder reports for two years following a change of independent registered public accounting firm. 2. PROXY VOTING Policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling the numbers shown below and on the Securities and Exchange Commission's website at http://www.sec.gov. Bedford (800) 533-7719 Sansom Street (888) 261-4073 3. QUARTERLY PORTFOLIO SCHEDULES The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarter of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Fund's Form N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 16 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The Statement of Additional Information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (800) 533-7719 for Bedford and (888) 261-4073 for Sansom Street.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director - 1988 to present Since 1969, Director and Vice 14 Director, Comcast Corporation Chairman, Comcast Corporation (cable Comcast 1500 Market Street, 35th Fl. television and communications); Corporation. Philadelphia, PA 19102 Director, NDS Group PLC (provider of DOB: 7/16/33 systems and applications for digital pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director - 1988 to present Since 2000, Vice President, Fox Chase 14 None Fox Chase Cancer Center Cancer Center (biomedical research 333 Cottman Avenue and medical care); prior to 2000, Philadelphia, PA 19111 Executive Vice President, Fox Chase DOB: 12/06/35 Cancer Center. ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director - 1991 to present Since December 2000, Director, 14 None 106 Pierrepont Street Gabelli Partners, L.P. (an investment Brooklyn, NY 11201 partnership); Chief Operating Officer DOB: 5/21/48 and member of the Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director - 1991 to present Since 1974, Chairman, Director and 14 Director, Moyco Technologies, Inc. President, Moyco Technologies, Inc. Moyco 200 Commerce Drive (manufacturer of precision coated and Technologies, Montgomeryville, PA 18936 industrial abrasives); Since 1999, Inc. DOB: 3/24/34 Director, Pennsylvania Business Bank. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
17 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director - 1991 to present Since July 2002, Senior Vice 14 None Oppenheimer & Company, Inc. President and prior thereto, 200 Park Avenue Executive Vice President of New York, NY 10166 Oppenheimer & Company, Inc. (formerly DOB:4/16/38 Fahnestock & Co., Inc., a registered broker-dealer). ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director - 2002 to present Director of PFPC Inc. from January 14 None 400 Bellevue Parkway 1987 to April 2002; Chairman and Wilmington, DE 19809 Chief Executive Officer of PFPC Inc. DOB: 9/25/38 until April 2002; Executive Vice President of PNC Bank, National Association from October 1981 to April 2002; Director of PFPC International Ltd. (financial services) from August 1993 to April 2002; Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
18 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President and - 1991 to present Certified Public Accountant; Vice N/A N/A 400 Bellevue Parkway Treasurer and Chairman of the Board, Fox Chase 4th Floor - 1988 to present Cancer Center; Trustee Emeritus, Wilmington, DE 19809 Pennsylvania School for the Deaf; DOB: 6/29/24 Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Cjief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary - Since 2003 Since 2000, Vice President and N/A N/A 301 Bellevue Parkway Counsel, PFPC Inc. (financial 2nd Floor services company); Associate, Wilmington, DE 19809 Stradley, Ronon, Stevens & Young, DOB: 1/27/68 LLC (law firm) from 1996-2000. ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief - Since 2004 Senior Legal Counsel, PFPC Inc. from N/A N/A Vigilant Compliance Compliance 2002 to 2004; Chief Legal Counsel, 186 Dundee Drive, Suite 700 Officer Corviant Corporation (Investment Williamstown, NJ 08094 Adviser, Broker/Dealer and Service DOB: 12/25/62 Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of the PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
19 INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 1700 Market Street Philadelphia, PA 19103-3984 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 This report is submitted for the general information of the shareholders of the Portfolio. Total investment return is based on historical results and is not intended to indicate future performance. Current performance may be lower or higher than the performance data provided in the report. SHAREBUILDER BEDFORD SHARES OF THE RBB MONEY MARKET PORTFOLIO Managed by BlackRock Institutional Management Corporation SHAREBUILDER(R) ANNUAL REPORT August 31, 2004 www.sharebuilder.com ================================================================================ THE BEDFORD CLASS OF THE RBB FUND, INC. MONEY MARKET PORTFOLIO ANNUAL REPORT AUGUST 31, 2004 ================================================================================ THE RBB FUND, INC. MONEY MARKET PORTFOLIO PRIVACY NOTICE (UNAUDITED) The RBB Fund, Inc. MONEY MARKET PORTFOLIO (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (800) 533-7719. October 2004 NOT PART OF THE ANNUAL REPORT THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, redemption fees; and (2) ongoing costs, including management fees; distribution fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
MONEY MARKET PORTFOLIO - BEDFORD CLASS ---------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,001.50 $4.73 Hypothetical (5% return before expenses) 1,000.00 1,020.32 4.78 MONEY MARKET PORTFOLIO - SANSOM STREET CLASS --------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,005.30 $1.01 Hypothetical (5% return before expenses) 1,000.00 1,024.08 1.02
* Expenses are equal to the Fund's annualized expense ratio of 0.94% for the Bedford Class shares and 0.20% for the Sansom Street Class shares, which includes waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period. 2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE (UNAUDITED) SECURITY % OF NET TYPE ASSETS VALUE -------- -------- ------------ Short Term Investments: Certificates of Deposit ........................ 23.2% $ 49,399,439 Commercial Paper ............................... 18.9% 40,351,733 Variable Rate Obligations ...................... 14.2% 30,195,000 Agency Obligations ............................. 9.6% 20,493,893 Master Notes ................................... 0.0% 100,000 Repurchase Agreements .......................... 34.0% 72,600,000 Other Assets in Excess of Liabilities ............................. 0.1% 232,522 ------ ------------ Net Assets -- 100.0% .............................. 100.0% $213,372,587 ====== ============ 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2004 PAR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--23.2% BANKS--6.8% Wells Fargo Bank, N.A. 1.530%, 09/13/04 ............................... $14,400 $ 14,400,000 ------------ DOMESTIC CERTIFICATES OF DEPOSIT--12.2% Citibank, N.A. 1.525%, 10/04/04 ............................... 14,000 14,000,192 Washington Mutual Bank 1.640%, 11/03/04 ............................... 12,000 12,000,000 ------------ 26,000,192 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--4.2% Foreningssparbanken AB (Swedbank) 1.440%, 03/01/05 ............................... 6,000 5,999,555 Societe Generale 1.440%, 05/09/05 ............................... 3,000 2,999,692 ------------ 8,999,247 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $49,399,439) ......................... 49,399,439 ------------ COMMERCIAL PAPER--18.9% ASSET BACKED SECURITIES--15.9% Emerald Certificates 1.650%, 10/27/04 ............................... 12,000 11,969,200 Lockhart Funding LLC 1.630%, 11/08/04 ............................... 10,000 9,969,211 Solitaire Funding LLC 1.560%, 10/07/04 ............................... 12,000 11,981,280 ------------ 33,919,691 ------------ INSURANCE--3.0% Irish Life & Permanent P.L.C. 1.540%, 10/18/04 ............................... 6,445 6,432,042 ------------ TOTAL COMMERCIAL PAPER (Cost $40,351,733) ......................... 40,351,733 ------------ PAR (000) VALUE ------- ------------ VARIABLE RATE OBLIGATIONS--14.2% ASSET BACKED SECURITIES--1.0% Racers Trust 2004-6-MM++ 1.610%, 09/22/04 ............................... $ 1,000 $ 1,000,000 SMM Trust 2004-G++ 1.327%, 09/03/04 ............................... 1,195 1,195,000 ------------ 2,195,000 ------------ BANKS--5.6% HBOS Treasury Services P.L.C.++ 1.579%, 09/24/04 ............................... 10,000 10,000,000 Westpac Banking Corp.++ 1.408%, 09/13/04 ............................... 2,000 2,000,000 ------------ 12,000,000 ------------ LIFE INSURANCE--2.4% MetLife Global Funding++ 1.680%, 09/28/04 ............................... 5,000 5,000,000 ------------ SECURITY BROKERS & DEALERS--5.2% Merrill Lynch & Co., Inc.++ 1.550%, 10/05/04 ............................... 11,000 11,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $30,195,000) ......................... 30,195,000 ------------ AGENCY OBLIGATIONS--9.6% Federal Home Loan Bank 1.344%, 09/13/04 ............................... 8,000 7,995,044 1.425%, 04/04/05 ............................... 2,500 2,500,000 Federal National Mortgage Association 1.640%, 11/18/04 ............................... 10,000 9,998,849 ------------ TOTAL AGENCY OBLIGATIONS (Cost $20,493,893) ......................... 20,493,893 ------------ See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONCLUDED) AUGUST 31, 2004 PAR (000) VALUE ------- ------------ MASTER NOTES--0.0% Morgan Stanley Mortgage Capital 1.733%, 09/01/04 ............................... $ 100 $ 100,000 ------------ TOTAL MASTER NOTES (Cost $100,000) ............................ 100,000 ------------ REPURCHASE AGREEMENTS--34.0% Goldman, Sachs & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $30,001,325 collateralized by $30,060,360 Federal Home Loan Mortgage Corporation Bonds at a rate of 4.50% to 6.00%, due 11/15/28 to 04/15/32. Market Value of collateral is $30,900,000.) 1.590%, 09/01/04 ............................... 30,000 30,000,000 Morgan Stanley & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $2,600,113 collateralized by $2,614,000 U.S. Treasury Notes at a rate of 4.25%, due 11/15/13 Market Value of collateral is $2,666,000.) 1.560%, 09/01/04 ............................... 2,600 2,600,000 Morgan Stanley & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $40,001,767 collateralized by $41,887,394 Federal National Mortgage Association Bonds at a rate of 5.00%, due 08/01/34. Market Value of collateral is $41,603,802.) 1.590%, 09/01/04 ............................... 40,000 40,000,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $72,600,000) ......................... 72,600,000 ------------ VALUE ------------ TOTAL INVESTMENTS AT VALUE--99.9% (Cost $213,140,065) ............................ $213,140,065 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% ........................... 232,522 ------------ NET ASSETS (Applicable to 72,001,861 Bedford shares and 141,372,745 Sansom Street shares)--100.0% ......................... $213,372,587 ============ NET ASSET VALUE, Offering and Redemption Price Per Share ($213,372,587 / 213,374,606) ................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Bedford Share ($72,000,732 / 72,001,861) ..................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Sansom Street Share ($141,371,855 / 141,372,745) ................... $1.00 ===== ++ Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2004 and the maturity date shown is the next interest rate readjustment date or the maturity date. See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004 Investment Income Interest ............................................. $2,989,573 ---------- Expenses Investment advisory and administration fees .......... 1,170,757 Distribution and service fees ........................ 519,349 Transfer agent fees .................................. 120,175 Printing fees ........................................ 97,001 Custodian fees ....................................... 60,794 Legal fees ........................................... 43,764 Directors' and Officer's fees ........................ 36,533 Audit fees ........................................... 36,275 Insurance fees ....................................... 10,152 Registration fees .................................... 8,500 Service organization fees ............................ 6,300 Miscellaneous ........................................ 4,353 ---------- Total Expenses .................................. 2,113,953 Less fees waived ..................................... (911,521) Less expense reimbursement by advisor ................ (78,531) ---------- Net total expenses .............................. 1,123,901 ---------- Net investment income ................................... 1,865,672 ---------- Realized loss on investments ............................ (2,019) ---------- Net increase in net assets resulting from operations .... $1,863,653 ========== See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income .................................................... $ 1,865,672 $ 2,499,023 Net gain/(loss) on investments ........................................... (2,019) 3,622 ------------ ------------ Net increase in net assets resulting from operations ..................... 1,863,653 2,502,645 ------------ ------------ Distributions to shareholders: Dividends to shareholders from Net Investment Income: Bedford shares ......................................................... (202,921) (377,857) Sansom Street shares ................................................... (1,662,751) (2,121,166) Distributions to shareholders from Net realized short-term gains: Bedford shares ......................................................... (1,077) (42,292) Sansom Street shares ................................................... (2,545) (96,036) ------------ ------------ Total distributions to shareholders .................................. (1,869,294) (2,637,351) ------------ ------------ Net capital share transactions (See Note 3) ................................ (65,400,496) (18,176,747) ------------ ------------ Total decrease in net assets ............................................... (65,406,137) (18,311,453) Net Assets: Beginning of year ........................................................ 278,778,724 297,090,177 ------------ ------------ End of year .............................................................. $213,372,587 $278,778,724 ============ ============
See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
THE BEDFORD CLASS -------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- Income from investment operations: Net investment income .................. 0.0025 0.0046 0.0157 0.0460 0.0512 Net gains on securities ................ -- 0.0005 -- -- -- ------- -------- -------- -------- -------- Total from investment operations ......................... 0.0025 0.0051 0.0157 0.0460 0.0512 ------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .............................. (0.0025) (0.0046) (0.0157) (0.0460) (0.0512) Distributions (from capital gains) ..... -- (0.0005) -- -- -- ------- -------- -------- -------- -------- Total distributions .................. (0.0025) (0.0051) (0.0157) (0.0460) (0.0512) ------- -------- -------- -------- -------- Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======== ======== ======== ======== Total Return .............................. 0.25% 0.53% 1.59% 4.70% 5.24% Ratios /Supplemental Data Net assets, end of year (000) .......... $72,001 $ 80,406 $ 52,878 $676,964 $423,977 Ratios of expenses to average net assets(a) ........................ .94% .98% 1.00% 1.00% .97% Ratios of net investment income to average net assets ................ .24% .46% 1.75% 4.46% 5.15% (a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been 1.34%, 1.30%, 1.25%, 1.19% and 1.05% for the years ended August 31, 2004, 2003, 2002, 2001 and 2000, respectively.
See Accompanying Notes to Financial Statements. 8 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
THE SANSOM STREET CLASS -------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income .................. 0.0100 0.0114 0.0209 0.0511 0.0560 Net gains on securities ................ -- 0.0005 -- -- -- -------- -------- -------- -------- -------- Total net income from investment operations ......................... 0.0100 0.0119 0.0209 0.0511 0.0560 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .............................. (0.0100) (0.0114) (0.0209) (0.0511) (0.0560) Distributions (from capital gains) ..... -- (0.0005) -- -- -- -------- -------- -------- -------- -------- Total distributions .................. (0.0100) (0.0119) (0.0209) (0.0511) (0.0560) -------- -------- -------- -------- -------- Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ......................... 1.00% 1.21% 2.11% 5.23% 5.75% Ratios/Supplemental Data Net assets, end of year (000) .......... $141,372 $198,373 $244,212 $201,632 $326,745 Ratios of expenses to average net assets(a) ........................ .20% .30% .49% .49% .49% Ratios of net investment income to average net assets ................... .98% 1.14% 2.10% 5.23% 5.42% (a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been .59%, .57%, .64%, .61% and .61% for the years ended August 31, 2004, 2003, 2002, 2001 and 2000, respectively.
See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2004 NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988, and is registered under the Investment Company Act of 1940, as amended, (the "1940 Act") as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the 1940 Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has fourteen active investment portfolios, including the Money Market Portfolio ("Portfolio"), which comprises the RBB family of funds. RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion shares are currently classified into ninety-seven classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. A) SECURITY VALUATION -- Securities held in the Portfolio are valued under the amortized cost method, which approximates current market value. Under this method, securities are valued at cost when purchased and thereafter a constant proportionate amortization of any discount or premium is recorded until maturity of the security. Regular review and monitoring of the valuation is performed to ensure that cost continues to approximate market value and to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain net asset value per share at $1.00. B) SECURITY TRANSACTIONS, INVESTMENT INCOME, AND EXPENSES -- 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 accrued when earned. Certain expenses, such as distribution, transfer agency and printing, are class specific expenses and vary by class. Expenses not directly attributable to a specific portfolio or class are allocated based on relative net assets of each portfolio and class, respectively. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all portfolios within the RBB family of funds (such as director or professional fees) are charged to all portfolios in proportion to their average net assets. C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. All distributions from net investment income are taxed as ordinary income. Any net realized capital gains are distributed at least annually. Income subject to distributions and capital gain subject to distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. D) FEDERAL INCOME TAXES -- No provision is made for federal income taxes. It is the Fund's intention to have each portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholders which will be sufficient to relieve it from Federal income and excise taxes. E) REPURCHASE AGREEMENTS -- Money market instruments may be purchased subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the underlying securities falls below 102% of the value of the repurchase price plus accrued interest, the 10 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Portfolio will require the seller to deposit additional collateral by the next Portfolio business day. In the event that the seller under the agreement defaults on its repurchase obligation or fails to deposit sufficient collateral, the Portfolio has the contractual right, subject to the requirements of applicable bankruptcy and insolvency laws, to sell the underlying securities and may claim any resulting loss from the seller. The agreements are conditioned upon the collateral being deposited under the Federal Reserve Book Entry System or with the Portfolio's custodian or a third party sub-custodian. F) USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent 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. NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Pursuant to Investment Advisory Agreements, BlackRock Institutional Management Corp. ("BIMC"), an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser and as administrator for the Portfolio. BIMC and PFPC Inc. ("PFPC") have entered into a delegation agreement on behalf of the Portfolio, wherein PFPC has agreed to perform Administration and Accounting services for an annual fee of .10% of the average net assets of the Portfolio, paid out of the fee paid to BIMC. For its advisory services, BIMC is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average daily net assets: PORTFOLIO ANNUAL RATE -------------------------- --------------------------------------------- Money Market Portfolio .45% of first $250 million of net assets; .40% of next $250 million of net assets; .35% of net assets in excess of $500 million. BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for this Portfolio. For each class of shares within the Portfolio, the net advisory fee charged to each class is the same on a relative basis. For the year ended August 31, 2004, advisory fees and waivers for the investment portfolio were as follows: GROSS NET ADVISORY ADVISORY FEE WAIVER FEE ---------- ---------- -------- Money Market Portfolio $1,129,619 $(911,521) $218,098 As of August 31, 2004, the Portfolio owed BIMC $17,525 in advisory fees. For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by RBB and PFPC. This agreement commenced on June 1, 2003. This fee is allocated among all funds in proportion to their net assets of the RBB funds. The Portfolio's portion of this fee for the period September 1, 2003 to August 31, 2004 was $41,138. 11 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) The investment advisor/administrator may voluntarily waive and/or reimburse the Portfolio for the amount, if any, by which the total operating and management expenses exceed the expense cap. For the year ended August 31, 2004, the expense caps were as follows: PORTFOLIO CLASS OF SHARES EXPENSE CAP --------- --------------- ----------- Money Market Portfolio Bedford 0.97% Sansom Street 0.20% PFPC Distributors, Inc. (the "Distributors") has voluntarily agreed to temporarily waive distribution and service (12b-1) fees of the Portfolio to the extent necessary so that the Portfolio's current yield quotation on any day will not be less than 0.20% of average daily net assets. Reimbursed expenses for the year ended August 31, 2004 were $78,531 for the Portfolio. The Fund, on behalf of each class of shares within the investment portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The Fund has entered into a Distribution Contract with PFPC Distributors, Inc. ("PFPC Distributors"). PFPC Distributors is a wholly-owned subsidiary of PFPC Worldwide Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. The Plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to .65% on an annualized basis for the Bedford Class and up to .20% on an annualized basis for the Sansom Street Class. The Sansom Street Class did not make any payments for the year. For the fiscal year ended August 31, 2004, distribution fees paid to PFPC Distributors for each class were as follows: DISTRIBUTION FEE ------------ Money Market Portfolio Bedford Class $519,349 Sansom Street Class -- -------- Total Money Market Portfolio $519,349 ======== PFPC serves as the transfer and dividend disbursing agent for each class. Both PFPC Trust Co. and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. PFPC may, at its discretion, voluntarily waive all or any portion of its transfer agency fee for any class of shares. For the year ended August 31, 2004, transfer agency fees for each class of shares within the investment portfolio were as follows: TRANSFER AGENCY FEE --------------- Money Market Portfolio Bedford Class $ 87,300 Sansom Street Class 32,875 -------- Total Money Market Portfolio $120,175 ======== 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) PFPC Trust Co. provides certain custodial services to the Portfolio. As compensation for such custodial services, PFPC Trust Co. is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average gross assets: PORTFOLIO ANNUAL RATE ------------------------ ------------------------------------------------ Money Market Portfolio .025% of first $50 million of gross assets; .020% of next $50 million of gross assets; .015% of gross assets in excess of $100 million. The Fund has entered into service agreements with banks affiliated with PNC who render support services to customers who are the beneficial owners of the Sansom Street Class in consideration of the payment of .10% of the daily net asset value of such shares. For the year ended August 31, 2004, service organization fees were $6,300 for the Money Market Portfolio. As of August 31, 2004, the Portfolio owed PFPC and its affiliates $62,006 for their services. NOTE 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- VALUE VALUE --------------- --------------- Shares sold: Bedford Class $ 386,514,072 $ 312,708,677 Sansom Street Class 1,920,438,260 1,864,927,379 --------------- --------------- Total Shares Sold 2,306,952,332 2,177,636,056 Shares issued on reinvestment of dividends: Bedford Class 198,103 430,446 Sansom Street Class 77,190 172,379 --------------- --------------- Total Shares Reinvested 275,293 602,825 Shares repurchased: Bedford Class (395,118,572) (285,586,385) Sansom Street Class (1,977,508,749) (1,910,829,243) --------------- --------------- Total Shares Repurchased (2,372,627,321) (2,196,415,628) Refund of deposit of capital for intent of share purchase:* (800) -- --------------- --------------- Net decrease $ (65,400,496) $ (18,176,747) =============== =============== Bedford Shares authorized 1,500,000,000 1,500,000,000 =============== =============== Sansom Street Shares authorized 1,500,000,000 1,500,000,000 =============== =============== * This class of shares was never operational and is now closed.
13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2004 NOTE 4. NET ASSETS At August 31, 2004, net assets consisted of the following: MONEY MARKET PORTFOLIO ------------ Paid-in capital $213,374,606 Accumulated net realized gain/(loss) on investments (2,019) ------------ Total net assets $213,372,587 ============ 14 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of net assets of Money Market Portfolio, a series of The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2004 and the related statement of operations, statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended August 31 2003 and the financial highlights of the Portfolio for the periods ended August 31, 2000, August 31, 2001, August 31, 2002 and August 31, 2003 were audited by other auditors whose report, dated October 27, 2003, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2004, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolio as of August 31, 2004, the results of its operations, the changes in its net assets, and its financial highlights for the respective stated period, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 18, 2004 15 ADDITIONAL INFORMATION (UNAUDITED) 1. CHANGE OF REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP ("PwC") withdrew as the registered public accounting firm of the Portfolio of RBB on December 11, 2003 due to PwC's business relationship with certain affiliates of BIMC. As a result of PwC's engagement to provide certain contemplated services to BIMC affiliates in the future, PwC will no longer be independent with respect to the Portfolio of RBB. On December 11, 2003, RBB by action of the Board of Directors and upon the recommendation of its Audit Committee engaged Deloitte & Touche LLP to serve as the independent registered public accounting firm to audit RBB's financial statements with respect to the Portfolio for the fiscal year ending August 31, 2004. PwC's reports on RBB's financial statements for the fiscal year ended August 31, 2003 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During RBB's fiscal year ended August 31, 2003, (i) there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the Registrant's financial statements for such years, and (ii) there were no "reportable events" of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. During RBB's fiscal year ended August 31, 2003, neither RBB, its funds nor anyone on their behalf has consulted Deloitte & Touche LLP on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on RBB's financial statements or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as described in paragraph (a)(1)(v) of said Item 304). The above information is required to be included in our shareholder reports for two years following a change of independent registered public accounting firm. 2. PROXY VOTING Policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling the numbers shown below and on the Securities and Exchange Commission's website at http://www.sec.gov. Bedford (800) 533-7719 Sansom Street (888) 261-4073 3. QUARTERLY PORTFOLIO SCHEDULES The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarter of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Fund's Form N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 16 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The Statement of Additional Information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (800) 533-7719 for Bedford and (888) 261-4073 for Sansom Street.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director - 1988 to present Since 1969, Director and Vice 14 Director, Comcast Corporation Chairman, Comcast Corporation (cable Comcast 1500 Market Street, 35th Fl. television and communications); Corporation. Philadelphia, PA 19102 Director, NDS Group PLC (provider of DOB: 7/16/33 systems and applications for digital pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director - 1988 to present Since 2000, Vice President, Fox Chase 14 None Fox Chase Cancer Center Cancer Center (biomedical research 333 Cottman Avenue and medical care); prior to 2000, Philadelphia, PA 19111 Executive Vice President, Fox Chase DOB: 12/06/35 Cancer Center. ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director - 1991 to present Since December 2000, Director, 14 None 106 Pierrepont Street Gabelli Partners, L.P. (an investment Brooklyn, NY 11201 partnership); Chief Operating Officer DOB: 5/21/48 and member of the Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director - 1991 to present Since 1974, Chairman, Director and 14 Director, Moyco Technologies, Inc. President, Moyco Technologies, Inc. Moyco 200 Commerce Drive (manufacturer of precision coated and Technologies, Montgomeryville, PA 18936 industrial abrasives); Since 1999, Inc. DOB: 3/24/34 Director, Pennsylvania Business Bank. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
17 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director - 1991 to present Since July 2002, Senior Vice 14 None Oppenheimer & Company, Inc. President and prior thereto, 200 Park Avenue Executive Vice President of New York, NY 10166 Oppenheimer & Company, Inc. (formerly DOB:4/16/38 Fahnestock & Co., Inc., a registered broker-dealer). ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director - 2002 to present Director of PFPC Inc. from January 14 None 400 Bellevue Parkway 1987 to April 2002; Chairman and Wilmington, DE 19809 Chief Executive Officer of PFPC Inc. DOB: 9/25/38 until April 2002; Executive Vice President of PNC Bank, National Association from October 1981 to April 2002; Director of PFPC International Ltd. (financial services) from August 1993 to April 2002; Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
18 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President and - 1991 to present Certified Public Accountant; Vice N/A N/A 400 Bellevue Parkway Treasurer and Chairman of the Board, Fox Chase 4th Floor - 1988 to present Cancer Center; Trustee Emeritus, Wilmington, DE 19809 Pennsylvania School for the Deaf; DOB: 6/29/24 Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Cjief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary - Since 2003 Since 2000, Vice President and N/A N/A 301 Bellevue Parkway Counsel, PFPC Inc. (financial 2nd Floor services company); Associate, Wilmington, DE 19809 Stradley, Ronon, Stevens & Young, DOB: 1/27/68 LLC (law firm) from 1996-2000. ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief - Since 2004 Senior Legal Counsel, PFPC Inc. from N/A N/A Vigilant Compliance Compliance 2002 to 2004; Chief Legal Counsel, 186 Dundee Drive, Suite 700 Officer Corviant Corporation (Investment Williamstown, NJ 08094 Adviser, Broker/Dealer and Service DOB: 12/25/62 Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of the PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
19 INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 1700 Market Street Philadelphia, PA 19103-3984 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 This report is submitted for the general information of the shareholders of the Portfolio. Total investment return is based on historical results and is not intended to indicate future performance. Current performance may be lower or higher than the performance data provided in the report. CUSTOMER CARE For questions regarding your ShareBuilder account please call 1-866-SHRBLDR (1-866-747-2537) or visit ShareBuilder online at ShareBuilder.com. Please be aware that ShareBuilder Customer Care Agents are not able to place a trade for you over the phone, open your account over the phone, or provide any type of financial advice or recommendations. WRITTEN CORRESPONDENCE Post Office Address: ShareBuilder - Bedford Shares of The RBB Money Market Portfolio c/o ShareBuilder Securities Corporation PO Box 1728 Bellevue, WA 98009 Street Address: ShareBuilder - Bedford Shares of The RBB Money Market Portfolio c/o ShareBuilder Securities Corporation 1445 - 120th Avenue Northeast Bellevue, WA 98005
INVESTMENT COMPANY ACT FILE NO. 811-05518 ================================================================================ THE SANSOM STREET CLASS OF THE RBB FUND, INC. MONEY MARKET PORTFOLIO Annual Report August 31, 2004 ================================================================================ THE RBB FUND, INC. MONEY MARKET PORTFOLIO PRIVACY NOTICE (UNAUDITED) The RBB Fund, Inc. MONEY MARKET PORTFOLIO (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (800) 533-7719. October 2004 NOT PART OF THE ANNUAL REPORT THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, redemption fees; and (2) ongoing costs, including management fees; distribution fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
MONEY MARKET PORTFOLIO - BEDFORD CLASS ---------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,001.50 $4.73 Hypothetical (5% return before expenses) 1,000.00 1,020.32 4.78 MONEY MARKET PORTFOLIO - SANSOM STREET CLASS --------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,005.30 $1.01 Hypothetical (5% return before expenses) 1,000.00 1,024.08 1.02
* Expenses are equal to the Fund's annualized expense ratio of 0.94% for the Bedford Class shares and 0.20% for the Sansom Street Class shares, which includes waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period. 2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE (UNAUDITED) SECURITY % OF NET TYPE ASSETS VALUE -------- -------- ------------ Short Term Investments: Certificates of Deposit ........................ 23.2% $ 49,399,439 Commercial Paper ............................... 18.9% 40,351,733 Variable Rate Obligations ...................... 14.2% 30,195,000 Agency Obligations ............................. 9.6% 20,493,893 Master Notes ................................... 0.0% 100,000 Repurchase Agreements .......................... 34.0% 72,600,000 Other Assets in Excess of Liabilities ............................. 0.1% 232,522 ------ ------------ Net Assets -- 100.0% .............................. 100.0% $213,372,587 ====== ============ 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2004 PAR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--23.2% BANKS--6.8% Wells Fargo Bank, N.A. 1.530%, 09/13/04 ............................... $14,400 $ 14,400,000 ------------ DOMESTIC CERTIFICATES OF DEPOSIT--12.2% Citibank, N.A. 1.525%, 10/04/04 ............................... 14,000 14,000,192 Washington Mutual Bank 1.640%, 11/03/04 ............................... 12,000 12,000,000 ------------ 26,000,192 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--4.2% Foreningssparbanken AB (Swedbank) 1.440%, 03/01/05 ............................... 6,000 5,999,555 Societe Generale 1.440%, 05/09/05 ............................... 3,000 2,999,692 ------------ 8,999,247 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $49,399,439) ......................... 49,399,439 ------------ COMMERCIAL PAPER--18.9% ASSET BACKED SECURITIES--15.9% Emerald Certificates 1.650%, 10/27/04 ............................... 12,000 11,969,200 Lockhart Funding LLC 1.630%, 11/08/04 ............................... 10,000 9,969,211 Solitaire Funding LLC 1.560%, 10/07/04 ............................... 12,000 11,981,280 ------------ 33,919,691 ------------ INSURANCE--3.0% Irish Life & Permanent P.L.C. 1.540%, 10/18/04 ............................... 6,445 6,432,042 ------------ TOTAL COMMERCIAL PAPER (Cost $40,351,733) ......................... 40,351,733 ------------ PAR (000) VALUE ------- ------------ VARIABLE RATE OBLIGATIONS--14.2% ASSET BACKED SECURITIES--1.0% Racers Trust 2004-6-MM++ 1.610%, 09/22/04 ............................... $ 1,000 $ 1,000,000 SMM Trust 2004-G++ 1.327%, 09/03/04 ............................... 1,195 1,195,000 ------------ 2,195,000 ------------ BANKS--5.6% HBOS Treasury Services P.L.C.++ 1.579%, 09/24/04 ............................... 10,000 10,000,000 Westpac Banking Corp.++ 1.408%, 09/13/04 ............................... 2,000 2,000,000 ------------ 12,000,000 ------------ LIFE INSURANCE--2.4% MetLife Global Funding++ 1.680%, 09/28/04 ............................... 5,000 5,000,000 ------------ SECURITY BROKERS & DEALERS--5.2% Merrill Lynch & Co., Inc.++ 1.550%, 10/05/04 ............................... 11,000 11,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $30,195,000) ......................... 30,195,000 ------------ AGENCY OBLIGATIONS--9.6% Federal Home Loan Bank 1.344%, 09/13/04 ............................... 8,000 7,995,044 1.425%, 04/04/05 ............................... 2,500 2,500,000 Federal National Mortgage Association 1.640%, 11/18/04 ............................... 10,000 9,998,849 ------------ TOTAL AGENCY OBLIGATIONS (Cost $20,493,893) ......................... 20,493,893 ------------ See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONCLUDED) AUGUST 31, 2004 PAR (000) VALUE ------- ------------ MASTER NOTES--0.0% Morgan Stanley Mortgage Capital 1.733%, 09/01/04 ............................... $ 100 $ 100,000 ------------ TOTAL MASTER NOTES (Cost $100,000) ............................ 100,000 ------------ REPURCHASE AGREEMENTS--34.0% Goldman, Sachs & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $30,001,325 collateralized by $30,060,360 Federal Home Loan Mortgage Corporation Bonds at a rate of 4.50% to 6.00%, due 11/15/28 to 04/15/32. Market Value of collateral is $30,900,000.) 1.590%, 09/01/04 ............................... 30,000 30,000,000 Morgan Stanley & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $2,600,113 collateralized by $2,614,000 U.S. Treasury Notes at a rate of 4.25%, due 11/15/13 Market Value of collateral is $2,666,000.) 1.560%, 09/01/04 ............................... 2,600 2,600,000 Morgan Stanley & Co. (Tri-Party Agreement dated 08/31/04 to be repurchased at $40,001,767 collateralized by $41,887,394 Federal National Mortgage Association Bonds at a rate of 5.00%, due 08/01/34. Market Value of collateral is $41,603,802.) 1.590%, 09/01/04 ............................... 40,000 40,000,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $72,600,000) ......................... 72,600,000 ------------ VALUE ------------ TOTAL INVESTMENTS AT VALUE--99.9% (Cost $213,140,065) ............................ $213,140,065 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% ........................... 232,522 ------------ NET ASSETS (Applicable to 72,001,861 Bedford shares and 141,372,745 Sansom Street shares)--100.0% ......................... $213,372,587 ============ NET ASSET VALUE, Offering and Redemption Price Per Share ($213,372,587 / 213,374,606) ................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Bedford Share ($72,000,732 / 72,001,861) ..................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Sansom Street Share ($141,371,855 / 141,372,745) ................... $1.00 ===== ++ Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2004 and the maturity date shown is the next interest rate readjustment date or the maturity date. See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004 Investment Income Interest ............................................. $2,989,573 ---------- Expenses Investment advisory and administration fees .......... 1,170,757 Distribution and service fees ........................ 519,349 Transfer agent fees .................................. 120,175 Printing fees ........................................ 97,001 Custodian fees ....................................... 60,794 Legal fees ........................................... 43,764 Directors' and Officer's fees ........................ 36,533 Audit fees ........................................... 36,275 Insurance fees ....................................... 10,152 Registration fees .................................... 8,500 Service organization fees ............................ 6,300 Miscellaneous ........................................ 4,353 ---------- Total Expenses .................................. 2,113,953 Less fees waived ..................................... (911,521) Less expense reimbursement by advisor ................ (78,531) ---------- Net total expenses .............................. 1,123,901 ---------- Net investment income ................................... 1,865,672 ---------- Realized loss on investments ............................ (2,019) ---------- Net increase in net assets resulting from operations .... $1,863,653 ========== See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income .................................................... $ 1,865,672 $ 2,499,023 Net gain/(loss) on investments ........................................... (2,019) 3,622 ------------ ------------ Net increase in net assets resulting from operations ..................... 1,863,653 2,502,645 ------------ ------------ Distributions to shareholders: Dividends to shareholders from Net Investment Income: Bedford shares ......................................................... (202,921) (377,857) Sansom Street shares ................................................... (1,662,751) (2,121,166) Distributions to shareholders from Net realized short-term gains: Bedford shares ......................................................... (1,077) (42,292) Sansom Street shares ................................................... (2,545) (96,036) ------------ ------------ Total distributions to shareholders .................................. (1,869,294) (2,637,351) ------------ ------------ Net capital share transactions (See Note 3) ................................ (65,400,496) (18,176,747) ------------ ------------ Total decrease in net assets ............................................... (65,406,137) (18,311,453) Net Assets: Beginning of year ........................................................ 278,778,724 297,090,177 ------------ ------------ End of year .............................................................. $213,372,587 $278,778,724 ============ ============
See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
THE BEDFORD CLASS -------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- -------- -------- -------- -------- Income from investment operations: Net investment income .................. 0.0025 0.0046 0.0157 0.0460 0.0512 Net gains on securities ................ -- 0.0005 -- -- -- ------- -------- -------- -------- -------- Total from investment operations ......................... 0.0025 0.0051 0.0157 0.0460 0.0512 ------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .............................. (0.0025) (0.0046) (0.0157) (0.0460) (0.0512) Distributions (from capital gains) ..... -- (0.0005) -- -- -- ------- -------- -------- -------- -------- Total distributions .................. (0.0025) (0.0051) (0.0157) (0.0460) (0.0512) ------- -------- -------- -------- -------- Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======== ======== ======== ======== Total Return .............................. 0.25% 0.53% 1.59% 4.70% 5.24% Ratios /Supplemental Data Net assets, end of year (000) .......... $72,001 $ 80,406 $ 52,878 $676,964 $423,977 Ratios of expenses to average net assets(a) ........................ .94% .98% 1.00% 1.00% .97% Ratios of net investment income to average net assets ................ .24% .46% 1.75% 4.46% 5.15% (a) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been 1.34%, 1.30%, 1.25%, 1.19% and 1.05% for the years ended August 31, 2004, 2003, 2002, 2001 and 2000, respectively.
See Accompanying Notes to Financial Statements. 8 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (CONTINUED) (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
THE SANSOM STREET CLASS -------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2002 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income .................. 0.0100 0.0114 0.0209 0.0511 0.0560 Net gains on securities ................ -- 0.0005 -- -- -- -------- -------- -------- -------- -------- Total net income from investment operations ......................... 0.0100 0.0119 0.0209 0.0511 0.0560 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .............................. (0.0100) (0.0114) (0.0209) (0.0511) (0.0560) Distributions (from capital gains) ..... -- (0.0005) -- -- -- -------- -------- -------- -------- -------- Total distributions .................. (0.0100) (0.0119) (0.0209) (0.0511) (0.0560) -------- -------- -------- -------- -------- Net asset value, end of year .............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ......................... 1.00% 1.21% 2.11% 5.23% 5.75% Ratios/Supplemental Data Net assets, end of year (000) .......... $141,372 $198,373 $244,212 $201,632 $326,745 Ratios of expenses to average net assets(a) ........................ .20% .30% .49% .49% .49% Ratios of net investment income to average net assets ................... .98% 1.14% 2.10% 5.23% 5.42% (a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been .59%, .57%, .64%, .61% and .61% for the years ended August 31, 2004, 2003, 2002, 2001 and 2000, respectively.
See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2004 NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988, and is registered under the Investment Company Act of 1940, as amended, (the "1940 Act") as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the 1940 Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has fourteen active investment portfolios, including the Money Market Portfolio ("Portfolio"), which comprises the RBB family of funds. RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion shares are currently classified into ninety-seven classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. A) SECURITY VALUATION -- Securities held in the Portfolio are valued under the amortized cost method, which approximates current market value. Under this method, securities are valued at cost when purchased and thereafter a constant proportionate amortization of any discount or premium is recorded until maturity of the security. Regular review and monitoring of the valuation is performed to ensure that cost continues to approximate market value and to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain net asset value per share at $1.00. B) SECURITY TRANSACTIONS, INVESTMENT INCOME, AND EXPENSES -- 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 accrued when earned. Certain expenses, such as distribution, transfer agency and printing, are class specific expenses and vary by class. Expenses not directly attributable to a specific portfolio or class are allocated based on relative net assets of each portfolio and class, respectively. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all portfolios within the RBB family of funds (such as director or professional fees) are charged to all portfolios in proportion to their average net assets. C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. All distributions from net investment income are taxed as ordinary income. Any net realized capital gains are distributed at least annually. Income subject to distributions and capital gain subject to distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. D) FEDERAL INCOME TAXES -- No provision is made for federal income taxes. It is the Fund's intention to have each portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholders which will be sufficient to relieve it from Federal income and excise taxes. E) REPURCHASE AGREEMENTS -- Money market instruments may be purchased subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the underlying securities falls below 102% of the value of the repurchase price plus accrued interest, the 10 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Portfolio will require the seller to deposit additional collateral by the next Portfolio business day. In the event that the seller under the agreement defaults on its repurchase obligation or fails to deposit sufficient collateral, the Portfolio has the contractual right, subject to the requirements of applicable bankruptcy and insolvency laws, to sell the underlying securities and may claim any resulting loss from the seller. The agreements are conditioned upon the collateral being deposited under the Federal Reserve Book Entry System or with the Portfolio's custodian or a third party sub-custodian. F) USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent 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. NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Pursuant to Investment Advisory Agreements, BlackRock Institutional Management Corp. ("BIMC"), an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser and as administrator for the Portfolio. BIMC and PFPC Inc. ("PFPC") have entered into a delegation agreement on behalf of the Portfolio, wherein PFPC has agreed to perform Administration and Accounting services for an annual fee of .10% of the average net assets of the Portfolio, paid out of the fee paid to BIMC. For its advisory services, BIMC is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average daily net assets: PORTFOLIO ANNUAL RATE -------------------------- --------------------------------------------- Money Market Portfolio .45% of first $250 million of net assets; .40% of next $250 million of net assets; .35% of net assets in excess of $500 million. BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for this Portfolio. For each class of shares within the Portfolio, the net advisory fee charged to each class is the same on a relative basis. For the year ended August 31, 2004, advisory fees and waivers for the investment portfolio were as follows: GROSS NET ADVISORY ADVISORY FEE WAIVER FEE ---------- ---------- -------- Money Market Portfolio $1,129,619 $(911,521) $218,098 As of August 31, 2004, the Portfolio owed BIMC $17,525 in advisory fees. For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by RBB and PFPC. This agreement commenced on June 1, 2003. This fee is allocated among all funds in proportion to their net assets of the RBB funds. The Portfolio's portion of this fee for the period September 1, 2003 to August 31, 2004 was $41,138. 11 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) The investment advisor/administrator may voluntarily waive and/or reimburse the Portfolio for the amount, if any, by which the total operating and management expenses exceed the expense cap. For the year ended August 31, 2004, the expense caps were as follows: PORTFOLIO CLASS OF SHARES EXPENSE CAP --------- --------------- ----------- Money Market Portfolio Bedford 0.97% Sansom Street 0.20% PFPC Distributors, Inc. (the "Distributors") has voluntarily agreed to temporarily waive distribution and service (12b-1) fees of the Portfolio to the extent necessary so that the Portfolio's current yield quotation on any day will not be less than 0.20% of average daily net assets. Reimbursed expenses for the year ended August 31, 2004 were $78,531 for the Portfolio. The Fund, on behalf of each class of shares within the investment portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The Fund has entered into a Distribution Contract with PFPC Distributors, Inc. ("PFPC Distributors"). PFPC Distributors is a wholly-owned subsidiary of PFPC Worldwide Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. The Plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to .65% on an annualized basis for the Bedford Class and up to .20% on an annualized basis for the Sansom Street Class. The Sansom Street Class did not make any payments for the year. For the fiscal year ended August 31, 2004, distribution fees paid to PFPC Distributors for each class were as follows: DISTRIBUTION FEE ------------ Money Market Portfolio Bedford Class $519,349 Sansom Street Class -- -------- Total Money Market Portfolio $519,349 ======== PFPC serves as the transfer and dividend disbursing agent for each class. Both PFPC Trust Co. and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. PFPC may, at its discretion, voluntarily waive all or any portion of its transfer agency fee for any class of shares. For the year ended August 31, 2004, transfer agency fees for each class of shares within the investment portfolio were as follows: TRANSFER AGENCY FEE --------------- Money Market Portfolio Bedford Class $ 87,300 Sansom Street Class 32,875 -------- Total Money Market Portfolio $120,175 ======== 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) PFPC Trust Co. provides certain custodial services to the Portfolio. As compensation for such custodial services, PFPC Trust Co. is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average gross assets: PORTFOLIO ANNUAL RATE ------------------------ ------------------------------------------------ Money Market Portfolio .025% of first $50 million of gross assets; .020% of next $50 million of gross assets; .015% of gross assets in excess of $100 million. The Fund has entered into service agreements with banks affiliated with PNC who render support services to customers who are the beneficial owners of the Sansom Street Class in consideration of the payment of .10% of the daily net asset value of such shares. For the year ended August 31, 2004, service organization fees were $6,300 for the Money Market Portfolio. As of August 31, 2004, the Portfolio owed PFPC and its affiliates $62,006 for their services. NOTE 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- VALUE VALUE --------------- --------------- Shares sold: Bedford Class $ 386,514,072 $ 312,708,677 Sansom Street Class 1,920,438,260 1,864,927,379 --------------- --------------- Total Shares Sold 2,306,952,332 2,177,636,056 Shares issued on reinvestment of dividends: Bedford Class 198,103 430,446 Sansom Street Class 77,190 172,379 --------------- --------------- Total Shares Reinvested 275,293 602,825 Shares repurchased: Bedford Class (395,118,572) (285,586,385) Sansom Street Class (1,977,508,749) (1,910,829,243) --------------- --------------- Total Shares Repurchased (2,372,627,321) (2,196,415,628) Refund of deposit of capital for intent of share purchase:* (800) -- --------------- --------------- Net decrease $ (65,400,496) $ (18,176,747) =============== =============== Bedford Shares authorized 1,500,000,000 1,500,000,000 =============== =============== Sansom Street Shares authorized 1,500,000,000 1,500,000,000 =============== =============== * This class of shares was never operational and is now closed.
13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2004 NOTE 4. NET ASSETS At August 31, 2004, net assets consisted of the following: MONEY MARKET PORTFOLIO ------------ Paid-in capital $213,374,606 Accumulated net realized gain/(loss) on investments (2,019) ------------ Total net assets $213,372,587 ============ 14 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of net assets of Money Market Portfolio, a series of The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2004 and the related statement of operations, statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended August 31 2003 and the financial highlights of the Portfolio for the periods ended August 31, 2000, August 31, 2001, August 31, 2002 and August 31, 2003 were audited by other auditors whose report, dated October 27, 2003, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2004, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Portfolio as of August 31, 2004, the results of its operations, the changes in its net assets, and its financial highlights for the respective stated period, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 18, 2004 15 ADDITIONAL INFORMATION (UNAUDITED) 1. CHANGE OF REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP ("PwC") withdrew as the registered public accounting firm of the Portfolio of RBB on December 11, 2003 due to PwC's business relationship with certain affiliates of BIMC. As a result of PwC's engagement to provide certain contemplated services to BIMC affiliates in the future, PwC will no longer be independent with respect to the Portfolio of RBB. On December 11, 2003, RBB by action of the Board of Directors and upon the recommendation of its Audit Committee engaged Deloitte & Touche LLP to serve as the independent registered public accounting firm to audit RBB's financial statements with respect to the Portfolio for the fiscal year ending August 31, 2004. PwC's reports on RBB's financial statements for the fiscal year ended August 31, 2003 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During RBB's fiscal year ended August 31, 2003, (i) there were no disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the Registrant's financial statements for such years, and (ii) there were no "reportable events" of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. During RBB's fiscal year ended August 31, 2003, neither RBB, its funds nor anyone on their behalf has consulted Deloitte & Touche LLP on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on RBB's financial statements or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as described in paragraph (a)(1)(v) of said Item 304). The above information is required to be included in our shareholder reports for two years following a change of independent registered public accounting firm. 2. PROXY VOTING Policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling the numbers shown below and on the Securities and Exchange Commission's website at http://www.sec.gov. Bedford (800) 533-7719 Sansom Street (888) 261-4073 3. QUARTERLY PORTFOLIO SCHEDULES The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarter of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Fund's Form N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 16 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The Statement of Additional Information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (800) 533-7719 for Bedford and (888) 261-4073 for Sansom Street.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director - 1988 to present Since 1969, Director and Vice 14 Director, Comcast Corporation Chairman, Comcast Corporation (cable Comcast 1500 Market Street, 35th Fl. television and communications); Corporation. Philadelphia, PA 19102 Director, NDS Group PLC (provider of DOB: 7/16/33 systems and applications for digital pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director - 1988 to present Since 2000, Vice President, Fox Chase 14 None Fox Chase Cancer Center Cancer Center (biomedical research 333 Cottman Avenue and medical care); prior to 2000, Philadelphia, PA 19111 Executive Vice President, Fox Chase DOB: 12/06/35 Cancer Center. ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director - 1991 to present Since December 2000, Director, 14 None 106 Pierrepont Street Gabelli Partners, L.P. (an investment Brooklyn, NY 11201 partnership); Chief Operating Officer DOB: 5/21/48 and member of the Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director - 1991 to present Since 1974, Chairman, Director and 14 Director, Moyco Technologies, Inc. President, Moyco Technologies, Inc. Moyco 200 Commerce Drive (manufacturer of precision coated and Technologies, Montgomeryville, PA 18936 industrial abrasives); Since 1999, Inc. DOB: 3/24/34 Director, Pennsylvania Business Bank. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
17 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director - 1991 to present Since July 2002, Senior Vice 14 None Oppenheimer & Company, Inc. President and prior thereto, 200 Park Avenue Executive Vice President of New York, NY 10166 Oppenheimer & Company, Inc. (formerly DOB:4/16/38 Fahnestock & Co., Inc., a registered broker-dealer). ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director - 2002 to present Director of PFPC Inc. from January 14 None 400 Bellevue Parkway 1987 to April 2002; Chairman and Wilmington, DE 19809 Chief Executive Officer of PFPC Inc. DOB: 9/25/38 until April 2002; Executive Vice President of PNC Bank, National Association from October 1981 to April 2002; Director of PFPC International Ltd. (financial services) from August 1993 to April 2002; Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
18 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President and - 1991 to present Certified Public Accountant; Vice N/A N/A 400 Bellevue Parkway Treasurer and Chairman of the Board, Fox Chase 4th Floor - 1988 to present Cancer Center; Trustee Emeritus, Wilmington, DE 19809 Pennsylvania School for the Deaf; DOB: 6/29/24 Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Cjief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary - Since 2003 Since 2000, Vice President and N/A N/A 301 Bellevue Parkway Counsel, PFPC Inc. (financial 2nd Floor services company); Associate, Wilmington, DE 19809 Stradley, Ronon, Stevens & Young, DOB: 1/27/68 LLC (law firm) from 1996-2000. ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief - Since 2004 Senior Legal Counsel, PFPC Inc. from N/A N/A Vigilant Compliance Compliance 2002 to 2004; Chief Legal Counsel, 186 Dundee Drive, Suite 700 Officer Corviant Corporation (Investment Williamstown, NJ 08094 Adviser, Broker/Dealer and Service DOB: 12/25/62 Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of the PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
19 INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 1700 Market Street Philadelphia, PA 19103-3984 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 This report is submitted for the general information of the shareholders of the Portfolio. Total investment return is based on historical results and is not intended to indicate future performance. Current performance may be higher or lower than the performance data provided in the report. (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] n/i NUMERIC INVESTORS Emerging Growth Fund n/i NUMERIC INVESTORS Growth Fund n/i NUMERIC INVESTORS Mid Cap Fund Annual Report August 31, 2004 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND ADVISER'S REPORT December 30, 2004 Dear Shareholder: We are pleased to provide you with the 2004 Annual Report on the performance of the N/I NUMERIC INVESTORS EMERGING GROWTH FUND, N/I NUMERIC INVESTORS GROWTH FUND, AND N/I NUMERIC INVESTORS MID CAP FUND (each, a "Fund" and collectively, the "Funds") for the fiscal year ended August 31, 2004. The 2004 Annual Report on the performance of the n/i Small Cap Value Fund will follow separately in the near future. INVESTMENT DISCUSSION The table below compares the returns of our three Funds with the returns of their benchmarks over several periods of interest.
TOTAL RETURNS ------------- AVERAGE ANNUAL AVERAGE SIX MONTHS SIX MONTHS ONE YEAR FIVE YEARS ANNUAL ENDED ENDED ENDED ENDED RETURN SINCE FEBRUARY 29, 2004 AUGUST 31, 2004 AUGUST 31, 2004 AUGUST 31, 2004 INCEPTION* ----------------- --------------- --------------- --------------- ------------ EMERGING GROWTH FUND +25.93% (10.50)% +12.71% +11.53% +15.54% Russell 2000 Growth Index +15.42% (10.44)% +3.38% (1.37)% +0.52% DIFFERENCE +10.51% (0.06)% +9.33% +12.90% +15.02% GROWTH FUND +24.02% (9.16)% +12.66% +5.14% +8.05% Russell 2500 Growth Index +15.23% (9.24)% +4.58% +0.78% +3.46% DIFFERENCE +8.79% +0.08% +8.08% +4.36% +4.59% MID CAP FUND +17.11% (2.11)% +14.64% +5.56% +11.35% S&P MidCap 400 Index +16.60% (3.59)% +12.43% +9.18% +12.57% Russell Mid Cap Index** +18.31% (2.55)% +15.29% +6.80% +10.14% DIFFERENCE (S&P MIDCAP 400 INDEX) +0.51% +1.48% +2.21% (3.62)% (1.22)% ---------- * Inception Dates: June 3, 1996 for all three Funds. ** This is not a benchmark of the Fund. Results of index performance are shown for general comparative purposes. The indices are unmanaged indices that are not available for direct investment. Mid-sized company stocks are generally more volatile than large company stocks. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at WWW.NUMERIC.COM. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.
1 All three Funds experienced negative absolute returns during the most recent six month period, ended August 31, 2004, primarily due to the recent market retreat. The Emerging Growth Fund and the Growth Fund suffered the largest decline. Our benchmark-relative returns (from our stock-selection process) were neutral to slightly negative over this period, with the exception of the Mid Cap Fund, which handily out-performed its benchmark by 1.5%. Nonetheless, the absolute returns for the entire fiscal year remained firmly in positive territory, with all of the Funds up in excess of 12.6%. These sizable returns for the year were driven by a combination of the upward move in the equity market, as measured by the respective benchmarks, and the substantial alpha generated by our process. Reviewing the benchmark-relative returns for the entire fiscal year, we are very pleased to observe that our investment process added value across all of our Funds. The excess returns range from just over 2% in the Mid Cap Fund, to over 9.3% in the Emerging Growth Fund. During the most recent six-month period there were a variety of factors which weighed on the market, with the closely followed S&P 500 Index down 2.7%. The period began with the ugly specter of terrorist attacks highlighted by the Madrid train bombings in March. Inflation fears were sparked by a higher than expected GDP price deflator and by comments from the Federal Reserve which potentially indicated that an aggressive tightening in monetary policy was imminent. In fact an aggressive Fed action did not materialize and the market has welcomed the measured Fed response. Although consumer spending has generally remained robust, concern over higher oil prices and lack-luster employment data ultimately prevailed to drive the market lower. Looking at the market's return in greater detail during the most recent six-month period reveals that value stocks significantly outpaced growth stocks and that large-cap stocks out-performed their small-cap counterparts. The nexus of these results made large-cap value stocks the best performing equity asset class over this period. Specifically, using the Russell style indices, large-cap value stocks (Russell 1000 Value Index) essentially remained unchanged, while small-cap growth stocks (Russell 2000 Growth Index) declined 10.4% during the period. Over the entire fiscal year value trounced growth by over 12% and the market displayed no preference regarding capitalization. As you will recall, we construct our portfolios using a bottom-up stock selection process that is based on our proprietary quantitative stock-selection models. These models allow us to formulate a view on the fair price for a stock, considering its growth and stability, and take into account analysts' estimate revisions, and the quality of a company's earnings. In addition, while always seeking to have strong absolute performance, we are primarily focused on the benchmark-relative return of each Fund. For this reason, we seek to mitigate unnecessary risks by managing portfolios that are effectively economic-sector neutral with respect to their benchmark. Namely, we seek to maintain sector weights that are only a few percentage points away from their respective benchmark sector weights. Furthermore, we try to avoid large stock-specific risk by broadly diversifying the portfolio across many stocks and by preventing any one holding from exceeding approximately 2% of a Fund's overall weight. Attribution analysis of each Fund's return over the entire fiscal year finds that all of our proprietary models made positive contributions to performance. Given the market's strong preference for value stocks over growth stocks, it is not surprising to note that our Fair Value model generally accounts for a good portion of each Fund's out-performance. During the year the Quality of Earnings model was also powerful across the Funds, with the exception of the Mid Cap Fund where it was only marginally productive. Lastly, our Estrend model added significant value in our two growth offerings and was found to be beneficial for our Mid Cap Fund. 2 The following table summarizes which economic sectors made the largest contribution to the total return for each Fund during the entire fiscal year. FUND LARGEST CONTRIBUTING SECTORS SECTOR'S RETURN -------------------------------------------------------------------------------- Emerging Growth Consumer Non-Cyclicals 22.6% Financials 35.6% Growth Consumer Non-Cyclicals 20.6% Consumer Cyclicals 21.9% Mid Cap Consumer Non-Cyclicals 16.0% Financials 15.3% It is interesting to note that 8 out of the 9 economic sectors posted double digit positive returns for the fiscal year, with only Technology losing value everywhere. For the Emerging Growth Fund, at the individual security level, the generic pharmaceutical products company, EON Labs (+81bps contribution to the Fund's total return; 0% of portfolio on 8/31/04), and the computer voice recognition company, Intervoice (+70bps; 0% of portfolio on 8/31/04) were among the largest contributors to the Fund's return during the fiscal year. The largest detractors included Sonus Networks (-42bps; 0% of portfolio on 8/31/04), the telecommunications equipment company, and TTM Technologies (-37bps; 0% of portfolio on 8/31/04), the circuit board manufacturing company. The positive contributors to the Growth Fund included the telecommunications equipment company, Ditech Communications (+77bps; 1% of portfolio on 8/31/04), and the oil refining company, Tesoro Petroleum Corp (+71bps; 0.8% of portfolio on 8/31/04). The holdings which lost the most value included Silicon Storage Technology (-42bps; 0% of portfolio on 8/31/04), the nonvolatile semiconductor memory company, and Helix Technology (-35bps; 0.5% of portfolio on 8/31/04), the semiconductor capital equipment company. The best performers in the Mid Cap Fund included the electric utility, Texas Genco Holdings (+50bps; 0% of portfolio on 8/31/04), and the medical products company, Varian Medical Systems (+50bps; 1.2% of portfolio on 8/31/04). On the downside, the largest detractors to performance included Career Education Corp (-88bps; 0.8% of portfolio on 8/31/04), the for-profit postsecondary education company, and LSI Logic (-46bps; 0% of portfolio on 8/31/04), the semiconductor company. As the Funds' investment adviser, we are continuously working at improving our investment process. Being a disciplined and quantitatively based asset manager, much of this effort is focused on enhancing our proprietary models. In this vein, we are pleased to inform you of several improvements that have recently been implemented. We have observed for some time that the efficacy of our analysts' estimate revision model, known as Estrend, has been on the decline. We have augmented its power by incorporating an element of price momentum. In addition we have found an additive way to introduce the use of short interest as information flow for the Mid Cap Value Fund. Short interest has been used in our growth offerings for some time now. Lastly, while our Fair Value model is one of the hallmarks of our success, we have known that it can struggle in certain growth sectors of the market. In an attempt to address this, we have introduced the use of a cash flow based valuation model for certain growth stocks. 3 MANAGEMENT DISCUSSION We have five business matters to share with you. Perhaps the fifth topic is the most important. First, the preceding section of this report was written by Joseph Schirripa, CFA, the co-portfolio manager for our n/i Small Cap Value Fund. In the past this discussion has usually been prepared by me, Langdon Wheeler, CFA, as Chief Investment Officer and President of Numeric. I am delighted to share this responsibility with such a thoughtful observer of the markets with a clear writing style. Second, I have mixed emotions as I report that one of my first and longest-serving colleagues at Numeric, Shannon Vanderhooft, CFA, has decided to take early retirement at the end of this year to be a full-time Mom for her pre-adolescent children. Shannon has been co-portfolio manager for the n/i Growth and Emerging Growth Funds for many years. She is also a member of our Management and Investment Committees as Head of our Small Cap and Momentum Group. My emotions are mixed because I salute her choice to make her children's well-being her first priority but I will miss working with her. Dan Taylor, CFA, a talented portfolio manager and quantitative analyst, has been co-managing these (and other) portfolios with Shannon for the past three years and will take the lead in managing these Funds going forward. Dan will also take Shannon's seat on the Investment Committee. Third, you are aware that we re-opened our previously closed n/i Emerging Growth Fund to current shareholders for two weeks in early September. During these two weeks, current shareholders in any of our three Funds were permitted to invest in any of our other Funds. Thereafter, only current investors in any Fund could add to their investment in that fund. You may recall that we also opened the Funds in June but delays in printing and mail caused many investors to not know about this opportunity until it had passed. Thus we did a second reopening to provide our loyal shareholders with an opportunity to diversify across our other strategies. For the moment all of our Funds are open to further investment by current shareholders in each Fund, although we must reserve the right to close any Fund again should we determine that the asset growth could impair our ability to add value. Fourth, you were recently sent a proxy seeking your approval to retain Numeric as advisor to the Funds, given the change in ownership that occurred at Numeric in late June. (Reflecting that transaction, our logo has a new color and our name is now followed by the initials "LLC" (limited liability company) rather than "LP" or limited partnership). In the transaction, Numeric's original financial partners and some former employees who still owned interests in Numeric were bought out completely by TA Associates, a private equity firm based in Boston. The resulting ownership structure has Numeric management owning roughly half of the firm and TA the other half. TA will take seats on our Board of Directors but we do not anticipate any changes in our investment process or our business strategy of "good not big" and "dollars of excess return". Thank you for responding promptly to this proxy. Fifth, RBB Funds has been notified by the Securities and Exchange Commission (the "SEC") that the performance fees on the Small Cap Value Fund have been miscalculated for the last several years and therefore an overpayment has been made. Applying similar standards, it appears that Numeric was underpaid by the Midcap and Growth Funds. RBB and we have agreed to apply the SEC's alternative fee calculation effective September 1, 2004. Small Cap Value Fund shareholders will be reimbursed for any previous overcharge plus interest, but shareholders of the Midcap and Growth Funds will NOT incur a delayed charge. We believe the Small Cap Value Fund reimbursement will occur outside of the Fund complex. We are currently evaluating alternative fee structures in an effort to achieve maximum fairness for the shareholders, and may communicate with you further if we conclude that a change in fee structure is warranted. 4 Thank you also for being a shareholder in the Funds. We are grateful for your business and for the confidence you have placed in us to manage a portion of your investments. We hope that you are pleased with the results of the past fiscal year, as we are pleased in creating value across all of our Funds. Sincerely, /s/ LANGDON B. WHEELER, CFA /s/ JOSEPH SCHIRRIPA, CFA Langdon B. Wheeler, CFA Joseph Schirripa, CFA President & Chief Investment Officer Co-Portfolio Manager Numeric Investors LLC(R) n/i Small Cap Value Fund ---------- In addition to historical information, this report contains forward-looking statements that may concern, among other things, the domestic market, industry and economic trends and developments and government regulation and their potential impact on each Fund's investment portfolio. These statements are subject to risks and uncertainties and actual trends, developments and regulations in the future and their impact on the Funds could be materially different from those projected, anticipated or implied. The Funds have no obligation to update or revise forward-looking statements. Performance results do not reflect the deduction of taxes that a shareholder would pay on a Fund's distributions. On the accompanying line charts and total return tables found on pages 6 through 8, the returns of each Fund assumes reinvestment of all dividends and capital gains distributions at net asset value on the ex-dividend date. Funds are distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA 19406. To be preceded or accompanied by a prospectus. 5 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND Comparison of Change in Value of $10,000 Investment in n/i NUMERIC INVESTORS Emerging Growth Fund(1)(2) vs. Russell 2000 Growth Index [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC Emerging Growth Fund Russell 2000 Growth Index 6/3/96 $10,000 $10,000 8/31/96 $9,725 $8,816 11/30/96 $11,392 $9,117 2/28/97 $11,426 $8,952 5/31/97 $12,194 $9,459 8/31/97 $15,405 $10,589 11/30/97 $15,547 $10,491 2/28/98 $16,354 $11,272 5/31/98 $16,189 $10,958 8/31/98 $12,210 $7,804 11/30/98 $16,225 $9,745 2/28/99 $16,109 $10,089 5/31/99 $17,589 $11,373 8/31/99 $19,058 $11,168 11/30/99 $20,975 $12,909 2/29/00 $27,971 $18,544 5/31/00 $24,620 $13,612 8/31/00 $29,429 $15,532 11/30/00 $22,518 $11,100 2/28/01 $22,942 $10,987 5/31/01 $24,382 $11,471 8/31/01 $23,496 $10,105 11/30/01 $23,035 $10,065 2/28/02 $23,828 $9,644 5/31/02 $25,379 $9,656 8/31/02 $21,798 $7,475 11/30/02 $22,296 $8,009 2/28/03 $20,875 $7,060 5/31/03 $24,954 $8,730 8/31/03 $29,181 $10,085 11/30/03 $33,555 $11,027 2/29/04 $36,748 $11,640 5/31/04 $35,186 $11,328 8/31/04 $32,890 $10,425 Past performance is not predictive of future performance. -------------------------------------------------- Value on August 31, 2004 --------------- Emerging Growth Fund $32,890 Russell 2000 Growth Index $10,425 -------------------------------------------------- -------------------------------------------------------------------------------- Total Returns AVERAGE ANNUAL ------------------------------- ONE YEAR ENDED FIVE YEARS ENDED SINCE AUGUST 31, 2004 AUGUST 31, 2004 INCEPTION (3) --------------- ---------------- ------------- Emerging Growth Fund 12.71% 11.53% 15.54% Russell 2000 Growth Index 3.38% (1.37)% 0.52% -------------------------------------------------------------------------------- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the index is unmanaged, does not incur expenses and is not available for investment. (2) Numeric Investors LLC(R) waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, as necessary, to maintain the expense limitation as set forth in the notes to the financial statements.Total returns shown include the effect of fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers or assumption of fees and expenses. Returns shown include the reinvestment of all dividends and other distributions. (3) For the period June 3, 1996 (commencement of operations) through August 31, 2004. 6 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] GROWTH FUND Comparison of Change in Value of $10,000 Investment in n/i NUMERIC INVESTORS Growth Fund(1)(2) vs. Russell 2500 Growth Index [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC Growth Fund Russell 2500 Growth Index 6/3/96 $10,000 $10,000 8/31/96 $9,867 $9,144 11/30/96 $10,925 $9,673 2/28/97 $10,575 $9,572 5/31/97 $11,384 $10,060 8/31/97 $13,585 $11,327 11/30/97 $13,402 $11,196 2/28/98 $13,754 $11,954 5/31/98 $13,111 $11,707 8/31/98 $9,641 $8,434 11/30/98 $11,931 $10,490 2/28/99 $12,040 $10,872 5/31/99 $13,385 $12,414 8/31/99 $14,731 $12,739 11/30/99 $16,999 $15,044 2/29/00 $23,591 $22,342 5/31/00 $20,133 $16,929 8/31/00 $24,027 $19,890 11/30/00 $16,929 $14,128 2/28/01 $15,982 $13,511 5/31/01 $16,580 $14,249 8/31/01 $15,269 $12,599 11/30/01 $15,079 $12,683 2/28/02 $15,254 $12,016 5/31/02 $15,808 $11,920 8/31/02 $13,214 $9,478 11/30/02 $13,287 $10,126 2/28/03 $12,471 $9,063 5/31/03 $14,715 $11,041 8/31/03 $16,798 $12,664 11/30/03 $19,289 $13,865 2/29/04 $20,834 $14,593 5/31/04 $19,959 $14,315 8/31/04 $18,925 $13,244 Past performance is not predictive of future performance. -------------------------------------------------- Value on August 31, 2004 --------------- Growth Fund $18,925 Russell 2500 Growth Index $13,244 -------------------------------------------------- -------------------------------------------------------------------------------- Total Returns AVERAGE ANNUAL ------------------------------- ONE YEAR ENDED FIVE YEARS ENDED SINCE AUGUST 31, 2004 AUGUST 31, 2004 INCEPTION (3) --------------- ---------------- ------------- Growth Fund 12.66% 5.14% 8.05% Russell 2500 Growth Index 4.58% 0.78% 3.46% -------------------------------------------------------------------------------- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects Fund expenses.Investors should note that the Fund is an aggressively managed mutual fund while the index is unmanaged, does not incur expenses and is not available for investment. (2) Numeric Investors LLC(R) waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, as necessary, to maintain the expense limitation as set forth in the notes to the financial statements.Total returns shown include the effect of fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers or assumption of fees and expenses. Returns shown include the reinvestment of all dividends and other distributions. (3) For the period June 3, 1996 (commencement of operations) through August 31, 2004. 7 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] MID CAP FUND Comparison of Change in Value of $10,000 Investment in n/i NUMERIC INVESTORS Mid Cap Fund(1)(2) vs. S&P MidCap 400 Index [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC Mid Cap Fund S&P MidCap 400 Index 6/3/96 $10,000 $10,000 8/31/96 $9,633 $9,713 11/30/96 $11,158 $10,738 2/28/97 $11,334 $11,062 5/31/97 $12,397 $11,815 8/31/97 $14,364 $13,333 11/30/97 $14,732 $13,688 2/28/98 $16,232 $15,103 5/31/98 $16,685 $15,350 8/31/98 $13,076 $12,084 11/30/98 $15,492 $15,109 2/28/99 $16,128 $15,421 5/31/99 $18,003 $17,177 8/31/99 $18,518 $17,105 11/30/99 $19,355 $18,336 2/29/00 $20,492 $20,199 5/31/00 $21,665 $20,862 8/31/00 $24,000 $23,903 11/30/00 $20,723 $21,204 2/28/01 $20,783 $22,004 5/31/01 $21,521 $23,142 8/31/01 $19,819 $21,962 11/30/01 $19,243 $21,576 2/28/02 $20,409 $22,601 5/31/02 $21,181 $23,697 8/31/02 $18,138 $19,935 11/30/02 $17,812 $20,230 2/28/03 $16,683 $18,384 5/31/03 $19,489 $21,530 8/31/03 $21,167 $23,601 11/30/03 $23,119 $25,867 2/29/04 $24,788 $27,519 5/31/04 $24,573 $27,284 8/31/04 $24,266 $26,533 Past performance is not predictive of future performance. -------------------------------------------------- Value on August 31, 2004 --------------- Mid Cap Fund $24,266 S&P MidCap 400 Index $26,533 -------------------------------------------------- -------------------------------------------------------------------------------- Total Returns AVERAGE ANNUAL ------------------------------- ONE YEAR ENDED FIVE YEARS ENDED SINCE AUGUST 31, 2004 AUGUST 31, 2004 INCEPTION (3) --------------- ---------------- ------------- Mid Cap Fund 14.64% 5.56% 11.35% S&P MidCap 400 Index 12.43% 9.18% 12.57% -------------------------------------------------------------------------------- ---------- (1) The chart assumes a hypothetical $10,000 initial investment in the Fund and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the index is unmanaged, does not incur expenses and is not available for investment. (2) Numeric Investors LLC(R) waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, as necessary, to maintain the expense limitation as set forth in the notes to the financial statements.Total returns shown include the effect of fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers or assumption of fees and expenses. Returns shown include the reinvestment of all dividends and other distributions. (3) For the period June 3, 1996 (commencement of operations) through August 31, 2004. 8 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND FUND EXPENSE EXAMPLES As a shareholder of the Fund(s), you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees; distribution fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on your Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. 9 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND FUND EXPENSE EXAMPLES (CONCLUDED)
EMERGING GROWTH FUND ----------------------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ------------- --------------- ------------- Actual $1,000.00 $ 895.00 $5.57 Hypothetical (5% return before expenses) 1,000.00 1,019.14 5.96 GROWTH FUND ----------------------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ------------- --------------- ------------- Actual $1,000.00 $ 908.40 $7.24 Hypothetical (5% return before expenses) 1,000.00 1,017.41 7.69 MID CAP FUND ----------------------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ------------- --------------- ------------- Actual $1,000.00 $ 979.00 $4.58 Hypothetical (5% return before expenses) 1,000.00 1,020.42 4.68 *Expenses are equal to the Funds' annualized expense ratios in the table below, which include waived fees or reimbursed expenses, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-year half period.
EXPENSE RATIO ------------- Emerging Growth Fund 1.17% Growth Fund 1.51% Mid Cap Fund 0.92% 10 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE -------------------------------------------------------------------------------- SECURITY TYPE/ % OF VALUE INDUSTRY CLASSIFICATION NET ASSETS (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCK Aerospace & Defense ....................... 0.7% $ 973,677 Airlines .................................. 1.3% 1,736,211 Apparel ................................... 2.3% 3,063,910 Automobile Parts & Equipment .............. 1.0% 1,330,995 Banks ..................................... 3.1% 4,121,864 Beverages ................................. 0.4% 511,360 Biotech ................................... 4.9% 6,604,374 Broadcasting .............................. 0.2% 232,804 Building & Building Materials ............. 0.5% 616,080 Building Supplies ......................... 0.6% 859,040 Chemicals - Specialty ..................... 1.6% 2,204,711 Commercial Services ....................... 0.5% 607,988 Communication Equipment ................... 1.4% 1,882,266 Computer Networking Products .............. 0.2% 204,840 Computer Peripherals ...................... 1.4% 1,925,952 Computer Services ......................... 0.8% 1,053,993 Computer Software ......................... 3.8% 5,090,182 Consumer Products ......................... 1.2% 1,588,178 Correctional Rehabilitation ............... 0.1% 150,150 Data Processing ........................... 2.4% 3,188,525 Electrical Equipment ...................... 0.9% 1,173,920 Electronic Components & Accessories .......................... 5.2% 6,944,392 Financial Services ........................ 1.4% 1,874,822 Food & Agriculture ........................ 1.2% 1,657,993 Funeral Services .......................... 0.7% 902,325 Hazardous Waste Management ................ 0.1% 68,700 Health Care ............................... 2.6% 3,503,730 Home Furnishings .......................... 0.4% 500,910 Hospitals ................................. 1.0% 1,324,016 Hotels & Motels ........................... 0.9% 1,148,936 Insurance - Property & Casualty ........... 1.3% 1,748,319 Internet Content .......................... 3.5% 4,613,236 Internet Software ......................... 1.3% 1,719,194 Leisure & Entertainment ................... 1.4% 1,878,569 Machinery ................................. 3.5% 4,735,609 Manufacturing ............................. 2.5% 3,335,124 Medical & Medical Services ................ 1.6% 2,148,693 Medical Instruments & Supplies ............ 4.3% 5,704,788 Metals .................................... 0.2% 323,518 -------------------------------------------------------------------------------- SECURITY TYPE/ % OF VALUE INDUSTRY CLASSIFICATION NET ASSETS (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCK--(CONTINUED) Mortgage .................................. 1.7% $ 2,234,953 Multimedia/Publishing ..................... 1.0% 1,298,435 Oil & Gas Equipment & Services ............ 1.8% 2,416,125 Oil & Gas Field Exploration ............... 0.6% 786,513 Oil Refining .............................. 1.7% 2,258,178 Packaging ................................. 0.9% 1,248,525 Pharmaceuticals ........................... 1.7% 2,305,935 Printing .................................. 0.6% 841,035 Real Estate Investment Trusts ............. 1.8% 2,417,175 Residential Construction .................. 1.1% 1,500,604 Restaurants ............................... 0.8% 1,077,300 Retail - Specialty ........................ 4.7% 6,222,710 Savings & Loan Associations ............... 1.7% 2,257,159 Schools ................................... 0.7% 943,675 Semiconductors ............................ 3.8% 5,032,940 Services - Management Consulting ............................. 1.8% 2,463,802 Steel ..................................... 0.4% 526,674 Telecommunications Equipment & Services ............................. 5.3% 7,099,852 Transportation ............................ 2.2% 2,983,243 REPURCHASE AGREEMENTS ........................ 3.6% 4,822,458 LIABILITIES IN EXCESS OF OTHER ASSETS ........................... (0.3)% (459,965) ----- ------------ NET ASSETS -- 100.% .......................... 100.0% $133,531,220 ===== ============ 11 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE (CONTINUED) -------------------------------------------------------------------------------- SECURITY TYPE/ % OF VALUE INDUSTRY CLASSIFICATION NET ASSETS (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCK Aerospace & Defense ....................... 1.3% $ 473,683 Airlines .................................. 1.8% 640,865 Apparel ................................... 1.0% 343,138 Automobile Parts & Equipment .............. 1.3% 467,487 Banks ..................................... 0.1% 24,618 Biotech ................................... 4.8% 1,714,237 Building & Building Materials ............. 0.2% 54,360 Building Supplies ......................... 0.6% 214,760 Chemicals - Specialty ..................... 1.8% 644,704 Commercial Services ....................... 0.1% 19,048 Communication Equipment ................... 0.5% 196,950 Computer Peripherals ...................... 0.6% 219,735 Computer Services ......................... 0.2% 73,226 Computer Software ......................... 3.2% 1,137,222 Consumer Products ......................... 1.2% 444,213 Data Processing ........................... 1.3% 479,322 Electrical Equipment ...................... 0.5% 172,040 Electronic Components & Accessories .......................... 5.1% 1,834,802 Engineering ............................... 0.7% 266,760 Financial Services ........................ 1.9% 698,473 Food & Agriculture ........................ 2.1% 743,001 Funeral Services .......................... 0.5% 185,913 Health Care ............................... 2.3% 829,641 Hospitals ................................. 0.9% 334,656 Hotels & Motels ........................... 1.0% 347,462 Insurance ................................. 0.6% 234,038 Insurance - Health & Life ................. 0.4% 161,298 Insurance - Property & Casualty ........... 2.6% 944,973 Internet Content .......................... 2.3% 847,329 Internet Software ......................... 1.7% 596,400 Leisure & Entertainment ................... 1.5% 552,569 Machinery ................................. 3.0% 1,087,274 Manufacturing ............................. 3.1% 1,103,608 Medical & Medical Services ................ 1.2% 450,221 Medical Instruments & Supplies ............ 4.4% 1,604,161 Mortgage .................................. 3.1% 1,119,556 Multimedia/Publishing ..................... 1.5% 537,654 Oil & Gas Equipment & Services ............ 1.1% 390,530 Oil & Gas Field Exploration ............... 1.1% 391,089 -------------------------------------------------------------------------------- SECURITY TYPE/ % OF VALUE INDUSTRY CLASSIFICATION NET ASSETS (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCK--(CONTINUED) Oil Refining .............................. 2.3% $ 842,578 Packaging ................................. 0.5% 179,000 Paper & Allied Products ................... 0.2% 88,561 Pharmaceuticals ........................... 2.2% 781,351 Printing .................................. 0.2% 57,190 Real Estate Investment Trusts ............. 3.4% 1,211,837 Residential Construction .................. 3.0% 1,087,112 Restaurants ............................... 0.6% 230,417 Retail - Specialty ........................ 5.8% 2,094,463 Savings & Loan Associations ............... 1.8% 656,123 Schools ................................... 1.3% 472,748 Semiconductors ............................ 2.5% 908,936 Services - Management Consulting ............................. 1.5% 530,826 Steel ..................................... 0.8% 289,600 Telecommunications Equipment & Services ............................. 5.5% 1,992,100 Transportation ............................ 2.9% 1,056,844 Utilities ................................. 0.7% 240,312 Waste Management .......................... 0.8% 272,164 REPURCHASE AGREEMENTS ........................ 3.7% 1,322,114 LIABILITIES IN EXCESS OF OTHER ASSETS ........................... (2.3)% (819,216) ----- ----------- NET ASSETS -- 100.% .......................... 100.0% $36,076,076 ===== =========== 12 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] MID CAP FUND PORTFOLIO HOLDINGS SUMMARY TABLE (CONTINUED) -------------------------------------------------------------------------------- SECURITY TYPE/ % OF VALUE INDUSTRY CLASSIFICATION NET ASSETS (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCK Aerospace & Defense ....................... 3.5% $ 1,087,067 Airlines .................................. 0.2% 58,995 Apparel ................................... 1.9% 587,626 Automobile ................................ 1.0% 301,563 Automobile Parts & Equipment ............................ 3.0% 928,256 Banks ..................................... 5.2% 1,605,258 Beverages ................................. 0.4% 117,664 Biotech ................................... 2.0% 623,927 Broadcasting .............................. 0.2% 56,967 Building Supplies ......................... 1.1% 336,075 Chemicals - Specialty ..................... 2.6% 796,857 Commercial Services ....................... 0.4% 114,786 Computer Networking Products .............. 0.5% 147,925 Computer Services ......................... 1.0% 315,180 Computer Software ......................... 3.0% 934,550 Consumer Products ......................... 4.0% 1,221,489 Drilling Oil & Gas Wells .................. 0.3% 98,240 Electrical Equipment ...................... 0.3% 90,615 Electronic Components & Accessories .......................... 2.2% 695,330 Energy .................................... 1.0% 308,062 Financial Services ........................ 0.3% 96,712 Food & Agriculture ........................ 2.0% 616,776 Hazardous Waste Management ................ 0.4% 120,185 Health Care ............................... 2.4% 755,667 Hospitals ................................. 0.3% 99,600 Hotels & Motels ........................... 0.6% 181,510 Insurance ................................. 1.2% 372,929 Insurance - Property & Casualty ........... 4.3% 1,335,430 Internet Content .......................... 0.1% 41,850 Internet Software ......................... 1.1% 346,150 Leisure & Entertainment ................... 3.3% 1,005,389 Manufacturing ............................. 0.8% 248,761 Medical Instruments & Supplies ............ 6.2% 1,899,090 Metals - Diversified ...................... 0.1% 32,624 Mortgage .................................. 1.1% 333,494 Multimedia/Publishing ..................... 1.4% 418,109 Office & Business Equipment ............... 1.0% 309,276 Oil & Gas Equipment & Services ............ 3.7% 1,131,828 -------------------------------------------------------------------------------- SECURITY TYPE/ % OF VALUE INDUSTRY CLASSIFICATION NET ASSETS (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCK--(CONTINUED) Oil & Gas Field Exploration ............... 1.4% $ 424,908 Oil Refining .............................. 2.2% 686,012 Paper & Allied Products ................... 0.5% 163,872 Pharmaceuticals ........................... 0.7% 221,810 Real Estate Investment Trusts ............. 1.9% 573,294 Residential Construction .................. 2.7% 842,863 Retail - Discount ......................... 0.3% 108,350 Retail - Specialty ........................ 4.3% 1,338,093 Savings & Loan Associations ............... 5.3% 1,627,628 Schools ................................... 0.8% 240,552 Semiconductors ............................ 0.2% 50,020 Services - Management Consulting ............................. 1.0% 313,200 Steel ..................................... 0.3% 82,080 Telecommunications ........................ 1.1% 334,776 Telecommunications Equipment & Infrastructure ....................... 0.4% 110,308 Telecommunications Equipment & Services ............................. 3.6% 1,124,398 Transportation ............................ 0.8% 238,900 Utilities ................................. 3.1% 959,791 Wholesale - Groceries & General Line ......................... 0.5% 142,344 REPURCHASE AGREEMENTS ........................ 6.3% 1,932,695 LIABILITIES IN EXCESS OF OTHER ASSETS ........................... (1.5)% (465,971) ----- ----------- NET ASSETS -- 100.% .......................... 100.0% $30,821,735 ===== =========== 13 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCKS--96.7% AEROSPACE & DEFENSE--0.7% 36,440 Innovative Solutions and Support, Inc.* .......... $ 973,677 ------------ AIRLINES--1.3% 87,800 ExpressJet Holdings, Inc.* ....................... 943,850 47,200 Pinnacle Airlines Corp.* ......................... 461,191 24,900 Republic Airways Holdings, Inc.* ................. 331,170 ------------ 1,736,211 ------------ APPAREL--2.3% 19,100 Cutter & Buck, Inc. .............................. 208,572 33,835 Deckers Outdoor Corp.* ........................... 993,396 11,300 Haggar Corp. ..................................... 209,502 72,400 Skechers U.S.A., Inc., Class A* .................. 962,920 24,000 UniFirst Corp. ................................... 689,520 ------------ 3,063,910 ------------ AUTOMOBILE PARTS & EQUIPMENT--1.0% 16,200 Midas, Inc.* ..................................... 256,770 21,700 Spartan Motors, Inc. ............................. 276,675 81,800 Titan International, Inc. ........................ 797,550 ------------ 1,330,995 ------------ BANKS--3.1% 18,800 First Republic Bank .............................. 842,052 36,500 Glacier Bancorp, Inc. ............................ 1,028,570 5,100 Independent Bank Corp.-MI ........................ 131,478 16,310 MBT Financial Corp. .............................. 312,010 8,100 SNB Bancshares, Inc.* ............................ 90,639 21,130 Sterling Financial Corp.* ........................ 700,671 35,540 Vineyard National Bancorp Co. .................... 1,016,444 ------------ 4,121,864 ------------ BEVERAGES--0.4% 23,500 Boston Beer Co., Inc. (The)* ..................... 511,360 ------------ BIOTECH--4.9% 7,700 Adolor Corp.* .................................... 88,550 19,500 Alkermes, Inc.* .................................. 207,285 46,469 Anika Therapeutics, Inc.* ........................ 605,956 53,300 Array BioPharma, Inc.* ........................... 362,440 9,500 Bone Care International, Inc.* ................... 233,320 16,800 Cypress Bioscience, Inc.* ........................ 173,040 17,100 deCODE genetics, Inc.* ........................... 95,760 31,200 Dyax Corp.* ...................................... 247,728 9,300 Exelixis, Inc.* .................................. 72,540 10,500 ILEX Oncology, Inc.* ............................. 261,870 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- BIOTECH--(CONTINUED) 81,800 Lexicon Genetics, Inc.* .......................... $ 494,890 26,800 Ligand Pharmaceuticals, Inc., Class B* ........... 263,444 5,243 Medicines Co. (The)* ............................. 132,543 67,000 Neurogen Corp.* .................................. 459,620 40,900 NitroMed, Inc.* .................................. 753,787 19,800 Pharmion Corp.* .................................. 973,566 29,900 Salix Pharmaceuticals, Ltd.* ..................... 699,361 9,100 Telik, Inc.* ..................................... 172,354 12,900 Third Wave Technologies* ......................... 65,016 24,800 Vertex Pharmaceuticals, Inc.* .................... 241,304 ------------ 6,604,374 ------------ BROADCASTING--0.2% 28,600 Nexstar Broadcasting Group, Inc., Class A* ....... 232,804 ------------ BUILDING & BUILDING MATERIALS--0.5% 40,800 Perini Corp.* .................................... 616,080 ------------ BUILDING SUPPLIES--0.6% 28,000 NCI Building Systems, Inc.* ...................... 859,040 ------------ CHEMICALS - SPECIALTY--1.6% 31,900 Georgia Gulf Corp. ............................... 1,210,605 46,100 IMC Global, Inc. ................................. 734,834 11,700 Octel Corp. ...................................... 259,272 ------------ 2,204,711 ------------ COMMERCIAL SERVICES--0.5% 7,100 McGrath Rentcorp ................................. 243,459 8,800 Standard Parking Corp.* .......................... 114,840 6,700 Team, Inc.* ...................................... 109,210 5,900 Viad Corp. ....................................... 140,479 ------------ 607,988 ------------ COMMUNICATION EQUIPMENT--1.4% 99,124 Digi International, Inc.* ........................ 1,115,145 29,300 Novatel Wireless, Inc.* .......................... 575,745 44,300 Paradyne Networks, Inc.* ......................... 191,376 ------------ 1,882,266 ------------ COMPUTER NETWORKING PRODUCTS--0.2% 7,200 SafeNet, Inc.* ................................... 204,840 ------------ COMPUTER PERIPHERALS--1.4% 51,500 AMX Corp.* ....................................... 927,000 116,700 InFocus Corp.* ................................... 998,952 ------------ 1,925,952 ------------ The accompanying notes are an integral part of the financial statements. 14 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- COMPUTER SERVICES--0.8% 34,300 Agilysys, Inc. ................................... $ 534,394 61,857 Tier Technologies, Inc., Class B* ................ 519,599 ------------ 1,053,993 ------------ COMPUTER SOFTWARE--3.8% 9,800 Ansoft Corp.* .................................... 146,510 84,010 Aspen Technology, Inc.* .......................... 486,418 89,800 BindView Development Corp.* ...................... 282,870 15,310 Intergraph Corp.* ................................ 397,141 13,400 Moldflow Corp.* .................................. 160,800 190,800 Parametric Technology Corp.* ..................... 929,196 7,300 Progress Software Corp.* ......................... 147,022 33,600 QAD, Inc. ........................................ 208,320 15,800 SS&C Technologies, Inc. .......................... 259,436 19,400 SYNNEX Corp.* .................................... 308,266 73,900 Ulticom, Inc.* ................................... 706,484 79,468 Witness Systems, Inc.* ........................... 1,057,719 ------------ 5,090,182 ------------ CONSUMER PRODUCTS--1.2% 39,800 CCA Industries, Inc. ............................. 297,704 20,400 Helen of Troy, Ltd.* ............................. 550,800 23,400 RC2 Corp.* ....................................... 739,674 ------------ 1,588,178 ------------ CORRECTIONAL REHABILITATION--0.1% 7,700 Geo Group, Inc. (The)* ........................... 150,150 ------------ DATA PROCESSING--2.4% 35,500 CAM Commerce Solutions, Inc.* .................... 528,595 9,200 CSG Systems International, Inc.* ................. 133,124 37,200 Dawson Geophysical Co.* .......................... 736,560 41,000 Dendrite International, Inc.* .................... 528,900 29,900 infoUSA, Inc.* ................................... 271,791 38,715 NCO Group, Inc.* ................................. 989,555 ------------ 3,188,525 ------------ ELECTRICAL EQUIPMENT--0.9% 58,000 WESCO International, Inc.* ....................... 1,173,920 ------------ ELECTRONIC COMPONENTS & ACCESSORIES--5.2% 37,800 BEI Technologies, Inc. ........................... 1,052,352 16,200 Bel Fuse, Inc., Class B .......................... 613,494 45,300 CyberOptics Corp.* ............................... 793,203 47,000 Electro Scientific Industries, Inc.* ............. 972,430 64,301 Helix Technology Corp. ........................... 875,136 53,500 Macrovision Corp.* ............................... 1,265,275 8,700 Rofin-Sinar Technologies, Inc.* .................. 244,470 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- ELECTRONIC COMPONENTS & ACCESSORIES--(CONTINUED) 23,837 SBS Technologies, Inc.* .......................... $ 244,568 54,636 Universal Electronics, Inc.* ..................... 883,464 ------------ 6,944,392 ------------ FINANCIAL SERVICES--1.4% 31,100 Cash America International, Inc. ................. 719,654 57,300 Fremont General Corp. ............................ 1,155,168 ------------ 1,874,822 ------------ FOOD & AGRICULTURE--1.2% 39,300 Nash Finch Co. ................................... 1,160,529 14,550 Sanderson Farms, Inc. ............................ 497,464 ------------ 1,657,993 ------------ FUNERAL SERVICES--0.7% 132,500 Stewart Enterprises, Inc., Class A* .............. 902,325 ------------ HAZARDOUS WASTE MANAGEMENT--0.1% 7,500 American Ecology Corp. ........................... 68,700 ------------ HEALTH CARE--2.6% 38,400 Genesis HealthCare Corp.* ........................ 1,193,856 35,200 Sierra Health Services, Inc.* .................... 1,517,824 43,400 WellCare Health Plans, Inc.* ..................... 792,050 ------------ 3,503,730 ------------ HOME FURNISHINGS--0.4% 18,888 Hooker Furniture Corp. ........................... 500,910 ------------ HOSPITALS--1.0% 99,700 Select Medical Corp. ............................. 1,324,016 ------------ HOTELS & MOTELS--0.9% 6,900 Boca Resorts Inc., Class A* ...................... 132,480 19,600 Choice Hotels International, Inc. ................ 1,016,456 ------------ 1,148,936 ------------ INSURANCE - PROPERTY & CASUALTY--1.3% 7,500 American Physicians Capital, Inc.* ............... 206,100 51,100 Bristol West Holdings, Inc. ...................... 844,683 11,200 Infinity Property & Casualty Corp. ............... 307,104 16,800 PXRE Group, Ltd. ................................. 390,432 ------------ 1,748,319 ------------ INTERNET CONTENT--3.5% 148,500 EarthLink, Inc.* ................................. 1,486,485 8,500 Equinix, Inc.* ................................... 270,215 14,006 InfoSpace, Inc.* ................................. 532,228 131,900 LookSmart, Ltd.* ................................. 203,126 The accompanying notes are an integral part of the financial statements. 15 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- INTERNET CONTENT--(CONTINUED) 7,200 Neoforma, Inc.* .................................. $ 73,440 94,600 Register.com, Inc.* .............................. 543,950 44,315 TriZetto Group, Inc. (The)* ...................... 273,423 47,258 United Online, Inc.* ............................. 452,732 107,557 ValueClick, Inc.* ................................ 777,637 ------------ 4,613,236 ------------ INTERNET SOFTWARE--1.3% 31,648 Digital River, Inc.* ............................. 761,767 64,300 RSA Security, Inc.* .............................. 957,427 ------------ 1,719,194 ------------ LEISURE & ENTERTAINMENT--1.4% 13,000 Boyd Gaming Corp. ................................ 352,950 13,700 Penn National Gaming, Inc.* ...................... 532,245 40,344 Scientific Games Corp., Class A* ................. 687,059 109,009 Youbet.com, Inc.* ................................ 306,315 ------------ 1,878,569 ------------ MACHINERY--3.5% 2,200 Astec Industries, Inc.* .......................... 36,366 34,000 Bucyrus International, Inc., Class A* ............ 898,620 28,900 Columbus McKinnon Corp.* ......................... 252,875 38,600 Manitowoc Co., Inc. (The) ........................ 1,279,976 18,955 Middleby Corp. (The)* ............................ 950,025 35,400 Stewart & Stevenson Services, Inc. ............... 591,534 20,100 Terex Corp.* ..................................... 726,213 ------------ 4,735,609 ------------ MANUFACTURING--2.5% 30,500 Albany International Corp., Class A .............. 889,075 6,200 ESCO Technologies, Inc.* ......................... 398,970 51,200 Penn Engineering & Manufacturing Corp. ........... 977,920 40,300 Wabash National Corp.* ........................... 1,069,159 ------------ 3,335,124 ------------ MEDICAL & MEDICAL SERVICES--1.6% 11,600 NeighborCare, Inc.* .............................. 294,524 28,300 Option Care, Inc. ................................ 445,159 20,100 Pediatrix Medical Group, Inc.* ................... 1,409,010 ------------ 2,148,693 ------------ MEDICAL INSTRUMENTS & SUPPLIES--4.3% 16,200 Advanced Medical Optics, Inc.* ................... 602,964 42,000 Cantel Medical Corp.* ............................ 1,144,500 35,800 Haemonetics Corp.* ............................... 1,131,996 11,300 Intuitive Surgical, Inc.* ........................ 274,025 24,335 Lifecore Biomedical, Inc.* ....................... 172,778 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- MEDICAL INSTRUMENTS & SUPPLIES--(CONTINUED) 63,700 Misonix, Inc.* ................................... $ 398,125 20,800 Molecular Devices Corp.* ......................... 478,400 76,530 Urologix, Inc.* .................................. 769,892 36,100 VISX, Inc.* ...................................... 732,108 ------------ 5,704,788 ------------ METALS--0.2% 13,900 A.M. Castle & Co.* ............................... 126,490 23,400 Commonwealth Industries, Inc.* ................... 197,028 ------------ 323,518 ------------ MORTGAGE--1.7% 17,925 Doral Financial Corp. ............................ 729,010 28,075 New Century Financial Corp. ...................... 1,505,943 ------------ 2,234,953 ------------ MULTIMEDIA/PUBLISHING--1.0% 18,300 R.H. Donnelley Corp.* ............................ 850,035 23,600 Thomas Nelson, Inc. .............................. 448,400 ------------ 1,298,435 ------------ OIL & GAS EQUIPMENT & SERVICES--1.8% 7,300 Dril-Quip, Inc.* ................................. 144,832 16,671 Lufkin Industries, Inc. .......................... 540,140 20,400 Offshore Logistics, Inc.* ........................ 607,920 44,700 Oil States International, Inc.* .................. 719,670 12,300 Universal Compression Holdings, Inc.* ............ 403,563 ------------ 2,416,125 ------------ OIL & GAS FIELD EXPLORATION--0.6% 167,700 Mission Resources Corp.* ......................... 786,513 ------------ OIL REFINING--1.7% 17,000 Frontier Oil Corp. ............................... 347,140 42,900 Giant Industries, Inc.* .......................... 956,670 46,600 Holly Corp. ...................................... 954,368 ------------ 2,258,178 ------------ PACKAGING--0.9% 27,900 Silgan Holdings, Inc. ............................ 1,248,525 ------------ PHARMACEUTICALS--1.7% 65,000 First Horizon Pharmaceutical Corp.* .............. 1,094,600 10,300 Natural Health Trends Corp.* ..................... 144,097 56,200 Noven Pharmaceuticals, Inc.* ..................... 1,067,238 ------------ 2,305,935 ------------ The accompanying notes are an integral part of the financial statements. 16 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- PRINTING--0.6% 11,900 Consolidated Graphics, Inc.* ..................... $ 486,115 19,000 Ennis, Inc. ...................................... 354,920 ------------ 841,035 ------------ REAL ESTATE INVESTMENT TRUSTS--1.8% 6,600 Alexandria Real Estate Equities, Inc. ............ 427,680 23,200 Tanger Factory Outlet Centers, Inc. .............. 1,023,120 37,500 Taubman Centers, Inc. ............................ 966,375 ------------ 2,417,175 ------------ RESIDENTIAL CONSTRUCTION--1.1% 20,200 Brookfield Homes Corp. ........................... 532,674 43,000 Levitt Corp., Class A ............................ 967,930 ------------ 1,500,604 ------------ RESTAURANTS--0.8% 90,000 CKE Restaurants, Inc.* ........................... 1,077,300 ------------ RETAIL - SPECIALTY--4.7% 59,100 7-Eleven, Inc.* .................................. 1,141,812 8,100 Blue Nile, Inc.* ................................. 210,924 53,443 Coldwater Creek, Inc.* ........................... 1,075,273 60,300 Dress Barn, Inc. (The)* .......................... 999,171 55,400 Hollywood Entertainment Corp.* ................... 558,986 55,034 J. Jill Group, Inc.* ............................. 995,565 12,400 Sportsman's Guide, Inc. (The)* ................... 255,564 60,270 Stein Mart, Inc.* ................................ 985,415 ------------ 6,222,710 ------------ SAVINGS & LOAN ASSOCIATIONS--1.7% 16,100 Encore Capital Group, Inc.* ...................... 271,768 17,000 Great Southern Bancorp, Inc. ..................... 547,910 9,900 ITLA Capital Corp.* .............................. 419,958 37,700 Oriental Financial Group, Inc. ................... 1,017,523 ------------ 2,257,159 ------------ SCHOOLS--0.7% 19,068 Bright Horizons Family Solutions, Inc.* .......... 943,675 ------------ SEMICONDUCTORS--3.8% 25,600 ADE Corp.* ....................................... 492,032 36,900 Advanced Power Technology, Inc.* ................. 284,130 14,000 ATMI, Inc.* ...................................... 263,760 127,300 Axcelis Technologies, Inc.* ...................... 992,940 5,200 Coherent, Inc.* .................................. 132,236 74,903 FSI International, Inc.* ......................... 364,029 99,200 Silicon Image, Inc.* ............................. 1,091,200 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- SEMICONDUCTORS--(CONTINUED) 13,400 Siliconix, Inc.* ................................. $ 459,084 60,580 Zoran Corp.* ..................................... 953,529 ------------ 5,032,940 ------------ SERVICES - MANAGEMENT CONSULTING--1.8% 16,800 American Dental Partners, Inc.* .................. 304,080 64,600 Korn/Ferry International* ........................ 1,147,942 42,000 PDI, Inc.* ....................................... 1,011,780 ------------ 2,463,802 ------------ STEEL--0.4% 36,600 Shiloh Industries, Inc.* ......................... 526,674 ------------ TELECOMMUNICATIONS EQUIPMENT & SERVICES--5.3% 134,800 Airspan Networks, Inc.* .......................... 554,028 25,500 Catapult Communications Corp.* ................... 609,450 54,900 Crown Castle International Corp.* ................ 785,619 60,698 Ditech Communications Corp.* ..................... 1,306,221 45,700 Dycom Industries, Inc.* .......................... 1,175,404 65,900 InterDigital Communications Corp.* ............... 1,027,381 128,506 NMS Communications Corp.* ........................ 616,829 197,100 SBA Communications Corp., Class A* ............... 1,024,920 ------------ 7,099,852 ------------ TRANSPORTATION--2.2% 36,900 Celadon Group, Inc.* ............................. 625,455 27,461 EGL, Inc.* ....................................... 665,380 32,400 Hub Group, Inc., Class A* ........................ 859,248 65,500 OMI Corp. ........................................ 833,160 ------------ 2,983,243 ------------ Total Common Stocks (Cost $125,040,725) ............................ 129,168,727 ------------ The accompanying notes are an integral part of the financial statements. 17 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2004 -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (000'S) (NOTE 1) -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--3.6% $1,199 Bear, Stearns & Co. Inc. (Agreement dated 08/31/04 to be repurchased at $1,198,554), 0.78%, 09/01/04 (Note 6)** ..................... $ 1,198,528 3,624 Bear, Stearns & Co. Inc. (Agreement dated 08/31/04 to be repurchased at $3,624,086), 1.55%, 09/01/04 (Note 7) ....................... 3,623,930 ------------ Total Repurchase Agreements (Cost $4,822,458) .............................. 4,822,458 ------------ Total Investments -- 100.3% (Cost $129,863,183) ......................................... 133,991,185 ------------ Liabilities in Excess of Other Assets -- (0.3)% ............... (459,965) ------------ Net Assets -- 100.0% .......................................... $133,531,220 ============ ---------- * Non-income producing. ** Investment purchased with collateral received for securities on loan. The accompanying notes are an integral part of the financial statements. 18 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] GROWTH FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCKS--98.6% AEROSPACE & DEFENSE--1.3% 9,000 Innovative Solutions and Support, Inc.* .......... $ 240,480 6,100 United Defense Industries, Inc.* ................. 233,203 ----------- 473,683 ----------- AIRLINES--1.8% 4,600 Alaska Air Group, Inc.* .......................... 108,284 24,000 ExpressJet Holdings, Inc.* ....................... 258,000 19,191 Northwest Airlines Corp.* ........................ 180,779 9,600 Pinnacle Airlines Corp.* ......................... 93,802 ----------- 640,865 ----------- APPAREL--1.0% 5,300 Deckers Outdoor Corp.* ........................... 155,608 14,100 Skechers U.S.A., Inc., Class A* .................. 187,530 ----------- 343,138 ----------- AUTOMOBILE PARTS & EQUIPMENT--1.3% 6,600 Copart, Inc.* .................................... 143,352 1,200 Midas, Inc.* ..................................... 19,020 4,500 Titan International, Inc. ........................ 43,875 28,000 Visteon Corp. .................................... 261,240 ----------- 467,487 ----------- BANKS--0.1% 2,200 SNB Bancshares, Inc.* ............................ 24,618 ----------- BIOTECH--4.8% 2,600 Alkermes, Inc.* .................................. 27,638 3,200 Amylin Pharmaceuticals, Inc.* .................... 63,328 1,300 Anika Therapeutics, Inc.* ........................ 16,952 9,300 Array BioPharma, Inc.* ........................... 63,240 7,765 Cephalon, Inc.* .................................. 365,033 2,200 Cypress Bioscience, Inc.* ........................ 22,660 1,800 Dyax Corp.* ...................................... 14,292 9,100 Exelixis, Inc.* .................................. 70,980 1,422 ILEX Oncology, Inc.* ............................. 35,465 4,200 ImClone Systems, Inc.* ........................... 223,776 2,700 Ligand Pharmaceuticals, Inc., Class B* ........... 26,541 1,800 Medicines Co. (The)* ............................. 45,504 695 Neurocrine Biosciences, Inc.* .................... 34,590 3,000 NitroMed, Inc.* .................................. 55,290 2,700 OSI Pharmaceuticals, Inc.* ....................... 160,893 3,400 Pharmion Corp.* .................................. 167,178 8,100 Salix Pharmaceuticals, Ltd.* ..................... 189,459 2,000 Sepracor, Inc.* .................................. 99,220 1,700 Telik, Inc.* ..................................... 32,198 ----------- 1,714,237 ----------- -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- BUILDING & BUILDING MATERIALS--0.2% 3,600 Perini Corp.* .................................... $ 54,360 ----------- BUILDING SUPPLIES--0.6% 7,000 NCI Building Systems, Inc.* ...................... 214,760 ----------- CHEMICALS - SPECIALTY--1.8% 4,100 Georgia Gulf Corp. ............................... 155,595 2,500 IMC Global, Inc. ................................. 39,850 4,500 Lubrizol Corp. (The) ............................. 160,425 1,100 OM Group, Inc.* .................................. 37,455 15,900 RPM International, Inc. .......................... 251,379 ----------- 644,704 ----------- COMMERCIAL SERVICES--0.1% 800 Viad Corp. ....................................... 19,048 ----------- COMMUNICATION EQUIPMENT--0.5% 7,900 Digi International, Inc.* ........................ 88,875 5,500 Novatel Wireless, Inc.* .......................... 108,075 ----------- 196,950 ----------- COMPUTER PERIPHERALS--0.6% 21,927 InFocus Corp.* ................................... 187,695 1,800 TransAct Technologies, Inc.* ..................... 32,040 ----------- 219,735 ----------- COMPUTER SERVICES--0.2% 4,700 Agilysys, Inc. ................................... 73,226 ----------- COMPUTER SOFTWARE--3.2% 9,500 Aspen Technology, Inc.* .......................... 55,005 7,100 Autodesk, Inc. ................................... 315,311 5,500 Intergraph Corp.* ................................ 142,670 20,500 Parametric Technology Corp.* ..................... 99,835 1,000 Progress Software Corp.* ......................... 20,140 8,150 SS&C Technologies, Inc. .......................... 133,823 7,700 SYNNEX Corp.* .................................... 122,353 18,639 Witness Systems, Inc.* ........................... 248,085 ----------- 1,137,222 ----------- CONSUMER PRODUCTS--1.2% 4,800 American Greetings Corp., Class A* ............... 115,536 5,500 Helen of Troy, Ltd.* ............................. 148,500 5,700 RC2 Corp.* ....................................... 180,177 ----------- 444,213 ----------- DATA PROCESSING--1.3% 1,200 CSG Systems International, Inc.* ................. 17,364 3,400 Dawson Geophysical Co.* .......................... 67,320 6,900 Dendrite International, Inc.* .................... 89,010 The accompanying notes are an integral part of the financial statements. 19 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- DATA PROCESSING--(CONTINUED) 1,000 Dun & Bradstreet Corp. (The)* .................... $ 55,140 9,800 NCO Group, Inc.* ................................. 250,488 ----------- 479,322 ----------- ELECTRICAL EQUIPMENT--0.5% 8,500 WESCO International, Inc.* ....................... 172,040 ----------- ELECTRONIC COMPONENTS & ACCESSORIES--5.1% 9,400 Amphenol Corp., Class A* ......................... 282,564 11,600 BEI Technologies, Inc. ........................... 322,944 1,500 Bel Fuse, Inc., Class B .......................... 56,805 6,000 CyberOptics Corp.* ............................... 105,060 11,900 Electro Scientific Industries, Inc.* ............. 246,211 14,221 Helix Technology Corp. ........................... 193,548 13,000 Jabil Circuit, Inc.* ............................. 268,190 15,200 Macrovision Corp.* ............................... 359,480 ----------- 1,834,802 ----------- ENGINEERING--0.7% 10,800 URS Corp.* ....................................... 266,760 ----------- FINANCIAL SERVICES--1.9% 9,500 Cash America International, Inc. ................. 219,830 3,800 First Cash Financial Services, Inc.* ............. 73,112 18,100 Fremont General Corp. ............................ 364,896 2,100 Jackson Hewitt Tax Service, Inc. ................. 40,635 ----------- 698,473 ----------- FOOD & AGRICULTURE--2.1% 4,100 Corn Products International, Inc. ................ 189,215 5,600 Nash Finch Co. ................................... 165,368 9,900 Pilgrim's Pride Corp. ............................ 251,658 4,000 Sanderson Farms, Inc. ............................ 136,760 ----------- 743,001 ----------- FUNERAL SERVICES--0.5% 27,300 Stewart Enterprises, Inc., Class A* .............. 185,913 ----------- HEALTH CARE--2.3% 2,200 Coventry Health Care, Inc.* ...................... 111,716 8,800 Genesis HealthCare Corp.* ........................ 273,592 8,400 Sierra Health Services, Inc.* .................... 362,208 4,500 WellCare Health Plans, Inc.* ..................... 82,125 ----------- 829,641 ----------- HOSPITALS--0.9% 25,200 Select Medical Corp. ............................. 334,656 ----------- -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- HOTELS & MOTELS--1.0% 6,700 Choice Hotels International, Inc. ................ $ 347,462 ----------- INSURANCE--0.6% 14,600 Assured Guaranty, Ltd. ........................... 234,038 ----------- INSURANCE - HEALTH & LIFE--0.4% 5,800 UICI ............................................. 161,298 ----------- INSURANCE - PROPERTY & CASUALTY--2.6% 11,700 Bristol West Holdings, Inc. ...................... 193,401 3,100 Everest Re Group, Ltd. ........................... 217,496 600 Infinity Property & Casualty Corp. ............... 16,452 6,365 IPC Holdings, Ltd. ............................... 230,986 10,100 Platinum Underwriters Holdings, Ltd. ............. 286,638 ----------- 944,973 ----------- INTERNET CONTENT--2.3% 36,600 EarthLink, Inc.* ................................. 366,366 2,200 Equinix, Inc.* ................................... 69,938 3,800 InfoSpace, Inc.* ................................. 144,400 18,300 LookSmart, Ltd.* ................................. 28,182 12,890 United Online, Inc.* ............................. 123,486 15,900 ValueClick, Inc.* ................................ 114,957 ----------- 847,329 ----------- INTERNET SOFTWARE--1.7% 10,134 Digital River, Inc.* ............................. 243,925 5,700 McAfee, Inc.* .................................... 112,746 16,100 RSA Security, Inc.* .............................. 239,729 ----------- 596,400 ----------- LEISURE & ENTERTAINMENT--1.5% 1,500 Boyd Gaming Corp. ................................ 40,725 5,700 MGM MIRAGE* ...................................... 235,638 1,900 Penn National Gaming, Inc.* ...................... 73,815 9,800 Scientific Games Corp., Class A* ................. 166,894 1,100 Speedway Motorsports, Inc. ....................... 35,497 ----------- 552,569 ----------- MACHINERY--3.0% 4,450 Bucyrus International, Inc., Class A* ............ 117,614 2,100 Cascade Corp. .................................... 54,180 7,200 Manitowoc Co., Inc. (The) ........................ 238,752 5,550 Middleby Corp. (The) ............................. 278,166 4,800 Stewart & Stevenson Services, Inc. ............... 80,208 4,400 Tecumseh Products Co., Class A ................... 181,060 3,800 Terex Corp.* ..................................... 137,294 ----------- 1,087,274 ----------- The accompanying notes are an integral part of the financial statements. 20 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- MANUFACTURING--3.1% 8,900 Albany International Corp., Class A .............. $ 259,435 1,200 ESCO Technologies, Inc.* ......................... 77,220 3,400 Harman International Industries, Inc. ............ 328,746 10,700 Wabash National Corp.* ........................... 283,871 10,400 Walter Industries, Inc. .......................... 154,336 ----------- 1,103,608 ----------- MEDICAL & MEDICAL SERVICES--1.2% 2,500 Covance, Inc.* ................................... 93,625 2,100 NeighborCare, Inc.* .............................. 53,319 1,900 Option Care, Inc. ................................ 29,887 3,900 Pediatrix Medical Group, Inc.* ................... 273,390 ----------- 450,221 ----------- MEDICAL INSTRUMENTS & SUPPLIES--4.4% 2,900 Advanced Medical Optics, Inc.* ................... 107,938 5,900 Cantel Medical Corp.* ............................ 160,775 2,000 Dade Behring Holdings, Inc.* ..................... 105,140 9,300 Haemonetics Corp.* ............................... 294,066 1,500 Intuitive Surgical, Inc.* ........................ 36,375 4,100 PerkinElmer, Inc. ................................ 71,668 7,000 Respironics, Inc.* ............................... 372,400 16,500 Urologix, Inc.* .................................. 165,990 5,500 Varian Medical Systems, Inc.* .................... 182,325 5,300 VISX, Inc.* ...................................... 107,484 ----------- 1,604,161 ----------- MORTGAGE--3.1% 11,150 Doral Financial Corp. ............................ 453,470 7,000 LandAmerica Financial Group, Inc. ................ 301,280 6,801 New Century Financial Corp. ...................... 364,806 ----------- 1,119,556 ----------- MULTIMEDIA/PUBLISHING--1.5% 6,900 Gemstar-TV Guide International, Inc.* ............ 36,432 1,600 Pixar* ........................................... 124,352 6,600 R.H. Donnelley Corp.* ............................ 306,570 3,700 Thomas Nelson, Inc. .............................. 70,300 ----------- 537,654 ----------- OIL & GAS EQUIPMENT & SERVICES--1.1% 7,000 FMC Technologies, Inc.* .......................... 215,040 10,900 Oil States International, Inc.* .................. 175,490 ----------- 390,530 ----------- -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- OIL & GAS FIELD EXPLORATION--1.1% 6,100 Houston Exploration Co. (The)* ................... $ 313,235 16,600 Mission Resources Corp.* ......................... 77,854 ----------- 391,089 ----------- OIL REFINING--2.3% 3,800 Frontier Oil Corp. ............................... 77,596 12,900 Giant Industries, Inc.* .......................... 287,670 9,200 Holly Corp. ...................................... 188,416 12,200 Tesoro Petroleum Corp.* .......................... 288,896 ----------- 842,578 ----------- PACKAGING--0.5% 4,000 Silgan Holdings, Inc. ............................ 179,000 ----------- PAPER & ALLIED PRODUCTS--0.2% 8,300 Buckeye Technologies, Inc.* ...................... 88,561 ----------- PHARMACEUTICALS--2.2% 10,703 Andrx Corp.* ..................................... 215,772 19,300 First Horizon Pharmaceutical Corp.* .............. 325,012 2,400 Natural Health Trends Corp.* ..................... 33,576 10,900 Noven Pharmaceuticals, Inc.* ..................... 206,991 ----------- 781,351 ----------- PRINTING--0.2% 1,400 Consolidated Graphics, Inc.* ..................... 57,190 ----------- REAL ESTATE INVESTMENT TRUSTS--3.4% 5,700 CBL & Associates Properties, Inc. ................ 348,156 1,000 Colonial Properties Trust ........................ 40,450 6,900 Mills Corp. (The) ................................ 351,486 16,700 OMEGA Healthcare Investors, Inc. ................. 170,340 6,500 Rayonier, Inc. ................................... 301,405 ----------- 1,211,837 ----------- RESIDENTIAL CONSTRUCTION--3.0% 8,000 Brookfield Homes Corp. ........................... 210,960 5,300 Levitt Corp., Class A ............................ 119,303 3,900 M.D.C. Holdings, Inc. ............................ 268,515 500 NVR, Inc.* ....................................... 251,125 4,700 Standard Pacific Corp. ........................... 237,209 ----------- 1,087,112 ----------- RESTAURANTS--0.6% 11,700 CKE Restaurants, Inc.* ........................... 140,049 3,200 Jack in the Box, Inc.* ........................... 90,368 ----------- 230,417 ----------- The accompanying notes are an integral part of the financial statements. 21 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] GROWTH FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- RETAIL - SPECIALTY--5.8% 14,300 7-Eleven, Inc.* .................................. $ 276,276 9,500 American Eagle Outfitters, Inc.* ................. 316,350 5,200 Barnes & Noble, Inc.* ............................ 179,712 1,300 Blue Nile, Inc.* ................................. 33,852 1,600 Claire's Stores, Inc. ............................ 38,944 15,198 Coldwater Creek, Inc.* ........................... 305,784 10,400 Dress Barn, Inc. (The)* .......................... 172,328 7,400 Hollywood Entertainment Corp.* ................... 74,666 14,700 J. Jill Group, Inc.* ............................. 265,923 1,300 Michaels Stores, Inc. ............................ 74,529 900 Regis Corp. ...................................... 36,837 1,000 Ruddick Corp. .................................... 19,070 16,000 Stein Mart, Inc.* ................................ 261,600 1,600 Wolverine World Wide, Inc. ....................... 38,592 ----------- 2,094,463 ----------- SAVINGS & LOAN ASSOCIATIONS--1.8% 1,700 FirstFed Financial Corp.* ........................ 77,520 7,300 Independence Community Bank Corp. ................ 286,452 3,500 MAF Bancorp, Inc. ................................ 146,405 5,400 Oriental Financial Group, Inc. ................... 145,746 ----------- 656,123 ----------- SCHOOLS--1.3% 1,400 Bright Horizons Family Solutions, Inc.* .......... 69,286 3,000 Career Education Corp.* .......................... 92,520 10,700 Education Management Corp.* ...................... 310,942 ----------- 472,748 ----------- SEMICONDUCTORS--2.5% 2,800 ATMI, Inc.* ...................................... 52,752 34,200 Axcelis Technologies, Inc.* ...................... 266,760 28,400 Silicon Image, Inc.* ............................. 312,400 17,600 Zoran Corp.* ..................................... 277,024 ----------- 908,936 ----------- SERVICES - MANAGEMENT CONSULTING--1.5% 17,400 Korn/Ferry International* ........................ 309,198 9,200 PDI, Inc.* ....................................... 221,628 ----------- 530,826 ----------- STEEL--0.8% 20,000 Oregon Steel Mills, Inc.* ........................ 289,600 ----------- TELECOMMUNICATIONS EQUIPMENT & SERVICES--5.5% 22,800 Airspan Networks, Inc.* .......................... 93,708 22,800 Crown Castle International Corp.* ................ 326,268 16,383 Ditech Communications Corp.* ..................... 352,562 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- TELECOMMUNICATIONS EQUIPMENT & SERVICES--(CONTINUED) 12,400 Dycom Industries, Inc.* .......................... $ 318,928 16,800 InterDigital Communications Corp.* ............... 261,912 30,645 NMS Communications Corp.* ........................ 147,096 16,200 Polycom, Inc.* ................................... 316,386 33,700 SBA Communications Corp., Class A* ............... 175,240 ----------- 1,992,100 ----------- TRANSPORTATION--2.9% 4,400 EGL, Inc.* ....................................... 106,612 4,880 Hub Group, Inc., Class A* ........................ 129,418 18,900 Laidlaw International, Inc.* ..................... 296,730 17,200 OMI Corp. ........................................ 218,784 7,100 Overseas Shipholding Group, Inc. ................. 305,300 ----------- 1,056,844 ----------- UTILITIES--0.7% 10,200 ONEOK, Inc. ...................................... 240,312 ----------- WASTE MANAGEMENT--0.8% 16,356 Metal Management, Inc.* .......................... 272,164 ----------- Total Common Stocks (Cost $34,481,234) ............................. 35,573,178 ----------- PRINCIPAL AMOUNT (000'S) -------------- REPURCHASE AGREEMENTS--3.7% $458 Bear, Stearns & Co. Inc. (Agreement dated 08/31/04 to be repurchased at $457,692), 0.78%, 09/01/04 (Note 6)** ..................... 457,682 864 Bear, Stearns & Co. Inc. (Agreement dated 08/31/04 to be repurchased at $864,470), 1.55%, 09/01/04 (Note 7) ....................... 864,432 ----------- Total Repurchase Agreements (Cost $1,322,114) .............................. 1,322,114 ----------- Total Investments -- 102.3% (Cost $35,803,348) .......................................... 36,895,292 ----------- Liabilities in Excess of Other Assets -- (2.3)% ............... (819,216) ----------- Net Assets -- 100.0% .......................................... $36,076,076 =========== --------- * Non-income producing. ** Investment purchased with collateral received for securities on loan. The accompanying notes are an integral part of the financial statements. 22 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] MID CAP FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- COMMON STOCKS--95.2% AEROSPACE & DEFENSE--3.5% 3,300 General Dynamics Corp. ........................... $ 322,212 6,200 Northrop Grumman Corp. ........................... 320,230 9,500 Raytheon Co. ..................................... 329,935 3,000 United Defense Industries, Inc.* ................. 114,690 ----------- 1,087,067 ----------- AIRLINES--0.2% 6,599 AMR Corp.* ....................................... 58,995 ----------- APPAREL--1.9% 7,400 Liz Claiborne, Inc. .............................. 281,718 6,200 V.F. Corp. ....................................... 305,908 ----------- 587,626 ----------- AUTOMOBILE--1.0% 7,300 General Motors Corp. ............................. 301,563 ----------- AUTOMOBILE PARTS & EQUIPMENT--3.0% 8,900 American Axle & Manufacturing Holdings, Inc. ............................................. 301,621 16,500 Dana Corp. ....................................... 311,355 5,600 Johnson Controls, Inc. ........................... 315,280 ----------- 928,256 ----------- BANKS--5.2% 7,900 BB&T Corp. ....................................... 315,921 8,100 Marshall & Ilsley Corp. .......................... 324,648 8,100 National City Corp. .............................. 306,099 2,300 Popular, Inc. .................................... 55,660 4,900 SunTrust Banks, Inc. ............................. 333,690 10,600 Synovus Financial Corp. .......................... 269,240 ----------- 1,605,258 ----------- BEVERAGES--0.4% 3,200 Constellation Brands, Inc.* ...................... 117,664 ----------- BIOTECH--2.0% 3,300 Affymetrix, Inc.* ................................ 91,740 5,100 Cephalon, Inc.* .................................. 239,751 2,800 Charles River Laboratories International, Inc.* .......................................... 121,940 3,200 ImClone Systems, Inc.* ........................... 170,496 ----------- 623,927 ----------- BROADCASTING--0.2% 1,700 Clear Channel Communications, Inc. ............... 56,967 ----------- -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- BUILDING SUPPLIES--1.1% 7,500 Lafarge North America, Inc. ...................... $ 336,075 ----------- CHEMICALS - SPECIALTY--2.6% 2,600 Engelhard Corp. .................................. 73,502 10,600 Lubrizol Corp. (The) ............................. 377,890 19,500 RPM International, Inc. .......................... 308,295 900 Sherwin-Williams Co. (The) ....................... 37,170 ----------- 796,857 ----------- COMMERCIAL SERVICES--0.4% 1,400 FedEx Corp. ...................................... 114,786 ----------- COMPUTER NETWORKING PRODUCTS--0.5% 6,100 Storage Technology Corp.* ........................ 147,925 ----------- COMPUTER SERVICES--1.0% 6,800 Computer Sciences Corp.* ......................... 315,180 ----------- COMPUTER SOFTWARE--3.0% 5,200 Adobe Systems, Inc. .............................. 238,524 7,000 Autodesk, Inc. ................................... 310,870 16,500 Citrix Systems, Inc.* ............................ 262,515 2,900 Intuit, Inc.* .................................... 122,641 ----------- 934,550 ----------- CONSUMER PRODUCTS--4.0% 4,600 Black & Decker Corp. (The) ....................... 317,078 9,400 Eastman Kodak Co. ................................ 278,052 4,300 Fortune Brands, Inc. ............................. 314,545 5,100 Whirlpool Corp. .................................. 311,814 ----------- 1,221,489 ----------- DRILLING OIL & GAS WELLS--0.3% 3,200 Transocean, Inc.* ................................ 98,240 ----------- ELECTRICAL EQUIPMENT--0.3% 2,100 Hubbell Inc., Class B ............................ 90,615 ----------- ELECTRONIC COMPONENTS & ACCESSORIES--2.2% 6,800 Amphenol Corp., Class A* ......................... 204,408 5,800 Arrow Electronics, Inc.* ......................... 125,512 7,400 Jabil Circuit, Inc.* ............................. 152,662 21,900 Sanmina-SCI Corp.* ............................... 151,548 4,800 Vishay Intertechnology, Inc.* .................... 61,200 ----------- 695,330 ----------- ENERGY--1.0% 7,400 TXU Corp. ........................................ 308,062 ----------- The accompanying notes are an integral part of the financial statements. 23 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] MID CAP FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- FINANCIAL SERVICES--0.3% 1,100 Bear, Stearns Cos., Inc. (The) ................... $ 96,712 ----------- FOOD & AGRICULTURE--2.0% 4,400 Corn Products International, Inc. ................ 203,060 11,400 Pilgrim's Pride Corp. ............................ 289,788 5,600 Sara Lee Corp. ................................... 123,928 ----------- 616,776 ----------- HAZARDOUS WASTE MANAGEMENT--0.4% 4,300 Republic Services, Inc. .......................... 120,185 ----------- HEALTH CARE--2.4% 8,500 Coventry Health Care, Inc.* ...................... 431,630 4,900 UnitedHealth Group, Inc. ......................... 324,037 ----------- 755,667 ----------- HOSPITALS--0.3% 7,500 Select Medical Corp. ............................. 99,600 ----------- HOTELS & MOTELS--0.6% 3,500 Choice Hotels International, Inc. ................ 181,510 ----------- INSURANCE--1.2% 12,300 Assurant, Inc. ................................... 326,442 2,900 Assured Guaranty, Ltd. ........................... 46,487 ----------- 372,929 ----------- INSURANCE - PROPERTY & CASUALTY--4.3% 6,200 ACE, Ltd. ........................................ 239,010 6,400 Allstate Corp. (The) ............................. 302,144 8,200 IPC Holdings, Ltd. ............................... 297,578 7,800 Old Republic International Corp. ................. 183,690 4,900 RenaissanceRe Holdings Ltd. ...................... 235,788 1,100 XL Capital Ltd., Class A ......................... 77,220 ----------- 1,335,430 ----------- INTERNET CONTENT--0.1% 3,000 Netflix, Inc.* ................................... 41,850 ----------- INTERNET SOFTWARE--1.1% 17,500 McAfee, Inc.* .................................... 346,150 ----------- LEISURE & ENTERTAINMENT--3.3% 6,500 Harrah's Entertainment, Inc. ..................... 313,235 7,100 MGM MIRAGE* ...................................... 293,514 6,500 Polaris Industries, Inc. ......................... 306,540 5,000 Regal Entertainment Group, Class A ............... 92,100 ----------- 1,005,389 ----------- -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- MANUFACTURING--0.8% 2,100 Harman International Industries, Inc. ............ $ 203,049 1,600 Tektronix, Inc. .................................. 45,712 ----------- 248,761 ----------- MEDICAL INSTRUMENTS & SUPPLIES--6.2% 6,400 Becton, Dickinson & Co. .......................... 307,968 6,000 Biomet, Inc. ..................................... 273,900 3,700 DENTSPLY International, Inc. ..................... 188,515 5,800 Edwards Lifesciences Corp.* ...................... 204,798 4,600 Laboratory Corp. of America Holdings* ............ 191,314 4,500 PerkinElmer, Inc. ................................ 78,660 5,500 Respironics, Inc.* ............................... 292,600 10,900 Varian Medical Systems, Inc.* .................... 361,335 ----------- 1,899,090 ----------- METALS - DIVERSIFIED--0.1% 400 Phelps Dodge Corp. ............................... 32,624 ----------- MORTGAGE--1.1% 8,200 Doral Financial Corp. ............................ 333,494 ----------- MULTIMEDIA/PUBLISHING--1.4% 1,200 Hearst-Argyle Television, Inc. ................... 29,100 3,700 McGraw-Hill Companies, Inc. (The) ................ 280,201 1,400 Pixar* ........................................... 108,808 ----------- 418,109 ----------- OFFICE & BUSINESS EQUIPMENT--1.0% 7,100 Pitney Bowes, Inc. ............................... 309,276 ----------- OIL & GAS EQUIPMENT & SERVICES--3.7% 7,200 Cooper Cameron Corp.* ............................ 366,696 9,800 Questar Corp. .................................... 398,664 7,400 Tidewater, Inc. .................................. 215,932 6,200 Varco International, Inc.* ....................... 150,536 ----------- 1,131,828 ----------- OIL & GAS FIELD EXPLORATION--1.4% 4,000 Amerada Hess Corp. ............................... 322,000 1,400 Kerr-McGee Corp. ................................. 73,892 800 Marathon Oil Corp. ............................... 29,016 ----------- 424,908 ----------- OIL REFINING--2.2% 5,000 Sunoco, Inc. ..................................... 307,500 2,600 Tesoro Petroleum Corp.* .......................... 61,568 4,800 Valero Energy Corp. .............................. 316,944 ----------- 686,012 ----------- The accompanying notes are an integral part of the financial statements. 24 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] MID CAP FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- PAPER & ALLIED PRODUCTS--0.5% 2,400 Temple-Inland, Inc. .............................. $ 163,872 ----------- PHARMACEUTICALS--0.7% 4,100 AmerisourceBergen Corp. .......................... 221,810 ----------- REAL ESTATE INVESTMENT TRUSTS--1.9% 2,300 CBL & Associates Properties, Inc. ................ 140,484 10,800 General Growth Properties, Inc. .................. 325,836 2,100 Mills Corp. (The) ................................ 106,974 ----------- 573,294 ----------- RESIDENTIAL CONSTRUCTION--2.7% 5,500 Centex Corp. ..................................... 251,735 4,400 KB HOME .......................................... 302,588 6,300 Lennar Corp., Class A ............................ 288,540 ----------- 842,863 ----------- RETAIL - DISCOUNT--0.3% 5,500 Dollar General Corp. ............................. 108,350 ----------- RETAIL - SPECIALTY--4.3% 17,500 7-Eleven, Inc.* .................................. 338,100 2,900 Abercrombie & Fitch Co., Class A ................. 81,200 2,600 Dillard's, Inc., Class A ......................... 49,400 5,000 Federated Department Stores, Inc. ................ 217,000 1,800 Kmart Holding Corp.* ............................. 137,916 4,700 Office Depot, Inc.* .............................. 75,247 4,700 RadioShack Corp. ................................. 126,618 10,900 Staples, Inc. .................................... 312,612 ----------- 1,338,093 ----------- SAVINGS & LOAN ASSOCIATIONS--5.3% 8,400 American Capital Strategies, Ltd. ................ 262,080 13,500 Associated Banc-Corp ............................. 422,550 2,600 Astoria Financial Corp. .......................... 94,484 11,100 Independence Community Bank Corp. ................ 435,564 7,500 North Fork Bancorporation, Inc. .................. 314,550 2,000 Webster Financial Corp. .......................... 98,400 ----------- 1,627,628 ----------- SCHOOLS--0.8% 7,800 Career Education Corp.* .......................... 240,552 ----------- SEMICONDUCTORS--0.2% 2,000 Cree, Inc.* ...................................... 50,020 ----------- SERVICES - MANAGEMENT CONSULTING--1.0% 12,000 Accenture, Ltd., Class A* ........................ 313,200 ----------- -------------------------------------------------------------------------------- VALUE SHARES (NOTE 1) -------------------------------------------------------------------------------- STEEL--0.3% 2,700 International Steel Group, Inc.* ................. $ 82,080 ----------- TELECOMMUNICATIONS--1.1% 10,400 CenturyTel, Inc. ................................. 334,776 ----------- TELECOMMUNICATIONS EQUIPMENT & INFRASTRUCTURE--0.4% 10,900 Corning, Inc.* ................................... 110,308 ----------- TELECOMMUNICATIONS EQUIPMENT & SERVICES--3.6% 5,100 ALLTEL Corp. ..................................... 278,715 6,400 Crown Castle International Corp.* ................ 91,584 2,400 EchoStar Communications Corp., Class A* .......... 73,560 18,452 Polycom, Inc.* ................................... 360,368 35,300 Tellabs, Inc.* ................................... 320,171 ----------- 1,124,398 ----------- TRANSPORTATION--0.8% 3,500 Burlington Northern Santa Fe Corp. ............... 125,300 4,000 Norfolk Southern Corp. ........................... 113,600 ----------- 238,900 ----------- UTILITIES--3.1% 7,600 Alliant Energy Corp. ............................. 197,524 3,600 Equitable Resources, Inc. ........................ 188,748 20,700 Northeast Utilities .............................. 396,819 7,500 ONEOK, Inc. ...................................... 176,700 ----------- 959,791 ----------- WHOLESALE - GROCERIES & GENERAL LINE--0.5% 5,400 SUPERVALU, Inc. .................................. 142,344 ----------- Total Common Stocks (Cost $28,599,766) ............................. 29,355,011 ----------- The accompanying notes are an integral part of the financial statements. 25 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] MID CAP FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2004 -------------------------------------------------------------------------------- PRINCIPAL VALUE AMOUNT (000'S) (NOTE 1) -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS--6.3% $ 460 Bear, Stearns & Co. Inc. (Agreement dated 08/31/04 to be repurchased at $459,893), 0.78%, 09/01/04 (Note 6)** ..................... $ 459,884 1,473 Bear, Stearns & Co. Inc. (Agreement dated 08/31/04 to be repurchased at $1,472,874), 1.55%, 09/01/04 (Note 7) ....................... 1,472,811 ----------- Total Repurchase Agreements (Cost $1,932,695) .............................. 1,932,695 ----------- Total Investments -- 101.5% (Cost $30,532,461) .......................................... 31,287,706 ----------- Liabilities in Excess of Other Assets -- (1.5)% ............... (465,971) ----------- Net Assets -- 100.0% .......................................... $30,821,735 =========== --------- * Non-income producing. ** Investment purchased with collateral received for securities on loan. The accompanying notes are an integral part of the financial statements. 26 [THIS PAGE INTENTIONALLY LEFT BLANK.] (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 2004
EMERGING GROWTH GROWTH MID CAP FUND FUND FUND --------------- ----------- ----------- ASSETS Investments, at value including the value of securities on loan (Note 6) (Cost -- $129,863,183, $35,803,348 and $30,532,461 respectively) .............. $133,991,185 $36,895,292 $31,287,706 Receivable for investments sold ........................... 4,439,086 1,008,599 557,363 Dividends and interest receivable ......................... 29,772 12,462 45,109 Receivable for Fund shares sold ........................... 34,176 41,119 200 Prepaid expenses and other assets ......................... 15,011 11,103 10,754 ------------ ----------- ----------- Total assets ........................................... 138,509,230 37,968,575 31,901,132 ------------ ----------- ----------- LIABILITIES Payable for investments purchased ......................... 3,564,166 1,348,327 575,902 Payable upon return of securities loaned (Note 6) ......... 1,198,528 457,682 459,884 Payable for Fund shares redeemed .......................... 35,891 9,368 -- Investment advisory fee payable ........................... 85,124 33,044 4,181 Accrued expenses and other liabilities .................... 94,301 44,078 39,430 ------------ ----------- ----------- Total liabilities ...................................... 4,978,010 1,892,499 1,079,397 ------------ ----------- ----------- NET ASSETS Capital stock, $0.001 par value ........................... 7,641 2,778 1,948 Additional paid-in capital ................................ 94,897,065 38,889,772 30,847,560 Undistributed net investment income ....................... -- -- 138,858 Accumulated net realized gain/(loss) from investments ............................................ 34,498,512 (3,908,418) (921,876) Net unrealized appreciation on investments ................ 4,128,002 1,091,944 755,245 ------------ ----------- ----------- Net assets applicable to shares outstanding ............... $133,531,220 $36,076,076 $30,821,735 ============ =========== =========== Shares outstanding ........................................... 7,640,965 2,778,036 1,948,488 ------------ ----------- ----------- Net asset value, offering and redemption price per share ................................................. $17.48 $12.99 $15.82 ====== ====== ======
The accompanying notes are an integral part of the financial statements. 28 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] STATEMENTS OF OPERATIONS FOR THE FISCAL YEAR ENDED AUGUST 31, 2004
EMERGING GROWTH GROWTH MID CAP FUND FUND FUND ------------ ----------- ----------- INVESTMENT INCOME Dividends* ............................................ $ 742,194 $ 258,322 $ 414,467 Interest .............................................. 50,005 11,623 10,985 Securities lending (Note 6) ........................... 26,360 5,052 2,434 ------------ ----------- ----------- Total investment income ............................ 818,559 274,997 427,886 ------------ ----------- ----------- EXPENSES Investment advisory fees (Note 2) ..................... 1,079,356 322,175 123,573 Co-Administration fees and expenses ................... 284,412 109,634 101,313 Administrative services fees .......................... 215,871 57,922 44,638 Transfer agent fees and expenses ...................... 65,399 48,747 58,196 Audit and legal fees .................................. 47,553 19,516 20,093 Printing .............................................. 54,484 15,190 10,419 Custodian fees and expenses ........................... 48,974 12,084 9,527 Shareholder service fees .............................. 42,166 9,101 16,747 Federal and state registration fees ................... 15,566 13,553 12,471 Directors' and officer's fees and expenses ............ 16,018 4,110 4,142 Other ................................................. 8,447 2,136 1,589 ------------ ----------- ----------- Total expenses before waivers and reimbursements, if any .......................... 1,878,246 614,168 402,708 Less: waivers and reimbursements, if any ........... (219,469) (89,813) (113,715) ------------ ----------- ----------- Net expenses after waivers and reimbursements, if any .......................... 1,658,777 524,355 288,993 ------------ ----------- ----------- Net Investment Income/(Loss) ....................... (840,218) (249,358) 138,893 ------------ ----------- ----------- NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain from investments .................... 38,873,967 8,575,883 5,375,698 Net change in unrealized appreciation on investments ........................................ (20,887,368) (3,978,325) (1,692,107) ------------ ----------- ----------- Net realized and unrealized gain on investments ........................................ 17,986,599 4,597,558 3,683,591 ------------ ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 17,146,381 $ 4,348,200 $ 3,822,484 ============ =========== =========== ----------- * Net of foreign withholding taxes of $4,195, $1,173 and $634 for the Emerging Growth Fund, Growth Fund and Mid Cap Fund, respectively.
The accompanying notes are an integral part of the financial statements. 29 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] STATEMENTS OF CHANGES IN NET ASSETS
EMERGING GROWTH GROWTH FUND FUND ------------------------------- ----------------------------- FOR THE FISCAL YEARS FOR THE FISCAL YEARS ENDED AUGUST 31, ENDED AUGUST 31, ------------------------------- ----------------------------- 2004 2003 2004 2003 ------------ ------------ ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income/(loss) ....................... $ (840,218) $ (571,054) $ (249,358) $ (271,085) Net realized gain/(loss) from investments .......... 38,873,967 9,440,716 8,575,883 2,126,107 Net change in unrealized appreciation/(depreciation) on investments .................................. (20,887,368) 24,531,048 (3,978,325) 6,516,833 ------------ ------------ ----------- ----------- Net increase in net assets resulting from operations ...................................... 17,146,381 33,400,710 4,348,200 8,371,855 ------------ ------------ ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .............................. -- -- -- -- Net realized capital gains ......................... (2,757,588) -- -- -- ------------ ------------ ----------- ----------- Total dividends and distributions to shareholders .. (2,757,588) -- -- -- ------------ ------------ ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ................ (11,143,293) 19,899 (2,081,318) (8,596,538) ------------ ------------ ----------- ----------- Total increase/(decrease) in net assets ............ 3,245,500 33,420,609 2,266,882 (224,683) NET ASSETS Beginning of year .................................. 130,285,720 96,865,111 33,809,194 34,033,877 ------------ ------------ ----------- ----------- End of year* ....................................... $133,531,220 $130,285,720 $36,076,076 $33,809,194 ============ ============ =========== =========== MID CAP FUND ----------------------------- FOR THE FISCAL YEARS ENDED AUGUST 31, ----------------------------- 2004 2003 ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS: Net investment income/(loss) ....................... $ 138,893 $ 158,640 Net realized gain/(loss) from investments .......... 5,375,698 (57,630) Net change in unrealized appreciation/(depreciation) on investments .................................. (1,692,107) 3,661,873 ----------- ----------- Net increase in net assets resulting from operations ...................................... 3,822,484 3,762,883 ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .............................. (158,675) (167,268) Net realized capital gains ......................... -- -- ----------- ----------- Total dividends and distributions to shareholders .. (158,675) (167,268) ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ................ 1,046,142 (2,592,660) ----------- ----------- Total increase/(decrease) in net assets ............ 4,709,951 1,002,955 NET ASSETS Beginning of year .................................. 26,111,784 25,108,829 ----------- ----------- End of year* ....................................... $30,821,735 $26,111,784 =========== =========== * Includes undistributed net investment income as follows:
FOR THE FISCAL YEARS ENDED AUGUST 31, ---------------------------- 2004 2003 -------- --------- Emerging Growth Fund ........................ -- -- Growth Fund ................................. -- -- Mid Cap Fund ................................ $138,858 $158,640 The accompanying notes are an integral part of the financial statements. 30 & 31 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Contained below is per share operating performance data for each share outstanding, total investment return, ratios to average net assets and other supplemental data for the respective years. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
EMERGING GROWTH FUND ---------------------------------------------------------- FOR THE FISCAL YEARS ENDED AUGUST 31, ---------------------------------------------------------- 2004 2003 2002 2001 2000 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ......................... $ 15.81 $ 11.81 $ 12.73 $ 20.99 $ 18.03 ------- ------- ------- ------- ------- Net investment loss ........................................ (0.11) (1) (0.07) (1) (0.10) (0.07) (0.10) Net realized and unrealized gain/(loss) on investments (2) ......................................... 2.12 4.07 (0.82) (3.58) 7.39 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ......................................... 2.01 4.00 (0.92) (3.65) 7.29 ------- ------- ------- ------- ------- Distributions to shareholders from: Net realized capital gains ................................. (0.34) -- -- (4.61) (4.33) ------- ------- ------- ------- ------- Redemption fees (Note 5)* .................................. -- -- -- -- -- ------- ------- ------- ------- ------- Net asset value, end of year ............................... $ 17.48 $ 15.81 $ 11.81 $ 12.73 $ 20.99 ======= ======= ======= ======= ======= Total investment return (3) ................................ 12.71% 33.87% (7.23)% (20.16)% 54.42% ======= ======= ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) .................... $133,531 $130,286 $96,865 $139,927 $134,533 Ratio of expenses to average net assets (4) ................ 1.15% 1.20% 1.12% 1.07% 1.00% Ratio of expenses to average net assets without waivers and expense reimbursements, if any .................................. 1.31% 1.36% 1.26% 1.25% 1.28% Ratio of net investment loss to average net assets (4) .......................................... (0.58)% (0.55)% (0.75)% (0.67)% (0.55)% Portfolio turnover rate .................................... 269.90% 227.46% 216.40% 280.00% 297.08% GROWTH FUND ------------------------------------------------------------- FOR THE FISCAL YEARS ENDED AUGUST 31, ------------------------------------------------------------- 2004 2003 2002 2001 2000 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ......................... $ 11.53 $ 9.07 $ 10.48 $ 23.69 $ 14.89 ------- ------- ------- ------- ------- Net investment loss ........................................ (0.09) (1) (0.08) (1) (0.10) (0.10) (0.12) Net realized and unrealized gain/(loss) on investments (2) ......................................... 1.55 2.54 (1.31) (6.59) 9.29 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ......................................... 1.46 2.46 (1.41) (6.69) 9.17 ------- ------- ------- ------- ------- Distributions to shareholders from: Net realized capital gains ................................. -- -- -- (6.52) (0.37) ------- ------- ------- ------- ------- Redemption fees (Note 5)* .................................. -- -- -- -- -- ------- ------- ------- ------- ------- Net asset value, end of year ............................... $ 12.99 $ 11.53 $ 9.07 $ 10.48 $ 23.69 ======= ======= ======= ======= ======= Total investment return (3) ................................ 12.66% 27.12% (13.45)% (36.45)% 63.11% ======= ======= ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) .................... $36,076 $33,809 $34,034 $39,930 $79,520 Ratio of expenses to average net assets (4) ................ 1.36% 1.49% 1.35% 1.08% 1.00% Ratio of expenses to average net assets without waivers and expense reimbursements, if any .................................. 1.59% 1.79% 1.54% 1.36% 1.32% Ratio of net investment loss to average net assets (4) .......................................... (0.65)% (0.81)% (0.96)% (0.70)% (0.59)% Portfolio turnover rate .................................... 291.02% 237.59% 241.28% 271.29% 228.69% --------------- * Amount is less than $0.01 per share. (1) Calculated based on average shares outstanding for the year. (2) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of fund shares in relation to fluctuating net asset values during the respective years. (3) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each year reported and includes reinvestment of dividends and distributions, if any. (4) Reflects waivers and expense reimbursements, if any.
The accompanying notes are an integral part of the financial statements. 32 & 33 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] FINANCIAL HIGHLIGHTS (CONCLUDED) -------------------------------------------------------------------------------- Contained below is per share operating performance data for each share outstanding, total investment return, ratios to average net assets and other supplemental data for the respective years. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
MID CAP FUND ---------------------------------------------------------- FOR THE FISCAL YEARS ENDED AUGUST 31, ---------------------------------------------------------- 2004 2003 2002 2001 2000 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ......................... $ 13.88 $ 11.98 $ 13.16 $ 19.22 $ 16.89 ------- ------- ------- ------- ------- Net investment income ...................................... 0.07 0.08 0.08 0.06 0.08 Net realized and unrealized gain/(loss) on investments and futures transactions, if any (1) .............................................. 1.96 1.90 (1.22) (2.98) 4.25 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ......................................... 2.03 1.98 (1.14) (2.92) 4.33 ------- ------- ------- ------- ------- Dividends and distributions to shareholders from: Net investment income ...................................... (0.09) (0.08) (0.06) (0.08) (0.03) Net realized capital gains ................................. -- -- -- (3.06) (1.97) ------- ------- ------- ------- ------- Total dividends and distributions to shareholders .......... (0.09) (0.08) (0.06) (3.14) (2.00) ------- ------- ------- ------- ------- Redemption fees (Note 5) ................................... --* --* 0.02 --* --* ------- ------- ------- ------- ------- Net asset value, end of year ............................... $ 15.82 $ 13.88 $ 11.98 $ 13.16 $ 19.22 ======= ======= ======= ======= ======= Total investment return (2) ................................ 14.64% 16.70% (8.48)% (17.42)% 29.61% ======= ======= ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) .................... $30,822 $26,112 $25,109 $31,198 $44,430 Ratio of expenses to average net assets (3) ................ 0.97% 1.00% 0.85% 0.91% 1.00% Ratio of expenses to average net assets without waivers and expense reimbursements, if any .............. 1.35% 1.52% 1.27% 1.39% 1.61% Ratio of net investment income to average net assets (3) .......................................... 0.47% 0.66% 0.59% 0.39% 0.40% Portfolio turnover rate .................................... 292.78% 227.20% 270.77% 318.28% 378.17% ----------------- * Amount is less than $0.01 per share. (1) The amounts shown for a share outstanding throughout the respective years are not in accord with the changes in the aggregate gains and losses on investments during the respective years because of the timing of the sales and repurchases of fund shares in relation to fluctuating net asset values during the respective years. (2) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each year reported and includes reinvestment of dividends and distributions, if any. (3) Reflects waivers and expense reimbursements, if any.
The accompanying notes are an integral part of the financial statements. 34 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988, and is registered under the Investment Company Act of 1940, as amended, (the "Investment Company Act") as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has fourteen active investment portfolios, including the n/i NUMERIC INVESTORS FAMILY OF FUNDS ("n/i numeric investors Family") which consists of four diversified portfolios: n/i NUMERIC INVESTORS Emerging Growth Fund ("Emerging Growth Fund"), n/i NUMERIC INVESTORS Growth Fund ("Growth Fund"), n/i NUMERIC INVESTORS Mid Cap Fund ("Mid Cap Fund") and n/i NUMERIC INVESTORS Small Cap Value Fund ("Small Cap Value Fund")(each, a "Fund," and collectively, the "Funds"). RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion are currently classified into ninety-seven classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. PORTFOLIO VALUATION -- The Funds' net asset value ("NAV") is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Securities held by the Funds are valued using the closing price or the last sale price on a national securities exchange or on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there were no sales on that day or the securities are traded on other over-the-counter markets, the mean of the last bid and ask price prior to the market close are used. Short-term debt securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Debt securities having a remaining maturity of greater than 60 days are valued at the mean between the bid and ask prices. With the approval of the Company's Board of Directors, the Funds may use a pricing service, bank or broker/dealer experience in providing valuations to value the Funds' securities. If market quotations are unavailable or deemed unreliable, securities will be valued by the Funds' Valuation Committee as determined by procedures adopted by the Board of Directors. REPURCHASE AGREEMENTS -- Each Fund has agreed to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The financial institutions with whom each Fund enters into repurchase agreements are banks and broker/dealers, which Numeric Investors LLC(R) (the Funds' "Adviser" or "Numeric") considers creditworthy. The seller under a repurchase agreement will be required to maintain the value of the securities as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. 35 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) Numeric marks to market daily the value of the collateral, and, if necessary, requires the seller to deposit additional collateral by the next business day, so that the value of the collateral is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose each Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES -- The Funds record security transactions 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 in determining realized gains and losses on investments. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. Expenses incurred on behalf of a specific fund or fund family are charged directly to the fund or fund family (in proportion to net assets). Expenses incurred for all of the RBB families (such as director or professional fees) are charged to all funds in proportion to their net assets of the RBB Funds, or in such other manner as the Board of Directors deems fair or equitable. Expenses and fees, including investment advisory and administration fees, are accrued daily and taken into account for the purpose of determining the net asset value of the Funds. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and from net realized capital gains, if any, will be declared and recorded on the ex-dividend date and paid at least annually to shareholders. Income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. These differences can include the treatment of non-taxable dividends, expiring capital loss carryforwards, foreign currency gain/loss, and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the composition of net assets. The following permanent differences as of August 31, 2004, primarily attributable to net investment loss, were reclassified to the following accounts:
DECREASE INCREASE DECREASE ACCUMULATED NET ACCUMULATED ADDITIONAL PAID-IN REALIZED GAIN/(LOSS) FUND NET INVESTMENT LOSS CAPITAL FROM INVESTMENTS ---- ------------------- ------------------ -------------------- Emerging Growth Fund .................... $840,218 -- $(840,218) Growth Fund ............................. 249,358 $(249,358) --
U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is each Fund's intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from all or substantially all U.S. federal income and excise taxes. OTHER -- In the normal course of business, the Funds may enter into contracts that provide general indemnifications. The Funds' maximum exposure under these arrangements is dependent on claims that may be made against the Funds in the future, and, therefore, cannot be estimated; however, based on experience, the risk of material loss for such claims is considered remote. 36 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Numeric serves as each Fund's investment adviser. Numeric is entitled to a performance-based fee for its advisory services for the Growth and Mid Cap Funds' calculated at the end of each month using a basic fee of 0.85% of average daily net assets and a performance fee adjustment based on each Fund's performance during the last rolling 12-month period. Each Fund's net performance is compared with the performance of its benchmark index during that same rolling 12-month period. When a Fund's performance is at least 5.00% better than its benchmark, it would pay Numeric more than the basic fee. If a Fund did not perform at least 4.00% better than its benchmark, Numeric would be paid less than the basic fee. Each 1.00% of the difference in performance between a Fund and its benchmark plus 4.00% during the performance period would result in a 0.10% adjustment to the basic fee. The maximum annualized performance adjustment rate would be + or - 0.50% of average daily net assets which would be added to or deducted from the basic fee. The staff of the Securities and Exchange Commission (the "Staff") notified the Company that the methodology used to calculate the performance-based investment advisory fee for the Growth Fund and Mid Cap Fund (the "Funds") did not comply with the rules under the Investment Advisers Act of 1940, as amended, (the "Advisers Act") concerning performance fees. The rules under the Advisers Act require the performance rate to be applied to the average net assets over the performance period (a twelve-month rolling period for this Fund) rather than the average daily net assets in the most recent month, as was done previously. In applying the revised methodology as proposed by the Staff, it appears that Numeric was underpaid by the Growth Fund and Mid Cap Fund since the inception of the contract in January 2001. The Company and Numeric will not seek reimbursement for any unpaid fees from the Funds. Commencing in September 2004, the Company began calculating the fee in the manner requested by the Staff. Numeric is entitled to receive 0.75% of the Emerging Growth Fund's average daily net assets, computed daily and payable monthly for its advisory services. 37 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the fiscal year ended August 31, 2004, Numeric waived certain investment advisory fees, waivers and expense reimbursements were as follows:
TOTAL INVESTMENT NET INVESTMENT EXPENSE FUND ADVISORY FEES WAIVERS ADVISORY FEES REIMBURSEMENT ---- ---------------- -------- -------------- ------------- Emerging Growth Fund ...................................... $1,079,356 -- $1,079,356 -- Growth Fund ............................................... 322,175 $(34,614) 287,561 -- Mid Cap Fund .............................................. 123,573 (69,657) 53,916 $372
The Funds will not pay Numeric at a later time for any amounts it may waive or any amounts which Numeric has assumed. PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., and Bear Stearns Funds Management Inc. ("BSFM"), a wholly-owned subsidiary of The Bear Stearns Companies Inc., serve as co-administrators for each Fund. For providing administrative services PFPC is entitled to receive a monthly fee equal to an annual rate of 0.125% of each Fund's average daily net assets subject to a minimum monthly fee of $6,250 per Fund. BSFM is entitled to receive a monthly fee equal to an annual rate of 0.05% on the first $150 million and 0.02% of each Fund's average daily net assets thereafter. For the fiscal year ended August 31, 2004, PFPC, voluntarily agreed to waive a portion of its administration fees. During such period, PFPC's co-administration fees and related waivers were as follows:
TOTAL PFPC NET PFPC CO-ADMINISTRATION FEES PFPC CO-ADMINISTRATION FEES FUND AND EXPENSES WAIVERS AND EXPENSES ---- ---------------------- --------- --------------------- Emerging Growth Fund ........................ $188,841 $(32,381) $156,460 Growth Fund ................................. 83,922 (5,000) 78,922 Mid Cap Fund ................................ 81,584 (5,000) 76,584
For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by the Funds and PFPC. This fee is allocated to each portfolio of RBB based on each portfolio's average net assets as a percentage of the total RBB related net assets. For the fiscal year ended August 31, 2004, the regulatory administrative services fees were $23,903, $6,405 and $4,849 for the Emerging Growth Fund, Growth Fund and Mid Cap Fund, respectively. In addition, PFPC serves as each Fund's transfer and dividend disbursing agent. For the fiscal year ended August 31, 2004, transfer agency fees and expenses were $65,399, $48,747 and $58,196 for the Emerging Growth Fund, Growth Fund and Mid Cap Fund, respectively. PFPC Distributors, Inc. ("PFPC Distributors"), a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., provides certain administrative services to each Fund. As compensation for such administrative services, PFPC Distributors received a monthly fee equal to an annual rate of 0.15% of each Fund's average daily net assets. 38 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) For the fiscal year ended August 31, 2004, PFPC Distributors, voluntarily agreed to waive a portion of its administrative services fees for each Fund. During such period, administrative services fees were as follows:
TOTAL ADMINISTRATIVE NET ADMINISTRATIVE FUND SERVICES FEES WAIVERS SERVICES FEES ---- -------------- ---------- ------------------ Emerging Growth Fund ............................ $215,871 $(187,088) $28,783 Growth Fund ..................................... 57,922 (50,199) 7,723 Mid Cap Fund .................................... 44,638 (38,686) 5,952
The Emerging Growth Fund, Growth Fund and Mid Cap Fund owed PFPC and its affiliates $22,553, $12,396 and $11,114, respectively, for their services as of August 31, 2004. 3. SHAREHOLDER SERVICES PLAN The Board of Directors approved a Shareholder Services Plan which permits the Funds to pay fees to certain Shareholder Organizations of up to 0.25% of the average daily net assets of each Fund for which such Shareholder Organizations provide services for the benefit of customers. 4. INVESTMENT IN SECURITIES For the fiscal year ended August 31, 2004, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: FUND PURCHASES SALES ---- ------------ ------------ Emerging Growth Fund .......................... $372,674,557 $386,993,636 Growth Fund ................................... 106,857,100 108,688,857 Mid Cap Fund .................................. 84,340,552 83,859,167 39 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARE TRANSACTIONS As of August 31, 2004, each Fund has 50,000,000 shares of $0.001 par value capital stock authorized. Transactions in capital shares for the respective periods were as follows: EMERGING GROWTH FUND --------------------------------------------------- FOR THE FOR THE FISCAL YEAR ENDED FISCAL YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- ---------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ -------- ----------- Sales .................... 661,507 $ 12,007,872 804,076 $ 9,594,697 Repurchases .............. (1,417,033) (25,872,144) (766,322) (9,574,798) Reinvestments ............ 155,841 2,720,979 -- -- ---------- ------------ -------- ----------- Net increase/(decrease) .. (599,685) $(11,143,293) 37,754 $ 19,899 ========== ============ ======== =========== GROWTH FUND --------------------------------------------------- FOR THE FOR THE FISCAL YEAR ENDED FISCAL YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- ---------------------- SHARES AMOUNT SHARES AMOUNT ---------- ----------- -------- ----------- Sales .................... 450,488 $ 6,107,468 78,665 $ 733,076 Repurchases .............. (603,709) (8,188,786) (898,509) (9,329,614) ---------- ----------- -------- ----------- Net decrease ............. (153,221) $(2,081,318) (819,844) $(8,596,538) ========== =========== ======== =========== MID CAP FUND --------------------------------------------------- FOR THE FOR THE FISCAL YEAR ENDED FISCAL YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- ---------------------- SHARES AMOUNT SHARES AMOUNT ---------- ----------- -------- ----------- Sales .................... 309,072 $ 4,753,551 92,608 $ 1,080,079 Repurchases .............. (251,600) (3,859,957) (321,954) (3,835,656) Reinvestments ............ 10,217 152,548 14,677 162,917 ---------- ----------- -------- ----------- Net increase/(decrease) .. 67,689 $ 1,046,142 (214,669) $(2,592,660) ========== =========== ======== =========== There is a 2.00% redemption fee on shares redeemed which have been held for less than one year on each of the Funds. For the fiscal year ended August 31, 2004, these fees amounted to $18,386, $10,319 and $5,688 for the Emerging Growth Fund, Growth Fund and Mid Cap Fund, respectively. The redemption fees are collected and retained by each Fund for the benefit of the remaining shareholders and recorded as additional paid-in capital. 40 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 6. SECURITIES LENDING Loans of securities are required at all times to be secured by collateral equal to at least 100% of the market value of the securities on loan. 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. In the event that the borrower fails to return securities, and collateral being maintained by the lender is insufficient to cover the value of loaned securities, the borrower is obligated to pay the amount of the shortfall (and interest thereon) to the Funds. However, there can be no assurance the Funds can recover this amount. The value of securities on loan to brokers and the aggregate value of collateral by the Funds and pledged to borrowers at August 31, 2004, were as follows: VALUE OF FUND SECURITIES ON LOAN VALUE OF COLLATERAL ---- ------------------ ------------------- Emerging Growth Fund ............... $14,452,525 $14,839,024 Growth Fund ........................ 2,524,888 2,585,000 Mid Cap Fund ....................... 1,233,294 1,256,292 Collateral pledged by borrowers for securities out on loan to broker/dealers is in the form of U.S. Treasury securities. Cash collateral received by the Funds is invested into repurchase agreements with Bear, Stearns & Co. Inc., which in turn are collateralized by various U.S. Treasury securities. The stated interest rate on repurchase agreements is net of rebate paid to the borrower on securities loaned. Collateral for repurchase agreements in connection with securities lending at August 31, 2004 are listed below:
EMERGING GROWTH FUND ---------------------------------------------------------------------------- PRINCIPAL AMOUNT ACCRUED ISSUER (000'S) INTEREST RATE MATURITY MARKET VALUE INTEREST TOTAL VALUE ------ --------- ------------- -------- ------------ -------- ------------ Related Collateral: United States Treasury Bond .......... $1,155 5.500% 08/15/28 $1,231,877 $2,823 $1,234,700 GROWTH FUND ---------------------------------------------------------------------------- PRINCIPAL AMOUNT ACCRUED ISSUER (000'S) INTEREST RATE MATURITY MARKET VALUE INTEREST TOTAL VALUE ------ --------- ------------- -------- ------------ -------- ------------ Related Collateral: United States Treasury Bond .......... $ 445 5.500% 08/15/28 $ 474,619 $1,088 $ 475,707 MID CAP FUNDD ---------------------------------------------------------------------------- PRINCIPAL AMOUNT ACCRUED ISSUER (000'S) INTEREST RATE MATURITY MARKET VALUE INTEREST TOTAL VALUE ------ --------- ------------- -------- ------------ -------- ------------ Related Collateral: United States Treasury Bond $ 445 5.500% 08/15/28 $ 474,619 $1,088 $ 475,707
41 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. COLLATERAL FOR REPURCHASE AGREEMENTS Listed below is the collateral associated with the repurchase agreements with Bear, Stearns & Co. Inc., outstanding at August 31, 2004:
EMERGING GROWTH FUND ---------------------------------------------------------------------------- PRINCIPAL AMOUNT ACCRUED ISSUER (000'S) INTEREST RATE MATURITY MARKET VALUE INTEREST TOTAL VALUE ------ --------- ------------- -------- ------------ -------- ------------ United States Treasury Bond .......... $3,490 5.500% 08/15/28 $3,722,294 $ 8,531 $3,730,825 GROWTH FUND ---------------------------------------------------------------------------- PRINCIPAL AMOUNT ACCRUED ISSUER (000'S) INTEREST RATE MATURITY MARKET VALUE INTEREST TOTAL VALUE ------ --------- ------------- -------- ------------ -------- ------------ United States Treasury Bond .......... $ 835 5.500% 08/15/28 $ 890,578 $ 2,041 $ 892,619 MID CAP FUND ---------------------------------------------------------------------------- PRINCIPAL AMOUNT ACCRUED ISSUER (000'S) INTEREST RATE MATURITY MARKET VALUE INTEREST TOTAL VALUE ------ --------- ------------- -------- ------------ -------- ------------ United States Treasury Bond .......... $1,420 5.500% 08/15/28 $1,514,515 $ 3,471 $1,517,986
8. FEDERAL INCOME TAX INFORMATION At August 31, 2004, Federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by each Fund were as follows:
FEDERAL TAX UNREALIZED UNREALIZED NET UNREALIZED FUND COST APPRECIATION DEPRECIATION APPRECIATION ---- ------------ ------------ ------------ -------------- Emerging Growth Fund ............................. $130,875,645 $10,787,975 $(7,672,435) $3,115,540 Growth Fund ...................................... 35,973,225 2,736,488 (1,814,421) 922,067 Mid Cap Fund ..................................... 30,698,352 1,693,583 (1,104,229) 589,354
As of August 31, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM FUND INCOME GAINS ---- ------------- ------------- Emerging Growth Fund ........................ $24,325,391 $11,185,583 Growth Fund ................................. -- -- Mid Cap Fund ................................ 138,863 -- 42 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) At August 31, 2004, the Funds had capital loss carryforwards available to offset future capital gains through the indicated expiration dates: EXPIRING AUGUST 31, ---------------------------- FUND 2010 2011 ---- ---------- -------- Emerging Growth Fund ............................. -- -- Growth Fund ...................................... $3,738,541 -- Mid Cap Fund ..................................... 549,263 $206,720 During the year ended August 31, 2004, the Emerging Growth Fund, Growth Fund and Mid Cap Fund utilized $410,152, $8,532,536 and $5,425,231, respectively, of prior year capital loss carryforwards. The tax character of dividends and distributions paid during the last two fiscal years were as follows:
ORDINARY LONG-TERM FUND YEAR INCOME GAINS TOTAL ---- ---- ----------- ---------- ----------- Emerging Growth Fund 2004 $ 2,757,588 -- $ 2,757,588 2003 -- -- -- Growth Fund 2004 -- -- -- 2003 -- -- -- Mid Cap Fund 2004 $ 158,675 -- $ 158,675 2003 167,268 -- 167,268
43 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC.: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of n/i numeric investors Emerging Growth Fund, n/i numeric investors Growth Fund and n/i numeric investors Mid Cap Fund, separately managed portfolios of The RBB Fund, Inc. (the "Fund"), at August 31, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for the two years in the period then ended, and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the Standards of the Public Company Accounting Oversight Board (United States). Those standards 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 at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 29, 2004 44 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND SHAREHOLDER TAX INFORMATION -- (UNAUDITED) Each Fund is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Fund's fiscal year (August 31, 2004) as to the U.S. federal tax status of distributions received by each Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2004, the following dividends and distributions per share were paid by each of the Funds: ORDINARY INCOME --------------------------- NET INVESTMENT SHORT-TERM LONG-TERM FUND INCOME GAINS GAINS ---- -------------- ---------- --------- Emerging Growth Fund ............... -- $0.34 -- Growth Fund ........................ -- -- -- Mid Cap Fund ....................... $0.09 -- -- The percentage of total ordinary income dividends from the Emerging Growth and Mid Cap Funds' qualifying for the corporate dividend received deduction in 26% and 100%, respectively. These amounts were reported to shareholders as income in 2003. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2005. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Funds, if any. In general, dividends received by tax-exempt recipients (e.g. IRA's and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g. corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Funds. 45 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND OTHER INFORMATION -- (UNAUDITED) 1. PROXY VOTING Policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities, as well as information regarding how the Funds voted proxies relating to portfolio securities for the most recent 12-month period ended June 30, are available without charge, upon request, by calling (800) 348-5031 and on the Securities and Exchange Commission's website at http://www.sec.gov. 2. QUARTERLY PORTFOLIO SCHEDULES The Funds will file a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Funds Forms N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 46 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND PRIVACY NOTICE -- (UNAUDITED) The n/i NUMERIC INVESTORS FAMILY OF FUNDS of The RBB Fund, Inc. (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (800) 348-5031. October 2004 47 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The statement of Additional Information ("SAI") includes additional information about the Company's Directors and is available without charge, upon request, by calling (800) 348-5031.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER POSITION(S) TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 14 Director, Comcast Comcast Corporation Chairman, Comcast Corporation (cable Corporation 1500 Market Street, television and communications); 35th Floor Director, NDS Group PLC (provider of Philadelphia, PA 19102 systems and applications for digital DOB: 7/16/33 pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, Fox Chase 14 None Fox Chase Cancer Center Cancer Center (biomedical research 333 Cottman Avenue and medical care); prior to 2000, Philadelphia, PA 19111 Executive Vice President, Fox Chase DOB: 12/06/35 Cancer Center. ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director 1991 to present Since December 2000, Director, 14 None 106 Pierrepont Street Gabelli Partners, L.P. (an investment Brooklyn, NY 11201 partnership); Chief Operating Officer DOB: 5/21/48 and member of the Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
48 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND FUND MANAGEMENT (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER POSITION(S) TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 14 Director, Moyco Technologies, Inc. President, Moyco Technologies, Inc. Moyco 200 Commerce Drive (manufacturer of precision coated and Technologies, Montgomeryville, PA 18936 industrial abrasives). Since 1999, Inc. DOB: 3/24/34 Director, Pennsylvania Business Bank. ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 14 None Oppenheimer & Company, Inc. President and prior thereto, 200 Park Avenue Executive Vice President of New York, NY 10166 Oppenheimer & Co., Inc., formerly DOB: 4/16/38 Fahnestock & Co., Inc. (a registered broker-dealer). ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from January 14 None 400 Bellevue Parkway 1987 to April 2002, Chairman and Wilmington, DE 19809 Chief Executive Officer of PFPC Inc. DOB: 9/25/38 until April 2002, Executive Vice President of PNC Bank, National Association from October 1981 to April 2002, Director of PFPC International Ltd. (financial services) from August 1993 to April 2002, Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------
49 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] EMERGING GROWTH FUND GROWTH FUND MID CAP FUND FUND MANAGEMENT (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PORTFOLIOS IN OTHER POSITION(S) TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present Certified Public Accountant; Vice N/A N/A 400 Bellevue Parkway and and Chairman of the Board, Fox Chase 4th Floor Treasurer 1988 to present Cancer Center; Trustee Emeritus, Wilmington, DE 19809 Pennsylvania School for the Deaf; DOB: 6/29/24 Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary Since 2003 Since 2000, Vice President and N/A N/A 301 Bellevue Parkway Counsel, PFPC Inc. (financial 2nd Floor services company); Associate, Wilmington, DE 19809 Stradley, Ronon, Stevens & Young, LLC DOB: 1/27/68 (law firm) from 1996-2000. ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 Senior Legal Counsel, PFPC Inc. from N/A N/A Vigilant Compliance Compliance 2002 to 2004; Chief Legal Counsel, 186 Dundee Drive, Suite 700 Officer Corviant Corporation (Investment Williamstown, NJ 08094 Adviser, Broker/Dealer and Service DOB: 12/25/62 Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation and the Company's principal underwriter, PFPC Distributors, Inc. are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
50 (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] One Memorial Drive Cambridge, MA 02142 1-800-numeric [686-3742] http://www.numeric.com INVESTMENT ADVISER Numeric Investors LLC(R) One Memorial Drive Cambridge, MA 02142 CO-ADMINISTRATORS Bear Stearns Funds Management Inc. 383 Madison Avenue New York, NY 10179 PFPC Inc. Bellevue Corporate Center 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors,Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN Custodial Trust Company 101 Carnegie Center Princeton, NJ 08540 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Two Commerce Square Philadelphia, PA 19103 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103 This report is submitted for the general information of the shareholders of each Fund.Total investment return is based on historical results and is not intended to indicate future performance. The total investment return and principal value of an investment in each Fund will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. Current performance may be lower or higher than the performance data provided in the report. (LOGO) n/i NUMERIC INVESTORS FAMILY OF FUNDS [GRAPHIC OMITTED] One Memorial Drive Cambridge, MA 02142 1-800-numeric [686-3742] http://www.numeric.com BOSTON PARTNERS FAMILY OF FUNDS OF THE RBB FUND, INC. [GRAPHICS OMITTED] ANNUAL REPORT AUGUST 31, 2004 SMALL CAP VALUE FUND II LONG/SHORT EQUITY FUND LARGE CAP VALUE FUND MID CAP VALUE FUND ALL-CAP VALUE FUND [GRAPHIC OMITTED] bp BOSTON PARTNERS ASSET MANAGEMENT, LLC -------------------------------------------- ONE PHILOSOPHY o ONE CULTURE o ONE FOCUS BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- PRIVACY NOTICE (Unaudited) -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II LONG/SHORT EQUITY FUND LARGE CAP VALUE FUND MID CAP VALUE FUND ALL-CAP VALUE FUND The Boston Partners Family of Funds of The RBB Fund, Inc. (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (888) 261-4073. October 2004 NOT PART OF THE ANNUAL REPORT BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- GENERAL MARKET COMMENTARY -------------------------------------------------------------------------------- September 30, 2004 Dear Shareholder: The one year period ended August 31, 2004 witnessed all major equity indices posting positive returns. This same period also witnessed the first interest rate hikes in nearly four years, the impact of which seems to have affected the markets in the last few months. A number of factors, in addition to rising rates, have fueled an increase in market volatility the last few months, not the least of which is the pending presidential election, an escalation in the Iraq war, and the ever present fear of global terrorism. On the good news front, we currently have a healthy economy, improving corporate profitability and strong consumer confidence. Over the long term we are confident that good news will prevail. As the presidential election draws closer, we must consider its potential impact on the economy. Historically, after a president is elected, and regardless of party affiliation, fiscal policy trends towards tightening as the new administration aims to decrease the deficit and make good on campaign promises. This predictable change in fiscal policy combined with the Federal Reserve's recent moves toward higher interest rates is a big shift from the stimulative conditions of the past several years. While the stock market has typically done well in the last half of a presidential election year, we cannot ignore these potential headwinds that could influence the economy and the stock market. While we do not manage money based on a macro view of the economy, we do believe it is important to consider potential changes and their impact to the stock market. Regardless of the market environment, we believe that building a solid well diversified portfolio on a stock-by-stock basis is the key to success over the long run. Across all of our products, we have been able to opportunistically upgrade the quality of our portfolios by buying good companies as they are offered at compelling prices. The following pages contain investment discussion on each of the Boston Partners Funds. Please take a minute to review them and feel free to contact us with any comments or questions. Warm Regards, Boston Partners Family of Funds 2 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II -------------------------------------------------------------------------------- Dear Shareholder: The Boston Partners Small Cap Value Fund II Institutional Class returned 13.96% for the one year period ended August 31, 2004. The Fund did trail the benchmark for the period, but we believe we have continued to construct the portfolios with more attractive valuation and profitability characteristics than the benchmark. In the small cap universe value continued to outperform growth as it has on a 1, 3, and 5 year basis. Recent underperformance by the Fund can be primarily attributed to insurance holdings. The short-term performance of insurance investments was disappointing, but the overall valuation and profitability characteristics remain attractive to us. They represent the largest investment pocket in the portfolio and the primary source of overweighting against the benchmark. Areas of strength in the portfolio were Consumer Services, Consumer Non-Durables, and Finance. Communications was the only area that had a negative impact on returns. Health Care is another sector that we are confident in. Currently, we are double the benchmark's weight in that category and this reflects the portfolio's opportunistic selection of attractively valued companies with strong operating fundamentals. We continue to build the portfolio on a stock by stock basis in a broad cross-section of businesses. Please note that while the Fund remains closed to new investors, we are currently still accepting investments from existing shareholders of the Fund. Sincerely, David Dabora Small Cap Value Fund II Portfolio Manager ------------------------------------------------------ TOP TEN POSITIONS % OF PORTFOLIO ------------------------------------------------------ Apria Healthcare Group, Inc. 2.95% ------------------------------------------------------ IPC Holdings Ltd. 2.59% ------------------------------------------------------ Sierra Pacific Resources 1.80% ------------------------------------------------------ United Online, Inc. 1.51% ------------------------------------------------------ Assured Guaranty Ltd. 1.49% ------------------------------------------------------ Terex Corp. 1.44% ------------------------------------------------------ Earthlink, Inc. 1.43% ------------------------------------------------------ Champion Enterprises, Inc. 1.42% ------------------------------------------------------ Scottish Re Group Ltd. 1.40% ------------------------------------------------------ Sola International, Inc. 1.37% ------------------------------------------------------ ------------------------------------------------------ SECTOR BREAKDOWN % OF PORTFOLIO ------------------------------------------------------ Basic Industries 2.4% ------------------------------------------------------ Capital Goods 11.2% ------------------------------------------------------ Communications 3.6% ------------------------------------------------------ Consumer Durables 3.0% ------------------------------------------------------ Consumer Non-Durables 6.5% ------------------------------------------------------ Consumer Services 18.4% ------------------------------------------------------ Energy 1.4% ------------------------------------------------------ Finance 21.6% ------------------------------------------------------ Health Care 9.3% ------------------------------------------------------ Technology 5.6% ------------------------------------------------------ Transportation 1.6% ------------------------------------------------------ Utilities 1.9% ------------------------------------------------------ Other 13.5% ------------------------------------------------------ ------------------------------------------------------ PORTFOLIO REVIEW ------------------------------------------------------ P/E: Price/Earnings* 13.4x ------------------------------------------------------ P/B: Price/Book 1.5x ------------------------------------------------------ Holdings 203 ------------------------------------------------------ Wtd. Average Mkt. Cap (mil) $793 ------------------------------------------------------ ROE: Return on Equity 8.5 ------------------------------------------------------ OROA: Operating Return on Assets* 36.6 ------------------------------------------------------ * For the trailing one year period. ANNUAL REPORT 2004 | 3 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Small Cap Value Fund II Institutional Class 1,2 vs. Russell Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Small Cap Value Fund II -- Russell 2000(R) Russell 2000(R) Institutional Class Value Index Index -------------------------- --------------- --------------- 7/1/98 $10,000.00 $10,000.00 $10,000.00 7/31/98 9,280.00 9,217.00 9,190.00 8/31/98 7,620.00 7,773.62 7,405.30 11/30/98 7,930.00 8,685.93 8,746.42 2/28/99 7,640.00 8,157.32 8,649.04 5/31/99 8,670.00 9,099.22 9,710.74 8/31/99 8,670.00 8,868.24 9,506.32 11/30/99 8,450.00 8,561.35 10,117.17 2/29/00 8,713.79 9,118.02 12,910.60 5/31/00 9,854.28 9,073.93 10,673.03 8/31/00 11,394.95 10,081.20 12,086.93 11/30/00 11,224.88 9,783.93 10,057.25 2/28/01 14,381.97 11,118.18 10,736.41 5/31/01 16,926.00 11,741.00 11,280.77 8/31/01 17,613.30 11,897.63 10,682.07 11/30/01 17,172.19 11,641.24 10,542.41 2/28/02 17,994.57 12,594.35 10,772.98 5/31/02 19,739.00 13,550.32 11,223.56 8/31/02 16,312.45 11,232.14 9,033.54 11/30/02 15,938.50 11,431.43 9,426.03 2/28/03 14,437.00 10,277.38 8,393.08 5/31/03 18,134.50 12,535.45 10,306.95 8/31/03 20,969.90 13,892.96 11,659.95 11/30/03 22,943.30 15,421.70 12,845.96 2/29/04 25,689.20 16,853.60 13,798.64 5/31/04 24,955.50 16,398.80 13,426.84 8/31/04 23,896.90 16,600.30 12,983.88 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Small Cap Value Fund II -- Institutional Class 13.96% 10.71% 22.48% 15.17% Russell 2000(R) Value Index 19.49% 11.74% 13.36% 8.56% Russell 2000(R) Index 4 11.35% 6.72% 6.43% 4.32%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on July 1, 1998 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period July 1, 1998 (commencement of operations) through August 31, 2004. 4 This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. 4 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Small Cap Value Fund II Investor Class 1,2 vs. Russell Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Small Cap Value Fund II -- Russell 2000(R) Russell 2000(R) Investor Class Value Index Index -------------------------- --------------- --------------- 7/1/98 $10,000.00 $10,000.00 $10,000.00 7/31/98 9,290.00 9,217.00 9,190.00 8/31/98 7,630.00 7,773.62 7,405.30 11/30/98 7,940.00 8,685.93 8,746.42 2/28/99 7,640.00 8,157.32 8,649.04 5/31/99 8,660.00 9,099.22 9,710.74 8/31/99 8,650.00 8,868.24 9,506.32 11/30/99 8,440.00 8,561.35 10,117.17 2/29/00 8,700.00 9,118.02 12,910.60 5/31/00 9,830.00 9,073.93 10,673.03 8/31/00 11,360.00 10,081.23 12,086.93 11/30/00 11,180.00 9,783.93 10,057.25 2/28/01 14,325.37 11,118.18 10,736.41 5/31/01 16,858.20 11,741.00 11,280.77 8/31/01 17,524.74 11,897.63 10,682.07 11/30/01 17,083.80 11,641.24 10,542.41 2/28/02 17,895.60 12,594.35 10,772.98 5/31/02 19,618.73 13,550.32 11,223.56 8/31/02 16,203.62 11,232.14 9,033.54 11/30/02 15,809.20 11,431.43 9,426.03 2/28/03 14,318.40 10,277.38 8,393.08 5/31/03 17,973.30 12,535.45 10,305.95 8/31/03 20,766.40 13,891.96 11,659.95 11/30/03 22,708.10 15,421.67 12,845.96 2/29/04 25,401.10 16,853.57 13,798.64 5/31/04 24,667.60 16,398.85 13,426.84 8/31/04 23,609.20 16,600.35 12,983.88 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Small Cap Value Fund II -- Investor Class 13.69% 10.44% 22.24% 14.94% Russell 2000(R) Value Index 19.49% 11.74% 13.36% 8.56% Russell 2000(R) Index 4 11.35% 6.72% 6.43% 4.32%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on July 1, 1998 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period July 1, 1998 (commencement of operations) through August 31, 2004. 4 This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2004 | 5 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND -------------------------------------------------------------------------------- Dear Shareholder: The Boston Partners Long/Short Equity Fund Institutional Shares returned 2.73% for the one year period ended August 31, 2004. The Fund further refined its strategy over the last year. Robert Jones, an original partner of BPAM and member of the Large Cap Value management team, was added to the Long/Short management team in April. Also, the economic positioning of the portfolio will now be driven by available opportunities in the marketplace and is expected to remain fluid. In the past, the portfolio was constructed with the goal of being Beta neutral at all times. We believe an increased focus on security selection at the expense of a strict beta neutral portfolio will help us in better achieving the total return portion of our objectives. Total returns in the long portfolio were led by holdings in the Consumer Services, Capital Goods, and Basic Industries. A few of the detractors in the short portfolio were Technology, Transportation, and Communications. The portfolio continues to maintain a value bias purchasing companies with strong free cash flow, defensible business models, and clean balance sheets. The short portfolio focuses on companies that combine high valuations with low returns on capital. Sincerely, Robert T. Jones Long/Short Equity Fund Portfolio Manager ---------------------------------------------------- % OF PORTFOLIO TOP TEN HOLDINGS LONG ---------------------------------------------------- MBIA, Inc. 2.15% ---------------------------------------------------- Freddie Mac 1.87% ---------------------------------------------------- Steiner Leisure Ltd. 1.66% ---------------------------------------------------- Countrywide Financial Corp. 1.64% ---------------------------------------------------- Barnes & Noble, Inc. 1.64% ---------------------------------------------------- Pfizer, Inc. 1.51% ---------------------------------------------------- Radian Group, Inc. 1.49% ---------------------------------------------------- Claire's Stores, Inc. 1.45% ---------------------------------------------------- Xerox Corp. 1.37% ---------------------------------------------------- Apria Healthcare Group, Inc. 1.33% ---------------------------------------------------- ---------------------------------------------------- % OF PORTFOLIO SECTOR BREAKDOWN LONG SHORT ---------------------------------------------------- Basic Industries 2.5% 4.6% ---------------------------------------------------- Capital Goods 8.2% 9.6% ---------------------------------------------------- Communications 4.8% 3.2% ---------------------------------------------------- Consumer Durables 1.9% 1.5% ---------------------------------------------------- Consumer Non-Durables 6.5% 4.5% ---------------------------------------------------- Consumer Services 23.5% 21.7% ---------------------------------------------------- Energy 8.8% 1.2% ---------------------------------------------------- Finance 19.4% 5.4% ---------------------------------------------------- Health Care 9.0% 26.2% ---------------------------------------------------- Technology 11.5% 19.7% ---------------------------------------------------- Transportation 0.4% 1.0% ---------------------------------------------------- Utilities 1.1% 0.9% ---------------------------------------------------- Other 2.4% 0.5% ---------------------------------------------------- ---------------------------------------------------- PORTFOLIO REVIEW LONG SHORT ---------------------------------------------------- P/E: Price/Earnings* 7.7x 31.0x ---------------------------------------------------- P/B: Price/Book 1.6x 7.7x ---------------------------------------------------- Holdings 136 135 ---------------------------------------------------- Wtd. Average Mkt. Cap (mil) $10,182 $937 ---------------------------------------------------- OROA: Operating Return on Assets* 39.1 39.8 ---------------------------------------------------- * For the trailing one year period. 6 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Long/Short Equity Fund Institutional Class 1,2 vs. Various Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Long/Short Salomon Smith Barney Equity Fund -- U.S. 1-Month S&P 500(R) Institutional Class Treasury Bill Index 4 Index ------------------- --------------------- ----------- 11/17/98 $10,000.00 $10,000.00 $10,000.00 11/30/98 9,580.00 10,020.00 10,000.00 2/28/99 9,080.00 10,127.60 10,675.41 5/31/99 9,500.00 10,239.41 11,259.94 8/31/99 9,460.00 10,350.39 11,456.49 11/30/99 8,100.00 10,464.66 12,088.42 2/29/00 8,153.76 10,591.80 11,928.06 5/31/00 10,311.81 10,738.64 12,440.12 8/31/00 10,759.71 10,882.09 13,327.79 11/30/00 11,798.02 11,042.84 11,580.46 2/28/01 14,558.61 11,192.59 10,951.34 5/31/01 15,093.63 11,315.03 11,128.06 8/31/01 16,338.57 11,414.89 10,077.72 11/30/01 16,081.35 11,490.40 10,164.45 2/28/02 16,370.81 11,539.87 9,909.18 5/31/02 17,456.52 11,590.76 9,586.91 8/31/02 16,147.28 11,640.53 8,264.87 11/30/02 16,477.20 11,686.60 8,486.79 2/28/03 16,109.40 11,720.74 7,661.81 5/31/03 16,221.00 11,754.78 8,814.88 8/31/03 15,964.40 11,782.78 9,261.99 11/30/03 15,908.50 11,809.48 9,767.69 2/29/04 16,053.50 11,835.73 10,613.69 5/31/04 15,328.30 11,862.62 10,430.27 8/31/04 16,399.30 11,895.92 10,322.33 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ----- ------ ----------- Long/Short Equity Fund -- Institutional Class 2.73% 0.12% 11.63% 8.92% S&P 500(R) Index 4 11.45% 0.80% (2.06)% 0.55% Salomon Smith Barney U.S. 1-Month Treasury Bill Index 4 0.96% 1.39% 2.82% 3.05%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on November 17, 1998 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the S&P 500(R) Index is unmanaged, does not incur expenses and is not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period November 17, 1998 (commencement of operations) through August 31, 2004. 4 The Adviser has elected to change the benchmark index from the Solomon Smith Barney U.S. 1-Month Treasury Bill Index to the S&P 500(R) Index because the S&P 500(R) Index more appropriately reflects the types of securities held in the Fund and provides the best comparative performance information. ANNUAL REPORT 2004 | 7 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Long/Short Equity Fund Investor Class 1,2 vs. Various Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Long/Short Salomon Smith Barney Equity Fund -- U.S. 1-Month S&P 500(R) Investor Class Treasury Bill Index 4 Index -------------- -------------------- ----------- 11/17/98 $10,000.00 $10,000.00 $10,000.00 11/30/98 9,580.00 10,000.00 10,020.00 2/28/99 9,090.00 10,675.40 10,127.60 5/31/99 9,520.00 11,259.90 10,239.40 8/31/99 9,430.00 11,456.50 10,350.40 11/30/99 8,070.00 12,088.40 10,464.70 2/29/00 8,147.17 11,928.10 10,591.80 5/31/00 10,290.62 12,440.10 10,738.60 8/31/00 10,737.60 13,327.80 10,882.10 11/30/00 11,773.77 11,580.50 11,042.80 2/28/01 14,515.18 10,951.30 11,192.60 5/31/01 15,037.97 11,128.10 11,315.00 8/31/01 16,268.07 10,077.70 11,414.90 11/30/01 16,001.55 10,164.50 11,490.40 2/28/02 16,277.19 9,909.18 11,539.90 5/31/02 17,347.50 9,586.91 11,590.80 8/31/02 16,033.46 8,264.87 11,640.50 11/30/02 16,351.50 8,486.79 11,686.60 2/28/03 15,965.90 7,661.81 11,720.70 5/31/03 16,076.70 8,814.88 11,754.80 8/31/03 15,821.70 9,261.99 11,782.80 11/30/03 15,755.10 9,767.69 11,809.50 2/29/04 15,888.10 10,613.70 11,835.70 5/31/04 15,156.30 10,430.30 11,862.60 8/31/04 16,209.60 10,322.30 11,895.90 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Long/Short Equity Fund -- Investor Class 2.45% (0.12)% 11.44% 8.71% S&P 500(R) Index 4 11.45% 0.80% (2.06)% 0.55% Salomon Smith Barney U.S. 1-Month Treasury Bill Index 4 0.96% 1.39% 2.82% 3.05%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on November 17, 1998 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the S&P 500(R) Index is unmanaged, does not incur expenses and is not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period November 17, 1998 (commencement of operations) through August 31, 2004. 4 The Adviser has elected to change the benchmark index from the Solomon Smith Barney U.S. 1-Month Treasury Bill Index to the S&P 500(R) Index because the S&P 500(R) Index more appropriately reflects the types of securities held in the Fund and provides the best comparative performance information. 8 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND -------------------------------------------------------------------------------- Dear Shareholder: The Large Cap Value Fund Institutional Class outperformed the Russell 1000 Value Index for the one year period ended August 31, 2004. The Boston Partners Large Cap Value Fund had positive returns from 11 of the 13 economic sectors. The biggest relative contributor was the Finance Sector. Our avoidance of the Savings and Loan companies that performed poorly helped our performance. Energy was also a big contributor to performance as strong stock selection and an overweight in the sector added value. The sector has had a good run but we feel that there are still companies that have an attractive outlook while production continues to be low and demand high. One area where we are decidedly underweight is in cyclical stocks. We believe that cyclical companies in general are overvalued and have excessively optimistic expectations. Cyclical stocks have been even less appealing when considering that they trade at valuations in line with many higher quality stocks with far better long-term profitability characteristics. Many of these issues are found in the Health Care, Consumer Service, and Consumer Non-Durable sectors. Our limited exposure to cyclical stocks hurt last year but it helped us in this fiscal year. Sincerely, Mark Donovan Large Cap Value Fund Portfolio Manager ------------------------------------------------------ TOP TEN POSITIONS % OF PORTFOLIO ------------------------------------------------------ Freddie Mac 3.62% ------------------------------------------------------ Citigroup, Inc. 3.40% ------------------------------------------------------ Countrywide Financial Corp. 3.09% ------------------------------------------------------ MBIA, Inc. 2.81% ------------------------------------------------------ Xerox Corp. 2.68% ------------------------------------------------------ Marathon Oil Corp. 2.56% ------------------------------------------------------ Pfizer, Inc. 2.54% ------------------------------------------------------ Transocean, Inc. 2.54% ------------------------------------------------------ Tyco International Ltd. 2.46% ------------------------------------------------------ Berkshire Hathaway, Inc., Class B 2.45% ------------------------------------------------------ ------------------------------------------------------ SECTOR BREAKDOWN % OF PORTFOLIO ------------------------------------------------------ Basic Industries 1.8% ------------------------------------------------------ Capital Goods 7.9% ------------------------------------------------------ Communications 4.9% ------------------------------------------------------ Consumer Durables 0.5% ------------------------------------------------------ Consumer Non-Durables 8.9% ------------------------------------------------------ Consumer Services 11.5% ------------------------------------------------------ Energy 14.0% ------------------------------------------------------ Finance 30.2% ------------------------------------------------------ Health Care 8.2% ------------------------------------------------------ Technology 7.3% ------------------------------------------------------ Transportation 0.0% ------------------------------------------------------ Utilities 1.4% ------------------------------------------------------ Other 3.4% ------------------------------------------------------ ------------------------------------------------------ PORTFOLIO REVIEW ------------------------------------------------------ P/E: Price/Earnings* 13.8x ------------------------------------------------------ P/B: Price/Book 2.0x ------------------------------------------------------ Holdings 79 ------------------------------------------------------ Wtd. Average Mkt. Cap (mil) $59,898 ------------------------------------------------------ ROE: Return on Equity 17.2 ------------------------------------------------------ OROA: Operating Return on Assets* 37.3 ------------------------------------------------------ * For the trailing one year period. ANNUAL REPORT 2004 | 9 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Large Cap Value Institutional Class 1,2 vs. Various Indices [GRAPIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Large Cap Russell 1000(R) Value Fund -- S&P 500(R) Value Stock Institutional Class Index Index ------------------- ----------- --------------- 1/2/97 $10,000.00 $10,000.00 $10,000.00 1/31/97 10,440.00 10,625.00 10,485.00 2/28/97 10,620.00 10,707.88 10,639.13 5/31/97 11,360.00 11,543.41 11,284.27 8/31/97 12,460.00 12,291.42 12,202.89 11/30/97 12,810.00 13,112.19 13,134.91 2/28/98 13,786.06 14,458.09 14,223.36 5/31/98 13,828.35 15,087.80 14,970.07 8/31/98 11,185.31 13,286.39 12,677.20 11/30/98 12,728.84 16,213.89 15,116.83 2/28/99 12,383.01 17,309.00 15,533.69 5/31/99 13,678.04 18,256.74 17,145.42 8/31/99 13,100.09 18,575.42 16,490.34 11/30/99 13,282.04 19,600.02 16,698.51 2/29/00 11,901.91 19,340.02 15,025.66 5/31/00 13,881.74 20,170.26 16,838.20 8/31/00 14,671.39 21,609.53 17,174.14 11/30/00 15,312.26 18,776.43 17,099.67 2/28/01 16,230.26 17,756.38 17,523.51 5/31/01 16,825.21 18,042.90 18,134.00 8/31/01 16,087.48 16,339.91 16,984.65 11/30/01 16,301.66 16,480.53 16,562.60 2/28/02 16,401.83 16,066.63 16,849.85 5/31/02 16,633.03 15,544.11 17,126.77 8/31/02 14,049.00 13,400.56 14,753.61 11/30/03 14,021.60 13,760.39 14,972.02 2/28/03 12,786.40 12,422.78 13,602.48 5/31/03 14,830.00 14,292.34 15,782.33 8/31/03 14,968.10 15,017.28 16,470.71 11/30/03 15,934.70 15,837.22 17,542.80 2/29/04 17,880.30 17,208.92 19,356.77 5/31/04 17,434.70 16,911.53 18,909.21 8/31/04 17,643.60 16,736.51 19,353.52 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Large Cap Value Fund -- Institutional Class 17.87% 3.13% 6.14% 7.69% S&P 500(R) Index 11.45% 0.80% (2.06)% 6.95% Russell 1000(R) Value Index 4 17.52% 4.45% 3.25% 9.00%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on January 2, 1997 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period January 2, 1997 (commencement of operations) through August 31, 2004. 4 This is not a primary benchmark of the Fund. Results of index performance are presented for general comparative purposes. 10 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Large Cap Value Investor Class 1,2 vs. Various Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Large Cap Value Fund -- S&P 500(R) Russell 1000(R) Investor Class Index Value Stock Index -------------- ---------- ----------------- 1/2/97 $10,000.00 $10,000.00 $10,000.00 1/31/97 10,235.29 10,134.00 10,120.00 2/28/97 10,411.76 10,213.05 10,268.76 5/31/97 11,127.45 11,009.97 10,891.45 8/31/97 12,205.88 11,723.41 11,778.09 11/30/97 12,549.02 12,506.25 12,677.66 2/28/98 13,499.53 13,789.96 13,728.22 5/31/98 13,550.70 14,390.56 14,448.94 8/31/98 10,951.10 12,672.40 12,235.89 11/30/98 12,455.59 15,464.61 14,590.59 2/28/99 12,113.72 16,509.12 14,992.94 5/31/99 13,366.51 17,413.06 16,548.56 8/31/99 12,797.06 17,717.01 15,916.29 11/30/99 12,962.72 18,694.27 16,117.21 2/29/00 11,601.88 18,446.28 14,502.60 5/31/00 13,533.69 19,238.16 16,252.03 8/31/00 14,291.05 20,610.92 16,576.28 11/30/00 14,905.72 17,908.74 16,504.40 2/28/01 15,789.59 16,935.82 16,913.49 5/31/01 16,359.20 17,209.11 17,502.73 8/31/01 15,641.49 15,584.81 16,393.39 11/30/01 15,835.16 15,718.93 15,986.03 2/28/02 15,925.40 15,324.17 16,263.28 5/31/02 16,133.07 14,825.79 16,530.56 8/31/02 13,628.10 12,781.30 14,240.01 11/30/03 13,589.20 13,124.50 14,450.82 2/28/03 12,372.00 11,848.70 13,129.96 5/31/03 14,344.10 13,631.87 15,232.93 8/31/03 14,475.60 14,323.31 15,897.33 11/30/03 15,409.10 15,105.36 16,932.11 2/29/04 17,264.40 16,413.67 18,682.93 5/31/04 16,841.00 16,130.01 18,250.95 8/31/04 17,013.00 15,963.08 18,679.80 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Large Cap Value Fund -- Investor Class 17.53% 2.84% 5.86% 7.22% S&P 500(R) Index 11.45% 0.80% (2.06)% 6.33% Russell 1000(R) Value Index 4 17.52% 4.45% 3.25% 8.54%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on January 16, 1997 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period January 16, 1997 (commencement of operations) through August 31, 2004. 4 This is not a primary benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2004 | 11 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND -------------------------------------------------------------------------------- Dear Shareholder: The Boston Partners Mid Cap Value Fund Institutional Class returned 14.39% for the one year period ended August 31, 2004 trailing the Russell 2500 Value Index. In the mid cap asset class, value outperformed growth for the last year. More important than the shorter term performance is the impressive longer term returns that mid cap value has delivered. On a three, five, and seven year basis, the two primary mid cap value benchmarks rank in the top quartile of returns versus broader market indices. Despite the limelight garnered by small cap stocks, mid cap stocks have posted very competitive returns. Significant contributions to the strength of the portfolio were made by holdings in Consumer Non-Durables, Consumer Services, and Finance. A recent strong performer in the portfolio has been the Health Care Sector. An overweight in the sector as well as positive performance from health care supplies companies were the catalyst. The only sector that was a negative contributor for the quarter was Technology. We still believe that many opportunities continue to exist in the Mid Cap universe. Although a rising market has reduced the attractiveness of valuations, earnings continue to rise. More recent purchases have been in Capital Goods, adding to the position which we believe has attractive valuation and leverage to an improving economy. Sincerely, Steve Pollack Mid Cap Value Fund Portfolio Manager ----------------------------------------------------- TOP TEN POSITIONS % OF PORTFOLIO ----------------------------------------------------- Radian Group, Inc. 2.46% ----------------------------------------------------- Michaels Stores, Inc. 2.01% ----------------------------------------------------- Spartech Corp. 1.90% ----------------------------------------------------- Smithfield Foods, Inc. 1.87% ----------------------------------------------------- Federal Sign 1.83% ----------------------------------------------------- Apollo Investment Corp. 1.83% ----------------------------------------------------- Edwards, Inc., A.G. 1.81% ----------------------------------------------------- Ensco International, Inc. 1.75% ----------------------------------------------------- Gtech Holdings Corp. 1.74% ----------------------------------------------------- Sierra Pacific Resources 1.72% ----------------------------------------------------- ----------------------------------------------------- SECTOR BREAKDOWN % OF PORTFOLIO ----------------------------------------------------- Basic Industries 6.4% ----------------------------------------------------- Capital Goods 9.5% ----------------------------------------------------- Communications 5.0% ----------------------------------------------------- Consumer Durables 1.3% ----------------------------------------------------- Consumer Non-Durables 7.1% ----------------------------------------------------- Consumer Services 15.6% ----------------------------------------------------- Energy 5.4% ----------------------------------------------------- Finance 19.9% ----------------------------------------------------- Health Care 6.8% ----------------------------------------------------- Technology 11.2% ----------------------------------------------------- Transportation 0.8% ----------------------------------------------------- Utilities 3.8% ----------------------------------------------------- Other 7.2% ----------------------------------------------------- ----------------------------------------------------- PORTFOLIO REVIEW ----------------------------------------------------- P/E: Price/Earnings* 14.2x ----------------------------------------------------- P/B: Price/Book 2.1x ----------------------------------------------------- Holdings 90 ----------------------------------------------------- Wtd. Average Mkt. Cap (mil) $2,964 ----------------------------------------------------- ROE: Return on Equity 18.9 ----------------------------------------------------- OROA: Operating Return on Assets* 26.3 ----------------------------------------------------- * For the trailing one year period. 12 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Mid Cap Value Institutional Class 1,2 vs. Russell Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Russell Mid Cap Value Fund -- Russell 2500(R) Russell 2500(R) Midcap(R) Institutional Class Value Index Index Value Index --------------------- --------------- --------------- ----------- 6/2/97 $10,000.00 $10,000.00 $10,000.00 $10,000.00 6/30/97 10,330.00 10,471.00 10,409.00 10,367.00 8/31/97 11,010.00 11,099.03 11,172.13 11,006.96 11/30/97 11,250.00 11,669.85 11,419.51 11,715.99 2/28/98 12,638.73 12,638.26 12,289.12 12,725.56 5/31/98 12,871.84 12,837.11 12,279.85 12,995.96 8/31/98 9,608.27 10,091.69 92,89.34 10,636.40 11/30/98 10,713.02 11,518.89 11,012.50 12,407.81 2/28/99 10,568.86 10,942.25 10,893.94 12,212.40 5/31/99 11,694.72 12,247.88 12,310.85 13,617.04 8/31/99 11,633.86 11,954.64 12,298.50 12,963.36 11/30/99 10,802.15 11,653.39 13,080.07 12,438.61 2/29/00 9,762.10 11,749.26 16,211.32 11,506.26 5/30/00 11,378.81 12,586.27 14,379.45 13,175.20 8/31/00 12,006.97 13,481.80 16,219.18 13,776.28 11/30/00 11,512.68 13,222.78 13,919.03 13,988.54 2/28/01 12,208.03 14,635.43 14,609.22 15,103.83 5/31/01 13,191.71 15,542.89 15,478.65 15,933.16 8/31/01 12,994.97 15,454.47 14,639.96 15,371.81 11/30/01 12,963.91 15,113.58 14,488.92 14,957.57 2/28/02 13,745.66 16,320.40 14,847.55 15,992.15 5/31/02 14,331.62 17,339.54 15,369.90 16,772.38 8/31/02 11,829.08 14,871.96 12,811.14 14,623.24 11/30/02 12,012.20 14,860.42 13,175.04 14,418.89 2/28/03 11,097.00 13,618.53 11,951.03 13,458.64 5/31/03 13,184.50 16,334.93 14,432.45 15,809.44 8/31/03 14,124.50 18,046.38 16,217.03 16,997.96 11/30/03 15,308.70 20,074.12 17,910.91 18,628.29 2/29/04 16,635.60 21,976.24 19,269.05 20,438.74 5/31/04 16,586.50 21,413.21 18,830.67 20,107.40 8/31/04 16,156.80 21,635.31 18,270.57 20,587.07 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Mid Cap Value Fund -- Institutional Class 14.39% 7.53% 6.79% 6.84% Russell 2500(R) Value Index 19.89% 11.87% 12.60% 11.24% Russell 2500(R) Index 12.65% 7.65% 8.23% 8.67% Russell Midcap(R) Value Index 4 21.12% 10.23% 9.69% 10.48%
---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on June 2, 1997 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period June 2, 1997 (commencement of operations) through August 31, 2004. 4 This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2004 | 13 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners Mid Cap Value Investor Class 1,2 vs. Russell Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Mid Cap Russell Value Fund -- Russell 2500(R) Russell 2500(R) Midcap(R) Value Investor Class Value Index Index Index -------------- --------------- --------------- --------------- 6/2/97 $10,000.00 $10,000.00 $10,000.00 $10,000.00 6/30/97 10,330.00 10,471.00 10,409.00 10,367.00 8/31/97 11,010.00 11,099.03 11,172.13 11,006.96 11/30/97 11,240.00 11,669.85 11,419.51 11,715.99 2/28/98 12,632.31 12,638.26 12,289.12 12,725.56 5/31/98 12,856.61 12,837.11 12,279.85 12,995.96 8/31/98 9,604.23 10,091.69 92,89.34 10,636.40 11/30/98 10,695.15 11,518.89 11,012.50 12,407.81 2/28/99 10,552.61 10,942.25 10,893.94 12,212.40 5/31/99 11,663.95 12,247.88 12,310.85 13,617.04 8/31/99 11,602.77 11,954.64 12,298.50 12,963.36 11/30/99 10,756.53 11,653.39 13,080.07 12,438.61 2/29/00 9,727.54 11,749.26 16,211.32 11,506.26 5/31/00 11,329.85 12,586.27 14,379.45 13,175.20 8/31/00 11,939.75 13,481.80 16,219.18 13,776.28 11/30/00 11,443.56 13,222.78 13,919.03 13,988.54 2/28/01 12,132.65 14,635.43 14,609.22 15,103.83 5/31/01 13,097.04 15,542.89 15,478.65 15,933.16 8/31/01 12,889.65 15,454.47 14,639.96 15,371.81 11/30/01 12,858.54 15,113.58 14,488.92 14,957.57 2/28/02 13,625.08 16,320.40 14,847.55 15,992.15 5/31/02 14,198.89 17,339.54 15,369.90 16,772.38 8/31/02 11,696.08 14,871.96 12,811.14 14,623.24 11/30/02 11,879.30 14,860.42 13,175.04 14,418.89 2/28/03 10,975.80 13,618.53 11,951.03 13,458.64 5/31/03 13,026.90 16,334.93 14,432.45 15,809.44 8/31/03 13,954.80 18,046.38 16,217.03 16,998.96 11/30/03 15,114.60 20,074.12 17,910.91 18,628.29 2/29/04 16,409.10 21,976.24 19,269.05 20,438.67 5/31/04 16,360.10 21,413.21 18,830.67 20,107.40 8/31/04 15,919.30 21,635.31 18,270.57 20,587.07 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION 3 ------ ------ ------ ----------- Mid Cap Value Fund -- Investor Class 14.08% 7.29% 6.53% 6.63% Russell 2500(R) Value Index 19.89% 11.87% 12.60% 11.24% Russell 2500(R) Index 12.65% 7.65% 8.23% 8.67% Russell Midcap(R) Value Index 4 21.12% 10.23% 9.69% 10.48% ---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on June 2, 1997 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period June 2, 1997 (commencement of operations) through August 31, 2004. 4 This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. 14 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND -------------------------------------------------------------------------------- Dear Shareholder: The Boston Partners All-Cap Value Fund Institutional Shares returned 23.50% for the one year period ended August 31, 2004 outpacing the benchmark. The Fund also continues to beat the benchmark since the Fund's inception. Performance was driven by positive returns in 12 of 13 economic sectors. Finance, Energy and Health Care were the leading areas. Among the top contributors to the return were a large Capital Goods business, Mid Cap private insurance company and a Small Cap Health Care Services business. The Utilities sector was the only negative performing sector for the annual period. The All-Cap Value Fund invests opportunistically stock-by-stock throughout the entire market capitalization spectrum in businesses that have attractive valuation characteristics and sound fundamentals. The All-Cap Value Fund holds a diverse mix of stocks which collectively have better valuation and profitability characteristics than the value benchmark and the broad market. The portfolio's return has benefited from investments across the range of market cap and economic sectors. Since the Fund's inception we are currently at the greatest market cap for the portfolio. Regardless of what the market has in store, we will continue to implement our bottom-up stock selection discipline of seeking companies that have attractive valuation characteristics, sound business fundamentals, and stock specific catalysts. Sincerely, Harry Rosenbluth All-Cap Value Fund Portfolio Manager ------------------------------------------------------ TOP TEN POSITIONS % OF PORTFOLIO ------------------------------------------------------ Countrywide Financial Corp. 3.31% ------------------------------------------------------ UST, Inc. 3.29% ------------------------------------------------------ ACE Ltd. 2.94% ------------------------------------------------------ Pfizer, Inc. 2.78% ------------------------------------------------------ Loews Corp. 2.65% ------------------------------------------------------ White Mountains Insurance Group 2.55% ------------------------------------------------------ Freddie Mac 2.42% ------------------------------------------------------ MBIA, Inc. 1.94% ------------------------------------------------------ Alleghany Corp. 1.86% ------------------------------------------------------ Occidental Petroleum Corp. 1.75% ------------------------------------------------------ ------------------------------------------------------ SECTOR BREAKDOWN % OF PORTFOLIO ------------------------------------------------------ Basic Industries 1.1% ------------------------------------------------------ Capital Goods 2.4% ------------------------------------------------------ Communications 4.6% ------------------------------------------------------ Consumer Durables 0.5% ------------------------------------------------------ Consumer Non-Durables 14.8% ------------------------------------------------------ Consumer Services 9.6% ------------------------------------------------------ Energy 10.2% ------------------------------------------------------ Finance 30.3% ------------------------------------------------------ Health Care 12.0% ------------------------------------------------------ Technology 4.2% ------------------------------------------------------ Transportation 0.5% ------------------------------------------------------ Utilities 3.2% ------------------------------------------------------ Other 6.6% ------------------------------------------------------ ------------------------------------------------------ PORTFOLIO REVIEW ------------------------------------------------------ P/E: Price/Earnings* 12.4x ------------------------------------------------------ P/B: Price/Book 1.7x ------------------------------------------------------ Holdings 122 ------------------------------------------------------ Wtd. Average Mkt. Cap (mil) $24,378 ------------------------------------------------------ ROE: Return on Equity 24.3 ------------------------------------------------------ OROA: Operating Return on Assets* 53.2 ------------------------------------------------------ * For the trailing one year period. ANNUAL REPORT 2004 | 15 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners All-Cap Value Fund Institutional Class 1,2 vs. Russell Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: All-Cap Value Fund -- Russell 3000(R) Rusell 3000(R) Institutional Class Value Index Index ------------------- --------------- -------------- 7/1/02 $10,000.00 $10,000.00 $10,000.00 7/31/02 9,240.00 9,029.00 9,205.00 8/31/02 9,450.00 9,089.49 9,248.26 11/30/02 9,410.00 9,225.60 9,475.63 2/28/03 8,665.50 8,375.69 8,577.32 5/31/03 10,350.40 9,751.98 9,941.79 8/31/03 10,851.90 10,221.50 10,535.56 11/30/03 11,925.10 10,921.55 11,203.68 2/29/04 13,381.60 12,042.34 12,122.01 5/31/04 13,240.40 11,759.85 11,899.90 8/31/04 13,401.80 12,024.28 11,725.82 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return SINCE 1 YEAR INCEPTION 3 ------ ----------- All-Cap Value Fund -- Institutional Class 23.50% 14.45% Russell 3000(R) Value Index 17.64% 8.87% Russell 3000(R) Index 4 11.31% 7.62% ---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on July 1, 2002 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period July 1, 2002 (commencement of operations) through August 31, 2004. 4 This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. 16 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND (continued) -------------------------------------------------------------------------------- Comparison of Change in Value of $10,000 Investment in Boston Partners All-Cap Value Fund Investor Class 1,2 vs. Russell Indices [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: All-Cap Value Fund -- Russell 3000(R) Russell 3000(R) Investor Class Value Index Index --------------------- --------------- -------------- 7/1/02 $10,000.00 $10,000.00 $10,000.00 7/31/02 9,230.00 9,029.00 9,205.00 8/31/02 9,440.00 9,089.49 9,248.26 11/30/02 9,390.00 9,225.60 9,475.63 2/28/03 8,636.60 8,375.69 8,577.32 5/31/03 10,329.90 9,751.98 9,941.79 8/31/03 10,820.80 10,221.50 10,535.56 11/30/03 11,872.90 10,921.55 11,203.68 2/29/04 13,324.00 12,042.34 12,122.01 5/31/04 13,173.30 11,759.85 11,899.90 8/31/04 13,324.00 12,024.28 11,725.82 Past performance is not predictive of future performance For Period Ended August 31, 2004 Average Annual Total Return SINCE 1 YEAR INCEPTION 3 ------ ----------- All-Cap Value Fund -- Investor Class 23.13% 14.14% Russell 3000(R) Value Index 17.64% 8.87% Russell 3000(R) Index 4 11.31% 7.62% ---------- 1 The chart assumes a hypothetical $10,000 initial investment in the Fund made on July 1, 2002 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an aggressively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. 2 Boston Partners Asset Management, LLC waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. 3 For the period July 1, 2002 (commencement of operations) through August 31, 2004. 4 This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2004 | 17 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND EXPENSE EXAMPLES -------------------------------------------------------------------------------- As a shareholder of the Fund(s), you incur two types of costs: (1) transaction costs, redemption fees; and (2) ongoing costs, including management fees; distribution fees; and other expenses. The examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BOSTON PARTNERS SMALL CAP VALUE FUND II -- INSTITUTIONAL CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $ 930.20 $7.18 Hypothetical (5% return before expenses) ......... $1,000.00 $1,017.57 $7.53 BOSTON PARTNERS SMALL CAP VALUE FUND II -- INVESTOR CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $ 929.40 $8.39 Hypothetical (5% return before expenses) ......... $1,000.00 $1,016.29 $8.81
18 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND EXPENSE EXAMPLES (continued) --------------------------------------------------------------------------------
BOSTON PARTNERS LONG/SHORT EQUITY FUND -- INSTITUTIONAL CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $1,021,60 $14.33 Hypothetical (5% return before expenses) ......... $1,000.00 $1,010.75 $14.35 BOSTON PARTNERS LONG/SHORT EQUITY FUND -- INVESTOR CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $1,020.20 $15.59 Hypothetical (5% return before expenses) ......... $1,000.00 $1,009.47 $15.63 BOSTON PARTNERS LARGE CAP VALUE FUND -- INSTITUTIONAL CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $ 986.80 $4.99 Hypothetical (5% return before expenses) ......... $1,000.00 $1,020.01 $5.09 BOSTON PARTNERS LARGE CAP VALUE FUND -- INVESTOR CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $ 985.40 $6.24 Hypothetical (5% return before expenses) ......... $1,000.00 $1,018.74 $6.36 BOSTON PARTNERS MID CAP VALUE FUND -- INSTITUTIONAL CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $ 971.20 $4.95 Hypothetical (5% return before expenses) ......... $1,000.00 $1,020.01 $5.09 BOSTON PARTNERS MID CAP VALUE FUND -- INVESTOR CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $ 970.10 $6.19 Hypothetical (5% return before expenses) ......... $1,000.00 $1,018.74 $6.36
ANNUAL REPORT 2004 | 19 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND EXPENSE EXAMPLES (continued) --------------------------------------------------------------------------------
BOSTON PARTNERS ALL-CAP VALUE FUND -- INSTITUTIONAL CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $1,001.50 $6.29 Hypothetical (5% return before expenses) ......... $1,000.00 $1,018.74 $6.36 BOSTON PARTNERS ALL-CAP VALUE FUND -- INVESTOR CLASS -------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT VALUE VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------- --------------- -------------------- Actual ........................................... $1,000.00 $1,000.00 $7.54 Hypothetical (5% return before expenses) ......... $1,000.00 $1,017.46 $7.64 * Expenses are equal to the Fund's annualized expense ratios in the table below, which include waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-year half period.
INSTITUTIONAL INVESTOR ------------- -------- Boston Partners Small Cap Value Fund II .... 1.48% 1.73% Boston Partners Long/Short Equity Fund ..... 2.82% (1) 3.07% (1) Boston Partners Large Cap Value Fund ....... 1.00% 1.25% Boston Partners Mid Cap Value Fund ......... 1.00% 1.25% Boston Partners All-Cap Value Fund ......... 1.25% 1.50% (1) These amounts include dividends on securities which the Fund has sold short ("short-sale dividends"). Short-sale dividends generally reduce the market value of the securities by the amount of the dividend declared -- thus increasing the Fund's unrealized gain or reducing the Fund's unrealized loss on the securities sold short. Short-sale dividends are treated as an expense, and increase the Fund's total expense ratio, although no cash is received or paid by the Fund. The amount of short-sale dividend was 0.32% of average net assets for the most recent fiscal half-year. 20 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II PORTFOLIO HOLDINGS SUMMARY TABLE -------------------------------------------------------------------------------- % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ------------ COMMON STOCK Aerospace & Defense ........................ 0.3% $ 1,623,457 Air Transport .............................. 0.7% 3,435,611 Apparel .................................... 1.9% 8,548,171 Automotive Parts & Equipment ............... 0.3% 1,186,070 Banks - Regional ........................... 0.7% 3,251,890 Broadcasting ............................... 1.4% 6,530,929 Building & Construction .................... 2.6% 11,899,268 Building Materials ......................... 1.5% 6,769,324 Closed End Investment Companies ................................ 0.9% 4,398,973 Computer Equipment & Services .............. 2.0% 9,064,828 Computer Software .......................... 0.8% 3,538,133 Consulting Services ........................ 0.6% 2,837,428 Consumer Products .......................... 0.4% 1,795,148 Consumer Specialties ....................... 1.8% 8,162,686 Electronics ................................ 3.4% 15,632,844 Engineering & Construction ................. 3.8% 17,559,481 Environmental Control ...................... 1.0% 4,476,263 Financial Services ......................... 4.5% 20,815,507 Foods ...................................... 0.2% 1,052,441 Health Care - Services ..................... 7.8% 35,787,461 Health Care - Supplies ..................... 1.5% 6,973,487 Insurance - Life ........................... 1.8% 8,276,176 Insurance - Other .......................... 14.0% 64,604,416 Internet Services .......................... 3.0% 13,627,142 Iron & Steel ............................... 0.8% 3,563,372 Leisure & Lodging .......................... 1.5% 7,089,728 % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ------------ Machinery .................................. 2.7% $ 12,444,905 Manufacturing .............................. 2.0% 9,198,417 Metals & Mining ............................ 0.3% 1,558,947 Oil & Gas Exploration ...................... 0.5% 2,228,432 Oil Services ............................... 0.9% 4,325,125 Paper & Forest Products & Packaging ................................ 1.3% 5,965,377 Publishing & Information Services .......... 1.9% 8,742,030 Railroad & Bulk Shipping ................... 0.6% 2,683,308 Real Estate ................................ 10.0% 46,171,563 Recreational Products - Toys ............... 0.6% 2,560,826 Retail - Food & Drug ....................... 0.1% 661,573 Retail - Hard Goods ........................ 2.4% 10,922,229 Retail - Soft Goods ........................ 0.8% 3,921,509 Savings & Loans ............................ 0.2% 959,576 Services - Business ........................ 7.3% 33,791,070 Services - Consumer ........................ 1.6% 7,437,533 Soaps & Toiletries ......................... 1.1% 4,876,233 Telecommunications Equipment ............... 0.7% 3,389,040 Tobacco .................................... 0.8% 3,538,737 Trucking ................................... 0.2% 1,078,860 Utilities - Electric ....................... 1.9% 8,696,910 SHORT-TERM INVESTMENTS ........................ 3.1% 14,119,899 LIABILITIES IN EXCESS OF OTHER ASSETS ............................... (0.2)% (1,143,432) ----- ------------- NET ASSETS -- 100.0% .......................... 100.0% $460,628,901 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 21 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND PORTFOLIO HOLDINGS SUMMARY TABLE --------------------------------------------------------------------------------
% of Net Assets Value ----------------- ----------------------------- Security Type/Industry Classification Long Short Long Short ------------------------------------- ---- ------ ------------ ------------- COMMON STOCK Aerospace & Defense (1.2)% $ -- $ (903,924) Airlines ................................. 0.4% (0.4)% 287,025 (319,707) Automotive Parts & Equipment ............. 1.8% (0.5)% 1,338,287 (376,944) Banks - Regional ......................... 0.2% (0.8)% 128,065 (541,905) Broadcasting ............................. -- (0.9)% -- (649,458) Building & Construction .................. 2.9% (0.9)% 2,129,293 (673,335) Business & Public Services ............... 2.3% (1.3)% 1,651,041 (931,464) Chemicals - Specialty .................... -- (0.7)% -- (525,499) Commercial Services ...................... 2.3% (0.6)% 1,670,427 (453,514) Computer Equipment & Services ............ 2.6% (1.6)% 1,901,664 (1,135,121) Computer Software ........................ 3.9% (1.3)% 2,803,666 (968,357) Consulting Services ...................... 3.7% (0.4)% 2,687,051 (253,915) Consumer Products ........................ 4.0% (0.2)% 2,922,566 (144,164) Consumer Specialties ..................... 0.1% (0.4)% 63,076 (267,306) Data Processing & Reproduction ........... -- (0.5)% -- (381,183) Electronic Equipment & Products .......... -- (1.3)% -- (970,526) Electronics .............................. 1.1% (3.2)% 764,538 (2,328,183) Energy ................................... 0.5% (1.4)% 375,174 (1,013,169) Engineering .............................. 0.6% -- 449,540 -- Environmental Control .................... 2.4% (1.6)% 1,772,741 (1,156,213) Financial Services ....................... 6.8% (0.9)% 4,952,431 (661,129) Foods .................................... 1.6% (1.6)% 1,126,360 (1,187,707) Health Care - Biotech .................... 0.4% (5.4)% 313,940 (3,920,719) Health Care - Drugs ...................... 2.9% (1.5)% 2,106,135 (1,092,549) Health Care - Services ................... 4.7% (0.5)% 3,431,446 (374,352) Health Care - Supplies ................... 1.1% (3.6)% 792,000 (2,589,863) Insurance - Other ........................ 9.5% -- 6,862,701 -- Internet Services ........................ 1.6% (3.2)% 1,158,342 (2,301,509) Leisure & Lodging ........................ 3.0% -- 2,162,137 -- Machinery ................................ 0.7% 0.0% 482,421 (1,677) Manufacturing ............................ 2.1% (0.5)% 1,512,132 (372,214) Media & Entertaining ..................... 1.0% (0.3)% 709,590 (214,991) Metals & Mining .......................... -- (0.7)% -- (490,941) Office Equipment & Supplies .............. 1.9% (0.4)% 1,384,757 (321,044) Oil & Gas Exploration .................... 4.9% -- 3,553,209 -- Oil Services ............................. 3.4% (0.2)% 2,484,198 (133,395) Paper & Forest Products & Packaging ...... 0.6% (0.2)% 471,355 (148,362) Real Estate .............................. 2.3% (1.4)% 1,667,138 (988,076) Recreational Products - Toys ............. 1.2% -- 854,233 -- Restaurants .............................. 0.1% -- 60,847 -- Retail - Hard Goods ...................... 7.3% -- 5,325,807 -- Retail - Soft Goods ...................... -- (0.5)% -- (331,440) Savings & Loans .......................... 2.0% (0.4)% 1,457,437 (250,471)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 22 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO HOLDINGS SUMMARY TABLE --------------------------------------------------------------------------------
% of Net Assets Value ------------------ ----------------------------- Security Type/Industry Classification Long Short Long Short ------------------------------------- ------ ------- ------------ ------------- COMMON STOCK--(continued) Semiconductor Equipment & Products ....... 0.6% (1.2)% $ 457,613 $ (880,083) Telecommunications ....................... 3.3% (0.4)% 2,406,457 (300,832) Telecommunications Equipment ............. 1.7% (1.3)% 1,219,178 (925,130) Textiles & Apparel ....................... 0.3% (0.5)% 208,194 (366,281) Tobacco .................................. 0.6% (0.6)% 442,274 (441,936) Utilities - Electric ..................... 0.5% -- 351,535 -- BONDS - CONVERTIBLE ......................... 0.1% -- 73,688 -- SHORT-TERM INVESTMENTS ...................... 9.2% -- 6,665,307 -- ----- ------ ------------ ------------ TOTAL INVESTMENTS ........................... 104.2% (44.5)% $ 75,637,016 $(32,288,588) OTHER ASSETS IN EXCESS OF LIABILITIES ........................... 40.3% -- 29,266,835 -- ----- ------ ------------ ------------ NET ASSETS -- 100.0% ........................ 144.5% (44.5)% $104,903,851 $(32,288,588) ===== ====== ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 23 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE -------------------------------------------------------------------------------- % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ------------ COMMON STOCK Aerospace & Defense ........................ 2.1% $ 1,068,678 Apparel .................................... 1.8% 899,446 Banks - Major .............................. 2.5% 1,269,559 Building Materials ......................... 2.3% 1,133,694 Computer Equipment & Services .............. 1.0% 493,764 Computer Software .......................... 2.6% 1,300,875 Electronics ................................ 2.7% 1,344,343 Environmental Control ...................... 0.5% 240,370 Financial Services ......................... 14.0% 7,042,455 Foods ...................................... 2.7% 1,355,415 Health Care - Drugs ........................ 5.6% 2,788,722 Health Care - Services ..................... 1.7% 870,910 Health Care - Supplies ..................... 0.9% 476,388 Insurance - Other .......................... 13.6% 6,845,681 Leisure & Lodging .......................... 2.1% 1,057,977 Manufacturing .............................. 3.9% 1,982,286 Media & Entertainment ...................... 3.8% 1,894,133 Metals & Mining ............................ 0.6% 301,040 Office Equipment & Supplies ................ 0.9% 459,487 Oil & Gas - Integrated Majors .............. 4.9% 2,465,099 Oil & Gas - Refining & Marketing ........... 3.6% 1,813,687 % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ------------ Oil & Gas Exploration ...................... 2.4% $ 1,213,080 Oil Services ............................... 3.0% 1,522,172 Paper & Forest Products & Packaging ................................ 1.2% 624,900 Recreational Products - Toys ............... 1.3% 637,432 Restaurants ................................ 1.0% 487,238 Retail - Food & Drug ....................... 0.8% 384,000 Retail - Hard Goods ........................ 1.5% 740,070 Retail - Soft Goods ........................ 1.3% 660,632 Semiconductor Equipment & Products ................................. 0.6% 284,950 Soaps & Toiletries ......................... 1.2% 593,282 Telecommunications ......................... 4.6% 2,302,712 Telecommunications Equipment ............... 0.5% 239,976 Tobacco .................................... 2.0% 983,456 Utilities - Electric ....................... 1.4% 700,404 SHORT-TERM INVESTMENTS ........................ 3.4% 1,707,034 LIABILITIES IN EXCESS OF OTHER ASSETS ............................... 0.0% (7,061) ----- ----------- NET ASSETS -- 100.0% .......................... 100.0% $50,178,286 ===== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 24 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE -------------------------------------------------------------------------------- % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ------------ COMMON STOCK Apparel .................................... 1.8% $ 822,653 Automotive Parts & Equipment ............... 0.8% 371,772 Chemicals - Commodity ...................... 0.5% 227,997 Chemicals - Specialty ...................... 2.1% 945,934 Closed End Investment Company .............. 1.8% 824,964 Communications Equipment ................... 1.0% 435,168 Computer Equipment & Services .............. 3.4% 1,534,251 Computer Software .......................... 1.7% 758,734 Consumer Products .......................... 0.5% 215,300 Data Processing Services ................... 1.3% 592,850 Electronics ................................ 4.5% 2,044,201 Financial Services ......................... 3.6% 1,619,102 Foods ...................................... 4.0% 1,803,038 Health Care - Drugs ........................ 1.6% 735,896 Health Care - Services ..................... 3.4% 1,549,875 Health Care - Supplies ..................... 1.8% 803,946 Insurance - Life ........................... 1.9% 842,132 Insurance - Other .......................... 11.4% 5,119,715 Internet Services .......................... 2.8% 1,265,722 Leisure & Lodging .......................... 4.8% 2,178,299 Machinery .................................. 2.7% 1,198,250 Manufacturing .............................. 8.0% 3,591,126 % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ------------ Metals & Mining ............................ 0.8% $ 353,722 Oil & Gas Exploration ...................... 1.6% 701,422 Oil Services ............................... 3.9% 1,734,976 Paper & Forest Products & Packaging ................................ 1.9% 836,492 Publishing ................................. 3.2% 1,432,996 Real Estate ................................ 3.0% 1,364,669 Recreational Products - Toys ............... 0.6% 274,351 Restaurants ................................ 1.5% 673,652 Retail - Hard Goods ........................ 3.0% 1,360,873 Retail - Soft Goods ........................ 2.1% 946,581 Savings & Loans ............................ 1.3% 570,262 Services - Business ........................ 1.0% 451,134 Telecommunications ......................... 1.5% 682,428 Tobacco .................................... 0.6% 281,352 Trucking ................................... 0.8% 367,380 Utilities - Electric ....................... 3.8% 1,723,174 SHORT-TERM INVESTMENTS ........................ 33.1% 14,919,572 LIABILITIES IN EXCESS OF OTHER ASSETS ............................... (29.1)% (13,096,998) ----- ------------ NET ASSETS -- 100.0% .......................... 100.0% $ 45,058,963 ===== ============ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 25 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE -------------------------------------------------------------------------------- % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ---------- COMMON STOCK Air Transport .............................. 0.4% $ 24,833 Apparel .................................... 4.0% 233,348 Beverages .................................. 0.5% 29,048 Building Materials ......................... 1.2% 72,456 Closed End Investment Companies ................................ 0.7% 41,316 Computer Equipment & Services .............. 3.0% 173,564 Computer Software .......................... 0.5% 28,392 Consumer Products .......................... 0.9% 51,814 Diversified Operations ..................... 0.1% 8,215 Electronics ................................ 0.3% 19,238 Financial Services ......................... 9.7% 566,615 Foods ...................................... 1.2% 69,652 Health Care - Drugs ........................ 6.2% 359,625 Health Care - Services ..................... 2.4% 140,126 Health Care - Supplies ..................... 2.6% 152,202 Insurance - Life ........................... 1.0% 56,074 Insurance - Other .......................... 17.2% 1,001,723 Manufacturing .............................. 1.0% 56,846 Media & Entertainment ...................... 1.7% 96,125 Metals & Mining ............................ 1.0% 57,904 Oil & Gas - Integrated Majors .............. 2.5% 142,732 Oil & Gas - Refining & Marketing ........... 1.2% 71,089 Oil & Gas Exploration ...................... 5.8% 340,567 % of Net Security Type/Industry Classification Assets Value ------------------------------------- -------- ---------- Real Estate ................................ 6.1% $ 354,314 Recreational Products - Toys ............... 0.9% 51,568 Restaurants ................................ 0.9% 50,287 Retail - Hard Goods ........................ 2.7% 157,597 Retail - Soft Goods ........................ 1.3% 77,414 Services - Business ........................ 1.5% 89,315 Telecommunications ......................... 3.6% 211,172 Telecommunications Equipment ............... 1.4% 81,399 Tobacco .................................... 6.7% 389,619 Utilities - Electric ....................... 2.1% 123,250 Utilities - Gas & Water .................... 1.1% 62,986 PREFERRED STOCK ............................... 1.4% 82,178 CORPORATE BONDS ............................... 0.7% 40,565 RIGHTS/WARRANTS ............................... 0.2% 12,199 SHORT-TERM INVESTMENTS ........................ 7.1% 410,960 WRITTEN OPTIONS ............................... (0.5)% (29,533) LIABILITIES IN EXCESS OF OTHER ASSETS ............................... (2.3)% (132,059) ----- ---------- NET ASSETS -- 100.0% .......................... 100.0% $5,826,735 ===== ========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 26 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ COMMON STOCK--97.1% AEROSPACE & DEFENSE--0.3% DRS Technologies, Inc.* .................... 44,625 $ 1,623,457 ------------ AIR TRANSPORT--0.7% ExpressJet Holdings, Inc.* ................. 69,445 746,534 Pinnacle Airlines Corp.* ................... 275,210 2,689,077 ------------ 3,435,611 ------------ APPAREL--1.9% Brown Shoe Co., Inc. ....................... 96,000 2,545,920 Russell Corp. .............................. 72,700 1,298,422 Steven Madden Ltd.* ........................ 131,000 2,390,750 Warnaco Group, Inc., (The)* ................ 114,850 2,313,079 ------------ 8,548,171 ------------ AUTOMOTIVE PARTS & EQUIPMENT--0.3% Standard Motor Products, Inc. .............. 83,000 1,186,070 ------------ BANKS - REGIONAL--0.7% Bancorp Bank, (The)* ....................... 57,500 1,150,000 First Community Bancorp .................... 15,500 631,005 Franklin Bank Corp., Class A 144A* .................................... 119,100 1,470,885 ------------ 3,251,890 ------------ BROADCASTING--1.4% 4Kids Entertainment, Inc.* ................. 66,400 1,157,352 Alliance Atlantis Communications, Inc., Class B* ........................... 262,930 4,969,377 Liberty Corp., (The) ....................... 10,000 404,200 ------------ 6,530,929 ------------ BUILDING & CONSTRUCTION--2.6% Champion Enterprises, Inc.* ................ 680,210 6,550,422 Infrasource Services, Inc.* ................ 137,000 1,220,670 Monaco Coach Corp.* ........................ 61,200 1,315,188 Palm Harbor Homes, Inc.* ................... 171,943 2,812,988 ------------ 11,899,268 ------------ Number of Shares Value --------- ------------ BUILDING MATERIALS--1.5% Drew Industries, Inc.* ..................... 82,700 $ 2,844,880 ElkCorp .................................... 63,945 1,599,264 Lennox International, Inc. ................. 143,000 2,325,180 ------------ 6,769,324 ------------ CLOSED END INVESTMENT COMPANIES--0.9% Apollo Investment Corp.* ................... 245,900 3,449,977 Gladstone Capital Corp. .................... 40,400 948,996 ------------ 4,398,973 ------------ COMPUTER EQUIPMENT & SERVICES--2.0% Insight Enterprises, Inc.* ................. 66,900 1,070,400 iPass, Inc.* ............................... 517,300 3,233,125 Keane, Inc.* ............................... 129,500 1,825,950 Pinnacle Systems, Inc.* .................... 120,100 449,174 Tier Technologies, Inc., Class B* .......... 93,400 784,560 Xyratex Ltd.* .............................. 174,525 1,701,619 ------------ 9,064,828 ------------ COMPUTER SOFTWARE--0.8% MSC.Software Corp.* ........................ 125,700 916,353 NetIQ Corp.* ............................... 178,000 1,712,360 SPSS, Inc.* ................................ 65,900 909,420 ------------ 3,538,133 ------------ CONSULTING SERVICES--0.6% FTI Consulting, Inc.* ...................... 86,700 1,550,196 MAXIMUS, Inc.* ............................. 44,250 1,287,232 ------------ 2,837,428 ------------ CONSUMER PRODUCTS--0.4% Natuzzi S.p.A. - ADR ....................... 192,200 1,795,148 ------------ CONSUMER SPECIALTIES--1.8% Rayovac Corp.* ............................. 81,500 1,873,685 Sola International, Inc.* .................. 325,855 6,289,001 ------------ 8,162,686 ------------ ELECTRONICS--3.4% Bell Microproducts, Inc.* .................. 9,900 75,141 CompuCom Systems, Inc.* .................... 109,900 498,946 DuPont Photomasks, Inc.* ................... 52,600 821,612 Engineered Support Systems, Inc. ........... 84,100 3,633,961 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 27 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ ELECTRONICS--(CONTINUED) Hypercom Corp.* ............................ 244,900 $ 1,787,770 Paxar Corp.* ............................... 203,800 4,124,912 Planar Systems, Inc.* ...................... 119,900 1,362,064 Pomeroy IT Solutions, Inc.* ................ 83,296 1,082,015 Rofin-Sinar Technologies, Inc.* ............ 20,470 575,207 Technitrol, Inc.* .......................... 94,100 1,671,216 ------------ 15,632,844 ------------ ENGINEERING & CONSTRUCTION--3.8% EMCOR Group, Inc.* ......................... 149,300 6,061,580 Granite Construction, Inc. ................. 37,000 843,600 Integrated Electrical Services, Inc.* ...... 357,700 1,724,114 Modtech Holdings, Inc.* .................... 69,900 510,969 URS Corp.* ................................. 234,614 5,794,966 Washington Group International, Inc.* .................................... 74,595 2,624,252 ------------ 17,559,481 ------------ ENVIRONMENTAL CONTROL--1.0% Tetra Tech, Inc.* .......................... 251,900 4,476,263 ------------ FINANCIAL SERVICES--4.5% Advanta Corp., Class B ..................... 250,300 5,882,050 Affiliated Managers Group, Inc.* ........... 23,100 1,133,055 Bay View Capital Corp.* .................... 33,670 622,558 BKF Capital Group, Inc.* ................... 22,600 626,924 CMET Finance Holdings, Inc. 144A* .................................... 15,000 1,500,000 Delta Financial Corp. ...................... 71,500 438,295 Federal Agricultural Mortgage Corp., Class C* .......................... 279,400 5,548,884 IndyMac Bancorp, Inc. ...................... 68,600 2,366,700 MCG Capital Corp. .......................... 57,700 998,210 NetBank, Inc. .............................. 137,900 1,467,256 Oxford Financial Corp. 144A ................ 130,000 1,300 Value Line, Inc. ........................... 6,100 230,275 ------------ 20,815,507 ------------ FOODS--0.2% NBTY, Inc.* ................................ 43,980 1,052,441 ------------ Number of Shares Value --------- ------------ HEALTH CARE - SERVICES--7.8% American Medical Security Group, Inc.* .................................... 45,200 $ 1,018,808 Apria Healthcare Group, Inc.* .............. 480,600 13,572,144 First Consulting Group, Inc.* .............. 98,440 495,153 Kendle International, Inc.* ................ 77,200 491,764 Kindred Healthcare, Inc.* .................. 141,130 3,649,622 LifePoint Hospitals, Inc.* ................. 56,090 1,620,440 Option Care, Inc.* ......................... 325,050 5,113,036 Radiation Therapy Services, Inc.* .......... 172,370 2,214,955 RehabCare Group, Inc.* ..................... 169,400 3,894,506 Renal Care Group, Inc.* .................... 86,700 2,745,789 Res-Care, Inc.* ............................ 91,800 971,244 ------------ 35,787,461 ------------ HEALTH CARE - SUPPLIES--1.5% Analogic Corp. ............................. 28,900 1,191,547 CONMED Corp.* .............................. 197,200 4,821,540 Owens & Minor, Inc. ........................ 39,200 960,400 ------------ 6,973,487 ------------ INSURANCE - LIFE--1.8% AmerUs Group Co. ........................... 45,800 1,825,588 Scottish Re Group Ltd. ..................... 303,700 6,450,588 ------------ 8,276,176 ------------ INSURANCE - OTHER--14.0% Allmerica Financial Corp.* ................. 39,790 1,153,910 American Physicians Capital, Inc.* ......... 71,500 1,964,820 Arch Capital Group Ltd.* ................... 19,200 702,720 Aspen Insurance Holdings Ltd. .............. 86,815 2,048,834 Assured Guaranty Ltd. ...................... 429,400 6,883,282 Bristol West Holdings, Inc.* ............... 190,025 3,141,113 CNA Surety Corp.* .......................... 242,725 2,524,340 Hilb, Rogal & Hamilton Co. ................. 145,800 4,963,032 Hub International Ltd. ..................... 188,100 3,293,631 Infinity Property & Casualty Corp. ......... 140,200 3,844,284 IPC Holdings Ltd. .......................... 329,200 11,946,668 Max Re Capital Ltd. ........................ 155,500 2,878,305 Navigators Group, Inc., (The)* ............. 181,170 5,297,411 Odyssey Re Holdings Corp. .................. 54,520 1,196,169 Penn-America Group, Inc. ................... 45,300 591,618 Platinum Underwriters Holdings Ltd. ..................................... 210,160 5,964,341 Quanta Capital Holdings Ltd.* .............. 370,900 3,427,116 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 28 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ INSURANCE - OTHER--(CONTINUED) RLI Corp. .................................. 29,750 $ 1,100,452 United National Group Ltd., Class A* ................................. 108,540 1,682,370 ------------ 64,604,416 ------------ INTERNET SERVICES--3.0% EarthLink, Inc.* ........................... 657,600 6,582,576 Stonepath Group, Inc.* ..................... 44,670 67,452 United Online, Inc.* ....................... 728,300 6,977,114 ------------ 13,627,142 ------------ IRON & STEEL--0.8% GrafTech International Ltd.* ............... 198,800 2,119,208 Ryerson Tull, Inc. ......................... 90,600 1,444,164 ------------ 3,563,372 ------------ LEISURE & LODGING--1.5% Argosy Gaming Co.* ......................... 75,700 2,530,651 Dover Downs Gaming & Entertainment, Inc. ...................... 6,685 68,922 Interstate Hotels & Resorts, Inc.* ......... 118,650 495,957 Intrawest Corp. ............................ 114,700 1,795,055 La Quinta Corp.* ........................... 195,365 1,531,662 MTR Gaming Group, Inc.* .................... 71,160 667,481 ------------ 7,089,728 ------------ MACHINERY--2.7% Actuant Corp., Class A* .................... 39,500 1,494,680 CIRCOR International, Inc. ................. 44,700 807,282 Global Power Equipment Group, Inc.* .................................... 308,570 2,181,590 Manitowoc Co., Inc., (The) ................. 39,500 1,309,820 Terex Corp.* ............................... 184,100 6,651,533 ------------ 12,444,905 ------------ MANUFACTURING--2.0% EnerSys* ................................... 96,925 1,230,947 NN, Inc. ................................... 124,100 1,250,928 Spartech Corp. ............................. 201,000 4,870,230 Tredegar Corp. ............................. 106,600 1,846,312 ------------ 9,198,417 ------------ Number of Shares Value --------- ------------ METALS & MINING--0.3% Olin Corp. ................................. 92,300 $ 1,558,947 ------------ OIL & GAS EXPLORATION--0.5% Atlas America, Inc.* ....................... 30,530 653,342 Swift Energy Co.* .......................... 77,400 1,575,090 ------------ 2,228,432 ------------ OIL SERVICES--0.9% Hornbeck Offshore Services, Inc.* .......... 41,605 505,917 Key Energy Services, Inc.* ................. 253,365 2,556,453 Parker Drilling Co.* ....................... 172,100 557,604 Todco, Class A* ............................ 45,700 705,151 ------------ 4,325,125 ------------ PAPER FOREST PRODUCTS & PACKAGING--1.3% Anchor Glass Container Corp.* .............. 50,700 422,838 Constar International, Inc.* ............... 74,200 397,712 Packaging Dynamics Corp.* .................. 33,105 496,575 Schweitzer-Mauduit International, Inc. ..................................... 54,700 1,663,427 Silgan Holdings, Inc. ...................... 66,700 2,984,825 ------------ 5,965,377 ------------ PUBLISHING & INFORMATION SERVICES--1.9% Bowne & Co., Inc. .......................... 228,400 3,065,128 infoUSA, Inc.* ............................. 279,640 2,541,928 Pulitzer, Inc. ............................. 21,100 1,027,570 Reader's Digest Association, Inc., (The) .................................... 148,200 2,107,404 ------------ 8,742,030 ------------ RAILROAD & BULK SHIPPING--0.6% RailAmerica, Inc.* ......................... 157,795 1,838,312 Stonepath Group, Inc. 144A* ................ 559,600 844,996 ------------ 2,683,308 ------------ REAL ESTATE--10.0% Affordable Residential Communities .............................. 185,995 2,882,922 American Financial Realty Trust (REIT) ................................... 99,725 1,401,136 American Financial Realty Trust (REIT) 144A .............................. 202,300 2,842,315 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 29 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ REAL ESTATE--(CONTINUED) Arbor Realty Trust 144A (REIT) ............. 20,200 $ 2,107,870 Ashford Hospitality Trust (REIT) ........... 53,625 461,175 Bimini Mortgage Management 144A (REIT)*+ ............................ 290,025 4,350,375 Brandywine Realty Trust (REIT) ............. 58,500 1,731,600 Capital Lease Funding, Inc. (REIT)* ........ 236,675 2,451,953 Falcon Financial Investment Trust (REIT)* .................................. 105,455 812,003 Fieldstone Investment Corp. 144A (REIT) .............................. 105,000 1,706,250 Gladstone Commercial Corp. (REIT) ................................... 131,475 2,144,357 Government Properties Trust, Inc. (REIT)* .................................. 141,075 1,324,694 Jones Lang LaSalle, Inc.* .................. 21,800 711,770 Lexington Corporate Properties Trust (REIT) ............................. 79,650 1,685,394 LNR Property Corp. ......................... 30,200 1,890,520 MFA Mortgage Investments, Inc. (REIT) ................................... 277,750 2,585,853 Medical Property Trust 144A (REIT) ................................... 107,000 1,070,000 Origen Financial, Inc. (REIT) .............. 461,625 3,480,653 Redwood Trust, Inc. (REIT) ................. 81,000 4,783,860 Trammell Crow Co.* ......................... 355,000 4,714,400 Ventas, Inc. (REIT) ........................ 37,750 1,032,463 ------------ 46,171,563 ------------ RECREATIONAL PRODUCTS - TOYS--0.6% Leapfrog Enterprises, Inc., Class A* ................................. 129,400 2,560,826 ------------ RETAIL - FOOD & DRUG--0.1% Finish Line, Inc., (The), Class A* ......... 22,805 661,573 ------------ RETAIL - HARD GOODS--2.4% Friedman's, Inc., Class A .................. 591,500 1,212,575 GameStop Corp., Class A* ................... 154,110 2,582,884 Hollywood Entertainment Corp.* ............. 356,555 3,597,640 Lithia Motors, Inc., Class A ............... 84,500 1,795,625 School Specialty, Inc.* .................... 48,900 1,733,505 ------------ 10,922,229 ------------ Number of Shares Value --------- ------------ RETAIL - SOFT GOODS--0.8% Charming Shoppes, Inc.* .................... 359,200 $ 2,464,112 K-Swiss, Inc., Class A ..................... 74,700 1,457,397 ------------ 3,921,509 ------------ SAVINGS & LOANS--0.2% Franklin Bank Corp.* ....................... 28,300 450,536 ITLA Capital Corp.* ........................ 12,000 509,040 ------------ 959,576 ------------ SERVICES - BUSINESS--7.3% Century Business Services, Inc.* ........... 412,200 1,751,850 Clark, Inc.* ............................... 167,980 2,259,331 Cornell Companies, Inc.* ................... 91,980 1,103,760 Geo Group, Inc., (The)* .................... 51,700 1,008,150 Harland (John H.) Co. ...................... 71,930 2,114,023 Insurance Auto Auctions, Inc.* ............. 52,114 896,882 Integrated Alarm Services Group, Inc.* .................................... 698,113 2,792,452 Kforce, Inc.* .............................. 141,176 927,526 MPS Group, Inc.* ........................... 436,300 3,896,159 Navigant International, Inc.* .............. 311,100 4,996,266 PRG-Schultz International, Inc.* ........... 571,500 3,240,405 ProQuest Co.* .............................. 22,750 552,825 SOURCECORP, Inc.* .......................... 66,140 1,465,001 Spherion Corp.* ............................ 224,000 1,639,680 Standard Parking Corp.* .................... 172,255 2,247,928 World Fuel Services Corp. .................. 82,400 2,898,832 ------------ 33,791,070 ------------ SERVICES - CONSUMER--1.6% Ambassadors International, Inc. ............ 24,100 292,333 Coinstar, Inc.* ............................ 73,800 1,455,336 Service Corporation International* ........................... 743,700 4,469,637 Steiner Leisure Ltd.* ...................... 57,100 1,220,227 ------------ 7,437,533 ------------ SOAPS & TOILETRIES--1.1% Nu Skin Enterprises, Inc., Class A ......... 69,400 1,791,908 Playtex Products, Inc.* .................... 412,950 2,696,564 Sykes Enterprises, Inc.* ................... 85,410 387,761 ------------ 4,876,233 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 30 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II (concluded) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ TELECOMMUNICATIONS EQUIPMENT--0.7% Adaptec, Inc.* ............................. 99,700 $ 695,906 Belden CDT, Inc.* .......................... 134,455 2,693,134 ------------ 3,389,040 ------------ TOBACCO--0.8% DIMON, Inc. ................................ 180,600 1,036,644 Standard Commercial Corp. .................. 77,700 1,188,810 Universal Corp. ............................ 29,100 1,313,283 ------------ 3,538,737 ------------ TRUCKING--0.2% Marten Transport Ltd.* ..................... 18,800 326,744 Quality Distribution, Inc.* ................ 121,505 752,116 ------------ 1,078,860 ------------ UTILITIES - ELECTRIC--1.9% Green Mountain Power Corp. ................. 15,000 397,050 Sierra Pacific Resources* .................. 965,100 8,299,860 ------------ 8,696,910 ------------ TOTAL COMMON STOCK (Cost $397,956,198) .................... 447,652,434 ------------ Number of Shares Value --------- ------------ SHORT TERM INVESTMENTS--3.1% Galaxy Institutional Money Market Fund 1.370% 09/01/04 .......................... 14,119,899 $ 14,119,899 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $14,119,899) ..................... 14,119,899 ------------ TOTAL INVESTMENTS--100.2% (Cost $412,076,097) ........................ 461,772,333 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(0.2)% ....................... (1,143,432) ------------ NET ASSETS--100.0% ............................ $460,628,901 ============ ---------- * -- Non-income producing. ADR -- American Depository Receipt. 144A -- Security was purchased pursuant to Rule 144A under Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. As of August 31, 2004, these securities amounted to 3.45% of net assets. REIT -- Real Estate Investment Trust + -- Security deemed to be illiquid. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 31 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ LONG POSITIONS--104.2% DOMESTIC COMMON STOCK--94.9% AIRLINES--0.4% ExpressJet Holdings, Inc.* ................. 26,700 $ 287,025 ------------ AUTOMOTIVE PARTS & EQUIPMENT--1.8% Hayes Lemmerz International, Inc.+* ................................... 43,300 556,405 Intier Automotive, Inc., Class A ........... 13,490 248,216 LKQ Corp.+* ................................ 12,400 226,176 Superior Industries International, Inc. ..................................... 9,700 307,490 ------------ 1,338,287 ------------ BANKS - REGIONAL--0.2% Banc Corp., (The)+ ......................... 19,855 128,065 ------------ BUILDING & CONSTRUCTION--2.9% Griffon Corp.+* ............................ 32,200 644,644 Masco Corp.+ ............................... 23,500 755,055 Rinker Group Ltd. - ADR+ ................... 11,800 729,594 ------------ 2,129,293 ------------ BUSINESS & PUBLIC SERVICES--2.3% 4Kids Entertainment, Inc.+* ................ 28,240 492,223 Corrections Corp. of America+* ............. 17,200 595,808 Integrated Alarm Services Group, Inc.+* ................................... 65,600 262,400 Kforce, Inc.+* ............................. 45,755 300,610 ------------ 1,651,041 ------------ COMMERCIAL SERVICES--2.3% Century Business Services, Inc.* ........... 109,600 465,800 Steiner Leisure Ltd.+* ..................... 56,370 1,204,627 ------------ 1,670,427 ------------ COMPUTER EQUIPMENT & SERVICES--2.6% BISYS Group, Inc., (The)+* ................. 32,800 465,760 CompuCom Systems, Inc.+* ................... 110,200 500,308 Computer Horizons Corp.* ................... 70,565 275,909 Performance Technolgies, Inc.** ............ 26,000 155,740 Pomeroy IT Solutions, Inc.* ................ 38,795 503,947 ------------ 1,901,664 ------------ Number of Shares Value --------- ------------ COMPUTER SOFTWARE--3.9% Datastream Systems, Inc.* .................. 39,603 $ 252,271 EPIQ Systems, Inc.+* ....................... 34,700 554,506 Hummingbird Ltd.* .......................... 15,600 338,676 ManTech International Corp., Class A* ................................. 30,000 480,600 Pervasive Software, Inc.+* ................. 43,900 263,400 Pinnacle Systems, Inc.+* ................... 89,757 335,691 Sybase, Inc.* .............................. 43,400 578,522 ------------ 2,803,666 ------------ CONSULTING SERVICES--3.7% Accenture Ltd., Class A* ................... 20,695 540,139 Clark, Inc.* ............................... 35,175 473,104 FTI Consulting, Inc.+* ..................... 52,600 940,488 Watson Wyatt & Co. Holdings+ ............... 29,100 733,320 ------------ 2,687,051 ------------ CONSUMER PRODUCTS--4.0% Blyth, Inc. ................................ 12,900 387,129 CNS, Inc. .................................. 2,525 25,628 Mohawk Industries, Inc.* ................... 9,190 706,895 Reebok International Ltd.+ ................. 26,200 890,014 Silgan Holdings, Inc.+ ..................... 20,400 912,900 ------------ 2,922,566 ------------ CONSUMER SPECIALTIES--0.1% Boyds Collection Ltd., (The)+* ............. 25,030 63,076 ------------ ELECTRONICS--1.1% Checkpoint Systems, Inc.* .................. 19,400 292,940 Rofin-Sinar Technologies, Inc.* ............ 6,500 182,650 Spectrum Control, Inc.* .................... 36,300 288,948 ------------ 764,538 ------------ ENERGY--0.5% Calpine Corp.+* ............................ 109,700 375,174 ------------ ENGINEERING--0.6% URS Corp.* ................................. 18,200 449,540 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 32 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ ENVIRONMENTAL CONTROL--2.4% Darling International, Inc.* ............... 143,930 $ 604,506 Republic Services, Inc.+ ................... 29,700 830,115 Waste Industries USA, Inc. ................. 31,600 338,120 ------------ 1,772,741 ------------ FINANCIAL SERVICES--6.8% BKF Capital Group, Inc.+ ................... 8,700 241,338 Countrywide Financial Corp.+ ............... 33,600 1,194,480 Fannie Mae ................................. 8,100 603,045 Freddie Mac+ ............................... 20,200 1,355,824 MBIA, Inc.+ ................................ 27,200 1,557,744 ------------ 4,952,431 ------------ FOODS--1.6% Fresh Del Monte Produce, Inc. .............. 14,280 370,137 M & F Worldwide Corp.* ..................... 49,590 659,547 Spartan Stores, Inc.* ...................... 23,695 96,676 ------------ 1,126,360 ------------ HEALTH CARE - BIOTECH--0.4% Gene Logic, Inc.+* ......................... 37,785 129,980 Savient Pharmaceuticals, Inc. .............. 84,000 183,960 ------------ 313,940 ------------ HEALTH CARE - DRUGS--2.9% Pfizer, Inc.+ .............................. 33,500 1,094,445 Shire Pharmaceuticals Group PLC - ADR* ............................... 23,200 601,344 Watson Pharmaceuticals, Inc.+* ............. 14,900 410,346 ------------ 2,106,135 ------------ HEALTH CARE - SERVICES--4.7% American Dental Partners, Inc.* ............ 15,600 282,360 Apria Healthcare Group, Inc.+* ............. 34,105 963,125 Medco Health Solutions, Inc.+* ............. 17,915 559,486 RehabCare Group, Inc.+* .................... 31,900 733,381 Renal Care Group, Inc.+* ................... 28,200 893,094 ------------ 3,431,446 ------------ Number of Shares Value --------- ------------ HEALTH CARE - SUPPLIES--1.1% Cantel Medical Corp.+* ..................... 17,400 $ 474,150 CONMED Corp.* .............................. 13,000 317,850 ------------ 792,000 ------------ INSURANCE - OTHER--9.5% Aspen Insurance Holdings Ltd.+ ............. 27,700 653,720 Assured Guaranty Ltd.+ ..................... 37,492 600,997 Bristol West Holdings, Inc.+* .............. 27,535 455,154 IPC Holdings Ltd.+ ......................... 18,500 671,365 PartnerRe Ltd. ............................. 14,100 723,753 Platinum Underwriters Holdings Ltd.+ .................................... 33,240 943,351 ProCentury Corp.+ .......................... 58,205 583,214 Protective Life Corp. ...................... 17,900 700,427 Radian Group, Inc.+ ........................ 24,400 1,080,920 Wesco Financial Corp. ...................... 1,300 449,800 ------------ 6,862,701 ------------ INTERNET SERVICES--1.6% EarthLink, Inc.* ........................... 54,500 545,545 iPass, Inc.* ............................... 58,600 366,250 Knot, Inc., (The)* ......................... 67,547 246,547 ------------ 1,158,342 ------------ LEISURE & LODGING--3.0% Dover Downs Gaming & Entertainment, Inc.+ ..................... 5,100 52,581 GTECH Holdings Corp. ....................... 16,000 376,000 Intrawest Corp.+ ........................... 10,500 164,325 Mikohn Gaming Corp.* ....................... 26,600 121,030 MTR Gaming Group, Inc.+* ................... 74,870 702,281 Penn National Gaming, Inc.+* ............... 19,200 745,920 ------------ 2,162,137 ------------ MACHINERY--0.7% Global Power Equipment Group, Inc.+* ................................... 68,235 482,421 ------------ MANUFACTURING--2.1% Mueller Industries, Inc. ................... 13,900 546,131 NN, Inc. ................................... 32,360 326,189 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 33 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ MANUFACTURING--(CONTINUED) NS Group, Inc.* ............................ 20,600 $ 309,000 Tredegar Corp. ............................. 19,100 330,812 ------------ 1,512,132 ------------ MEDIA & ENTERTAINMENT--1.0% Time Warner, Inc.+* ........................ 43,400 709,590 ------------ OFFICE EQUIPMENT & SUPPLIES--1.9% Ennis, Inc. ................................ 21,000 392,280 Xerox Corp.+* .............................. 73,900 992,477 ------------ 1,384,757 ------------ OIL & GAS EXPLORATION--4.9% Clayton Williams Energy, Inc.+* ............ 14,275 254,380 EnCana Corp.+ .............................. 14,900 612,390 Marathon Oil Corp. ......................... 14,155 513,402 PetroQuest Energy, Inc.* ................... 109,410 486,875 Pogo Producing Co.+ ........................ 13,100 576,138 Tesoro Petroleum Corp.* .................... 30,800 729,344 Transocean, Inc.* .......................... 12,400 380,680 ------------ 3,553,209 ------------ OIL SERVICES--3.4% Global Industries Ltd.* .................... 37,800 202,230 Key Energy Services, Inc.* ................. 39,700 400,573 Newpark Resources, Inc.+* .................. 72,490 413,193 RPC, Inc.+ ................................. 50,400 763,560 Superior Energy Services, Inc.+* ........... 32,530 364,011 Todco, Class A+* ........................... 16,725 258,067 Trico Marine Services, Inc.* ............... 317,555 82,564 ------------ 2,484,198 ------------ PAPER FOREST PRODUCTS & PACKAGING--0.6% Schweitzer-Mauduit International, Inc. ..................................... 15,500 471,355 ------------ REAL ESTATE--2.3% American Financial Realty Trust 144A (REIT) .............................. 51,500 723,575 Texas Pacific Land Trust+ .................. 6,200 544,980 United Capital Corp.* ...................... 19,830 398,583 ------------ 1,667,138 ------------ Number of Shares Value --------- ------------ RECREATIONAL PRODUCTS - TOYS--1.2% Hasbro, Inc.+ .............................. 46,100 $ 854,233 ------------ RESTAURANTS--0.1% Total Entertainment Restaurant Corp.* ................................... 6,140 60,847 ------------ RETAIL - HARD GOODS--7.3% Barnes & Noble, Inc.+* ..................... 34,500 1,192,320 Blockbuster, Inc., Class A+ ................ 30,800 247,324 Claire's Stores, Inc.+ ..................... 43,380 1,055,869 GameStop Corp., Class A+* .................. 36,500 611,740 Limited Brands+ ............................ 33,800 678,704 Rent-A-Center, Inc.+* ...................... 19,835 597,034 Zale Corp.* ................................ 36,800 942,816 ------------ 5,325,807 ------------ SAVINGS & LOANS--2.0% Citizens First Bancorp, Inc.+ .............. 7,405 156,615 Franklin Bank Corp.+* ...................... 34,000 541,280 HF Financial Corp. ......................... 5,525 87,019 Sovereign Bancorp, Inc.+ ................... 30,765 672,523 ------------ 1,457,437 ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS--0.6% Atmel Corp.* ............................... 61,800 215,682 White Electronic Designs Corp.+* .................................. 48,875 241,931 ------------ 457,613 ------------ TELECOMMUNICATIONS--3.3% MCI, Inc.* ................................. 27,400 471,828 Nextel Communications, Inc., Class A+* ................................ 27,900 647,001 PTEK Holdings, Inc.* ....................... 45,200 387,364 Vodafone Group PLC - ADR+ .................. 20,400 467,160 West Corp.* ................................ 16,800 433,104 ------------ 2,406,457 ------------ TELECOMMUNICATIONS EQUIPMENT--1.7% C-COR Inc.* ................................ 35,300 277,458 Comtech Telecommunications Corp.+* .................................. 52,000 941,720 ------------ 1,219,178 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 34 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ TEXTILES & APPAREL--0.3% Culp, Inc.* ................................ 27,430 $ 208,194 ------------ TOBACCO--0.6% Universal Corp. ............................ 9,800 442,274 ------------ UTILITIES - ELECTRIC--0.5% Central Vermont Public Service Corp. .................................... 16,700 351,535 ------------ TOTAL DOMESTIC COMMON STOCK (Cost $68,188,371) ..................... 68,898,021 ------------ Par (000) -------- CONVERTIBLE BONDS--0.1% Interpool, Inc. 9.25% 12/27/22 ........................... $75 73,688 ------------ TOTAL CONVERTIBLE BONDS--0.1% (Cost $75,000) ......................... 73,688 ------------ Number of Shares --------- SHORT-TERM INVESTMENTS--9.2% Galaxy Institutional Money Market Fund 1.370% 09/01/04 ..................... 5,355,814 5,355,814 Wilmington Money Market Fund 0.770% 09/01/04 .......................... 1,309,493 1,309,493 ------------ TOTAL SHORT-TERM INVESTMENTS--9.2% (Cost $6,665,307) 6,665,307 ------------ TOTAL LONG POSITIONS--104.2% (Cost $74,928,678) 75,637,016 ------------ SECURITIES SOLD SHORT--(44.5%) AEROSPACE & DEFENSE--(1.2%) BE Aerospace, Inc.* ........................ (54,020) (572,612) GenCorp, Inc.* ............................. (18,800) (227,104) Innovative Solutions and Support, Inc.* .................................... (3,900) (104,208) ------------ (903,924) ------------ Number of Shares Value --------- ------------ AIRLINES--(0.4%) AMR Corp.* ................................. (20,800) $ (185,952) UAL Corp.* ................................. (74,165) (83,065) US Airways Group, Inc., Class A* ........... (23,577) (50,690) ------------ (319,707) ------------ AUTOMOTIVE PARTS & EQUIPMENT--(0.5%) Goodyear Tire & Rubber Co., (The)* ................................... (34,330) (376,944) ------------ BANKS - REGIONAL--(0.8%) First Horizon National Corp. ............... (6,500) (295,555) First Indiana Corp. ........................ (13,000) (246,350) ------------ (541,905) ------------ BROADCASTING--(0.9%) Crown Media Holdings, Inc., Class A* ................................. (24,650) (181,917) Cumulus Media, Inc., Class A* .............. (6,810) (102,831) Spanish Broadcasting System, Inc., Class A .................................. (24,700) (216,372) XM Satellite Radio Holdings, Inc., Class A* ................................. (5,400) (148,338) ------------ (649,458) ------------ BUILDING & CONSTRUCTION--(0.9%) Insituform Technologies, Inc., Class A* ................................. (24,140) (429,451) Shaw Group, Inc., (The)* ................... (23,680) (243,667) Trex Co., Inc.* ............................ (5) (217) ------------ (673,335) ------------ BUSINESS & PUBLIC SERVICES--(1.3%) AMN Healthcare Services, Inc.* ............. (15,390) (177,908) Learning Tree International, Inc.* ......... (7,430) (95,996) Mobile Mini, Inc.* ......................... (13,000) (354,250) Robert Half International, Inc. ............ (12,380) (303,310) ------------ (931,464) ------------ CHEMICALS - SPECIALTY--(0.7%) NOVA Chemicals Corp. ....................... (10,520) (340,006) Zoltek Cos., Inc.* ......................... (25,550) (185,493) ------------ (525,499) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 35 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ COMMERCIAL SERVICES--(0.6%) Euronet Worldwide, Inc.* ................... (12,055) $ (211,686) Iron Mountain, Inc.* ....................... (4,635) (142,897) LML Payment Systems, Inc.* ................. (19,210) (98,931) ------------ (453,514) ------------ COMPUTER EQUIPMENT & SERVICES--(1.6%) ConSyGen, Inc.* ............................ (200) 0 Kronos, Inc.* .............................. (3,710) (158,714) Maxwell Technologies, Inc. ................. (8,804) (84,166) Merge Technologies, Inc.* .................. (10,101) (156,566) Mobility Electronics, Inc.* ................ (31,390) (231,972) National Instruments Corp. ................. (5,290) (137,910) PDF Solutions, Inc.* ....................... (15,580) (143,959) Research In Motion Ltd.* ................... (2,900) (174,638) Satellite Enterprises Corp.* ............... (8,615) (3,446) Xybernaut Corp.* ........................... (35,000) (43,750) ------------ (1,135,121) ------------ COMPUTER SOFTWARE--(1.3%) Authentidate Holding Corp.* ................ (25,880) (181,160) Magma Design Automation, Inc.* ............. (7,100) (117,150) Mercury Interactive Corp.* ................. (5,880) (202,919) Red Hat, Inc.* ............................. (10,800) (132,408) Ultimate Software Group, Inc., (The)* ................................... (29,310) (334,720) ------------ (968,357) ------------ CONSULTING SERVICES--(0.4%) Advisory Board Co., (The)* ................. (7,920) (253,915) ------------ CONSUMER PRODUCTS--(0.2%) Central Garden & Pet Co.* .................. (4,600) (144,164) ------------ CONSUMER SPECIALTIES--(0.4%) Greg Manning Auctions, Inc.* ............... (19,370) (267,306) ------------ DATA PROCESSING SERVICES--(0.5%) FalconStor Software, Inc.* ................. (18,100) (119,641) Total Systems Services, Inc. ............... (11,760) (261,542) ------------ (381,183) ------------ ELECTRONIC EQUIPMENT & PRODUCTS--(1.3%) Electro Rent Corp.* ........................ (22,000) (221,540) FLIR Systems, Inc.* ........................ (2,500) (145,925) ------------ Number of Shares Value --------- ------------ ELECTRONIC EQUIPMENT & PRODUCTS--(CONTINUED) Magal Security Systems Ltd.* ............... (14,800) $ (210,308) NVE Corp.* ................................. (6,300) (207,900) Taser International, Inc.* ................. (6,700) (184,853) ------------ (970,526) ------------ ELECTRONICS--(3.2%) FEI Co.* ................................... (12,380) (235,096) Fiberstars, Inc.* .......................... (8,945) (73,438) Identix, Inc.* ............................. (26,630) (122,498) Intersil Corp., Class A .................... (15,910) (277,311) Ionatron, Inc.* ............................ (23,615) (158,221) KEMET Corp.* ............................... (28,910) (250,650) Mechanical Technology, Inc.* ............... (11,150) (49,294) SonoSite, Inc.* ............................ (13,800) (332,994) SpatiaLight, Inc.* ......................... (65,660) (326,987) Universal Display Corp.* ................... (29,160) (253,692) Veeco Instruments, Inc.* ................... (12,810) (248,002) ------------ (2,328,183) ------------ ENERGY--(1.4%) Ballard Power Systems, Inc.* ............... (14,600) (94,316) Energy Conversion Devices, Inc.* ........... (16,900) (223,080) KFx, Inc.* ................................. (25,350) (172,380) Medis Technologies Ltd.* ................... (9,885) (103,792) Plug Power, Inc.* .......................... (28,750) (183,712) Power-One, Inc.* ........................... (19,860) (149,149) Valence Technology, Inc.* .................. (30,650) (86,740) ------------ (1,013,169) ------------ ENVIRONMENTAL SERVICES--(1.6%) Clean Harbors, Inc.* ....................... (29,535) (329,020) Flanders Corp.* ............................ (20,700) (177,192) Input/Output, Inc.* ........................ (25,080) (246,787) Ionics, Inc.* .............................. (11,700) (306,657) Pure Cycle Corp.* .......................... (12,115) (96,557) ------------ (1,156,213) ------------ FINANCIAL SERVICES--(0.9%) Harris & Harris Group, Inc. ................ (16,100) (144,095) NextCard, Inc.* ............................ (128,500) (1,606) W.P. Stewart & Co. Ltd. .................... (25,940) (515,428) ------------ (661,129) ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 36 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ FOODS--(1.6%) Lifeway Foods, Inc.* ....................... (10,960) $ (113,765) Peet's Coffee & Tea, Inc.* ................. (10,340) (236,786) Safeway, Inc.* ............................. (17,700) (357,540) Sanderson Farms, Inc. ...................... (3,700) (126,503) Smart & Final, Inc.* ....................... (10,700) (174,517) Wimm-Bill-Dann Foods OJSC - ADR* .............................. (13,530) (178,596) ------------ (1,187,707) ------------ HEALTH CARE - BIOTECH--(5.4%) Abgenix, Inc.* ............................. (9,290) (92,436) Amylin Pharmaceuticals, Inc.* .............. (10,000) (197,900) AtheroGenics, Inc.* ........................ (12,200) (204,838) Bioenvision, Inc.* ......................... (20,900) (166,573) Compugen Ltd.* ............................. (11,555) (58,700) Discovery Laboratories, Inc.* .............. (23,000) (181,700) Dyax Corp.* ................................ (13,070) (103,776) Hemispherx Biopharma, Inc.* ................ (35,285) (83,978) ICOS Corp.* ................................ (7,090) (184,978) Isis Pharmaceuticals, Inc.* ................ (18,590) (111,540) Isolagen, Inc.* ............................ (18,200) (152,880) Ista Pharmaceuticals, Inc.* ................ (11,200) (111,664) Martek Biosciences Corp.* .................. (6,210) (331,614) Medicines Co., (The)* ...................... (10,580) (267,462) Myriad Genetics, Inc.* ..................... (8,670) (140,714) Neurocrine Biosciences, Inc.* .............. (4,700) (233,919) Northfield Laboratories, Inc.* ............. (12,970) (168,610) NPS Pharmaceuticals, Inc.* ................. (6,720) (141,120) Nuvelo, Inc.* .............................. (17,700) (157,707) Star Scientific, Inc.* ..................... (65,210) (334,527) Tapestry Pharmaceuticals, Inc.* ............ (94,100) (111,038) Transkaryotic Therapies, Inc.* ............. (15,900) (250,425) Vertex Pharmaceuticals, Inc.* .............. (13,630) (132,620) ------------ (3,920,719) ------------ HEALTH CARE - DRUGS--(1.5%) Cubist Pharmaceuticals, Inc.* .............. (12,600) (99,162) Dendreon Corp.* ............................ (18,730) (184,116) Indevus Pharmaceuticals, Inc.* ............. (22,400) (153,888) Inspire Pharmaceuticals, Inc.* ............. (24,510) (354,169) Interpharm Holdings, Inc.* ................. (4,470) (11,622) Number of Shares Value --------- ------------ HEALTH CARE - DRUGS--(CONTINUED) Trimeris, Inc.* ............................ (9,300) $ (111,972) VaxGen, Inc.* .............................. (16,600) (177,620) ------------ (1,092,549) ------------ HEALTH CARE - SERVICES--(0.5%) CPC of America, Inc.* ...................... (865) (29,626) Eclipsys Corp.* ............................ (14,400) (210,960) TriZetto Group, Inc., (The)* ............... (21,680) (133,766) ------------ (374,352) ------------ HEALTH CARE - SUPPLIES--(3.6%) Align Technology, Inc.* .................... (13,590) (208,199) BriteSmile, Inc.* .......................... (20,590) (211,047) Conceptus, Inc.* ........................... (14,250) (131,528) Cyberonics, Inc.* .......................... (9,000) (154,080) Digene Corp.* .............................. (6,190) (155,060) EPIX Medical, Inc.* ........................ (7,860) (156,021) I-Flow Corp.** ............................. (10,805) (164,020) Immucor, Inc.* ............................. (12,930) (264,419) Ivax Diagnostics, Inc.* .................... (23,655) (147,371) Penwest Pharmaceuticals Co.* ............... (16,640) (179,046) Q-Med, Inc.* ............................... (12,390) (99,987) STAAR Surgical Co.* ........................ (17,130) (81,710) ThermoGenesis Corp.* ....................... (59,010) (231,319) TriPath Imaging, Inc. ...................... (18,500) (142,450) Zila, Inc.* ................................ (65,088) (263,606) ------------ (2,589,863) ------------ INTERNET SERVICES--(3.2%) Alloy, Inc.* ............................... (25,400) (103,124) Ask Jeeves, Inc.* .......................... (3,700) (95,904) Concur Technologies, Inc.* ................. (24,000) (252,000) eResearch Technology, Inc.* ................ (5,290) (106,382) Interliant, Inc.* .......................... (600) (1) IPIX Corp.* ................................ (24,800) (205,096) iVillage, Inc.* ............................ (21,900) (127,239) Kintera, Inc.* ............................. (18,200) (132,496) Lionbridge Technologies, Inc.* ............. (16,790) (133,816) Monster Worldwide, Inc.* ................... (7,900) (159,817) Netflix, Inc.* ............................. (15,600) (217,620) Openwave Systems, Inc.* .................... (20,310) (189,289) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 37 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ INTERNET SERVICES--(CONTINUED) Overstock.com, Inc.* ....................... (3,600) $ (112,860) Stamps.com, Inc.* .......................... (10,220) (152,482) Travelzoo, Inc.* ......................... (5,115) (230,175) Zix Corp. ................................ (20,050) (83,208) ------------ (2,301,509) ------------ MACHINERY--0.0% SureBeam Corp., Class A* ................... (111,800) (1,677) ------------ MANUFACTURING--(0.5%) Foamex International, Inc.* ................ (28,800) (90,720) Nanophase Technologies Corp.* ............ (30,100) (161,336) Trinity Industries, Inc. ................. (4,330) (120,158) ------------ (372,214) ------------ MEDIA & ENTERTAINMENT--(0.3%) Martha Stewart Living Omnimedia, Inc., Class A* ........................... (19,230) (214,991) ------------ METALS & MINING--(0.7%) Allegheny Technologies, Inc. ............... (26,100) (490,941) ------------ OFFICE EQUIPMENT & SUPPLIES--(0.4%) Herman Miller, Inc. ........................ (4,610) (116,126) Interface, Inc., Class A* ................ (28,700) (204,918) ------------ (321,044) ------------ OIL SERVICES--(0.2%) SEACOR Holdings, Inc.* ..................... (3,090) (133,395) ------------ PAPER FOREST PRODUCTS & PACKAGING--(0.2%) Pope & Talbot, Inc. ........................ (8,050) (148,362) ------------ RESTAURANTS--(1.4%) BJ's Restaurants, Inc.* .................... (13,000) (190,840) Cheesecake Factory, Inc., (The)* ........... (3,090) (127,864) Cosi, Inc.* ................................ (36,800) (190,992) P.F. Chang's China Bistro, Inc.* ........... (5,380) (225,529) Panera Bread Co., Class A* ................. (7,270) (252,851) ------------ (988,076) ------------ Number of Shares Value --------- ------------ RETAIL - SOFT GOODS--(0.5%) Pantry, Inc., (The)* ....................... (6,100) $ (118,706) PriceSmart, Inc.* .......................... (7,570) (66,684) REX Stores Corp.* .......................... (11,500) (146,050) ------------ (331,440) ------------ SAVINGS & LOANS--(0.4%) Charter Financial Corp. .................... (7,662) (250,471) ------------ SEMICONDUCTOR EQUIPMENT & PRODUCTS--(1.2%) American Superconductor Corp.* ............. (14,150) (169,093) Micrel, Inc.* .............................. (20,270) (196,822) Photon Dynamics, Inc.* ..................... (5,690) (127,854) Rudolph Technologies, Inc.* ................ (13,500) (218,700) Tessera Technologies, Inc.* ................ (8,600) (167,614) ------------ (880,083) ------------ TELECOMMUNICATIONS--(0.4%) Choice One Communications, Inc.* .................................... (37,790) (680) CTC Communications Group, Inc. o* .................................. (98,900) (10) First Avenue Networks, Inc.* ............... (6,890) (33,072) Level 3 Communications, Inc.* .............. (101,540) (266,035) WorldCom, Inc. - WorldCom Group o* ................................. (147,900) (1,035) ------------ (300,832) ------------ TELECOMMUNICATIONS EQUIPMENT--(1.3%) Copper Mountain Networks, Inc.* ............ (17,400) (115,884) Endwave Corp.* ............................. (11,800) (161,660) Extreme Networks, Inc.* .................... (16,120) (74,958) Paradyne Networks, Inc.* ................... (51,200) (221,184) SBA Communications Corp., Class A* ................................. (47,470) (246,844) Symmetricom, Inc.* ......................... (13,010) (104,600) ------------ (925,130) ------------ TEXTILES & APPAREL--(0.5%) Casual Male Retail Group, Inc.* ............ (36,220) (213,336) Cherokee, Inc. ............................. (6,500) (152,945) ------------ (366,281) ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 38 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND (concluded) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ TOBACCO--(0.6%) Vector Group Ltd. .......................... (26,400) $ (441,936) ------------ TOTAL SECURITIES SOLD SHORT (Proceeds $36,817,567) ................. (32,288,588) ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--40.3% ...................... 29,266,835 ------------ NET ASSETS--100.0% ............................ $ 72,615,263 ============ ---------- * -- Non-income producing. o -- Security is valued at fair market value as determined in good faith by or under the direction of RBB's Board of Directors. ADR -- American Depository Receipt. 144A -- Security was purchased pursuant to Rule 144A under Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. As of August 31, 2004, these securities amounted to 1.00% of net assets. REIT -- Real Estate Investment Trust + -- Security position is either entirely or partially held in a segregated account as collateral for securities sold short. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 39 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ COMMON STOCK--96.6% AEROSPACE & DEFENSE--2.1% Alliant Techsystems, Inc.* ................. 4,800 $ 278,112 Lockheed Martin Corp. ...................... 14,700 790,566 ----------- 1,068,678 ----------- APPAREL--1.8% Liz Claiborne, Inc. ........................ 13,900 529,173 Reebok International Ltd. .................. 10,900 370,273 ----------- 899,446 ----------- BANKS - MAJOR--2.5% Comerica, Inc. ............................. 12,900 775,935 Mellon Financial Corp. ..................... 8,200 236,652 National City Corp. ........................ 6,800 256,972 ----------- 1,269,559 ----------- BUILDING MATERIALS--2.3% Masco Corp. ................................ 13,900 446,607 Mohawk Industries, Inc.* ................... 5,400 415,368 Vulcan Materials Co. ....................... 5,700 271,719 ----------- 1,133,694 ----------- COMPUTER EQUIPMENT & SERVICES--1.0% Hewlett-Packard Co. ........................ 27,600 493,764 ----------- COMPUTER SOFTWARE--2.6% BMC Software, Inc.* ........................ 14,500 217,065 Microsoft Corp. ............................ 39,700 1,083,810 ----------- 1,300,875 ----------- ELECTRONICS--2.7% Xerox Corp.* ............................... 100,100 1,344,343 ----------- ENVIRONMENTAL CONTROL--0.5% Republic Services, Inc. .................... 8,600 240,370 ----------- FINANCIAL SERVICES--14.0% Citigroup, Inc. ............................ 36,599 1,704,781 Countrywide Financial Corp. ................ 43,598 1,549,909 Fannie Mae ................................. 8,500 632,825 Freddie Mac ................................ 27,100 1,818,952 Number of Shares Value --------- ------------ FINANCIAL SERVICES--(CONTINUED) Goldman Sachs Group, Inc. (The) ............ 3,600 $ 322,740 J.P. Morgan Chase & Co. .................... 25,600 1,013,248 ----------- 7,042,455 ----------- FOODS--2.7% H.J. Heinz Co. ............................. 13,500 511,785 PepsiCo, Inc. .............................. 8,700 435,000 Smithfield Foods, Inc.* .................... 15,900 408,630 ----------- 1,355,415 ----------- HEALTH CARE - DRUGS--5.6% Johnson & Johnson .......................... 7,800 453,180 Merck & Co., Inc. .......................... 10,000 449,700 Pfizer, Inc. ............................... 39,000 1,274,130 Shire Pharmaceuticals Group PLC - ADR* ............................... 23,600 611,712 ----------- 2,788,722 ----------- HEALTH CARE - SERVICES--1.7% Aetna, Inc. ................................ 9,400 870,910 ----------- HEALTH CARE - SUPPLIES--0.9% Becton, Dickinson and Co. .................. 9,900 476,388 ----------- INSURANCE - OTHER--13.6% ACE Ltd. ................................... 27,700 1,067,835 Ambac Financial Group, Inc. ................ 7,400 558,700 American International Group, Inc. ..................................... 10,895 776,160 Berkshire Hathaway, Inc., Class B* ......... 425 1,229,950 MBIA, Inc. ................................. 24,650 1,411,706 Nationwide Financial Services, Inc., Class A .................................. 7,200 250,488 Radian Group, Inc. ......................... 17,900 792,970 St. Paul Travelers Cos., Inc., (The) ....... 21,847 757,872 ----------- 6,845,681 ----------- LEISURE & LODGING--2.1% GTECH Holdings Corp. ....................... 28,000 658,000 Harrah's Entertainment, Inc. ............... 8,300 399,977 ----------- 1,057,977 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 40 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ----------- MANUFACTURING--3.9% ITT Industries, Inc. ....................... 6,600 $ 522,060 Tyco International Ltd. .................... 39,400 1,234,008 Whirlpool Corp. ............................ 3,700 226,218 ---------- 1,982,286 ----------- MEDIA & ENTERTAINMENT--3.8% Liberty Media Corp., Class A* .............. 64,032 570,525 Liberty Media International, Inc., Class A* ................................. 3,851 130,340 Time Warner, Inc.* ......................... 35,700 583,695 Viacom Inc. Class B (Non Voting Shares) .................................. 18,300 609,573 ----------- 1,894,133 ----------- METALS & MINING--0.6% Freeport-McMoRan Copper & Gold, Inc., Class B ...................... 8,000 301,040 ----------- OFFICE EQUIPMENT & SUPPLIES--0.9% Office Depot, Inc.* ........................ 28,700 459,487 ----------- OIL & GAS - INTEGRATED MAJORS--4.9% ChevronTexaco Corp. ........................ 5,400 526,500 ConocoPhillips ............................. 6,800 506,124 Exxon Mobil Corp. .......................... 19,000 875,900 Petroleo Brasileiro S.A. - ADR ............. 18,100 556,575 ----------- 2,465,099 ----------- OIL & GAS - REFINING & MARKETING--3.6% Ashland, Inc. .............................. 10,300 529,729 Marathon Oil Corp. ......................... 35,400 1,283,958 ----------- 1,813,687 ----------- OIL & GAS EXPLORATION--2.4% Canadian Natural Resources Ltd. ............ 30,000 974,700 EnCana Corp. ............................... 5,800 238,380 ----------- 1,213,080 ----------- OIL SERVICES--3.0% Premcor, Inc.* ............................. 7,400 248,122 Transocean, Inc.* .......................... 41,500 1,274,050 ----------- 1,522,172 ----------- Number of Shares Value --------- ----------- PAPER FOREST PRODUCTS & PACKAGING--1.2% Abitibi-Consolidated, Inc. ................. 67,800 $ 401,376 Smurfit-Stone Container Corp.* ............. 12,600 223,524 ----------- 624,900 ----------- RECREATIONAL PRODUCTS - TOYS--1.3% Hasbro, Inc. ............................... 34,400 637,432 ----------- RESTAURANTS--1.0% McDonald's Corp. ........................... 10,500 283,710 Outback Steakhouse, Inc. ................... 5,200 203,528 ----------- 487,238 ----------- RETAIL - FOOD & DRUG--0.8% CVS Corp. .................................. 9,600 384,000 ----------- RETAIL - HARD GOODS--1.5% Home Depot, Inc., (The) .................... 7,200 263,232 RadioShack Corp. ........................... 17,700 476,838 ----------- 740,070 ----------- RETAIL - SOFT GOODS--1.3% Limited Brands ............................. 32,900 660,632 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--0.6% Freescale Semiconductor Inc.* .............. 20,500 284,950 ----------- SOAPS & TOILETRIES--1.2% Procter & Gamble Co., (The) ................ 10,600 593,282 ----------- TELECOMMUNICATIONS--4.6% AT&T Wireless Services, Inc.* .............. 35,900 524,858 BellSouth Corp. ............................ 10,100 270,276 Nextel Communications, Inc., Class A* ................................. 34,200 793,098 Vodafone Group PLC - ADR ................... 31,200 714,480 ----------- 2,302,712 ----------- TELECOMMUNICATIONS EQUIPMENT--0.5% Nokia Oyj - ADR ............................ 20,200 239,976 ----------- TOBACCO--2.0% Altria Group, Inc. ......................... 9,600 469,920 UST, Inc. .................................. 12,800 513,536 ----------- 983,456 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 41 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- LARGE CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ----------- UTILITIES - ELECTRIC--1.4% NSTAR ...................................... 8,900 $ 434,320 Scottish Power PLC - ADR ................... 9,100 266,084 ----------- 700,404 ----------- TOTAL COMMON STOCK (Cost $41,867,927) ..................... 48,478,313 ----------- SHORT TERM INVESTMENTS--3.4% Galaxy Institutional Money Market Fund 1.370% 09/01/04 .......................... 1,707,034 1,707,034 TOTAL SHORT TERM INVESTMENTS (Cost $1,707,034) ...................... 1,707,034 ----------- TOTAL INVESTMENTS--100.0% (Cost $43,574,961) ......................... 50,185,347 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS--0.0% ...................... (7,061) ----------- NET ASSETS--100.0% ............................ $50,178,286 =========== ---------- * -- Non-income producing. ADR -- American Depository Receipt. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 42 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ COMMON STOCK--96.0% APPAREL--1.8% Reebok International Ltd. .................. 17,100 $ 580,887 V. F. Corp. ................................ 4,900 241,766 ------------ 822,653 ------------ AUTOMOTIVE PARTS & EQUIPMENT--0.8% Lear Corp. ................................. 6,900 371,772 ------------ CHEMICALS - COMMODITY--0.5% Eastman Chemical Co. ....................... 4,900 227,997 ------------ CHEMICALS - SPECIALTY--2.1% Ferro Corp. ................................ 17,600 361,504 Georgia Gulf Corp.* ........................ 15,400 584,430 ------------ 945,934 ------------ CLOSED END INVESTMENT COMPANY--1.8% Apollo Investment Corp.* ................... 58,800 824,964 ------------ COMMUNICATIONS EQUIPMENT--1.0% Enterasys Networks Inc.* ................... 193,800 348,840 TNS, Inc.* ................................. 4,400 86,328 ------------ 435,168 ------------ COMPUTER EQUIPMENT & SERVICES--3.4% BearingPoint, Inc.* ........................ 40,915 330,184 BISYS Group, Inc., (The)* .................. 47,000 667,400 iPass, Inc.* ............................... 34,900 218,125 Western Digital Corp.* ..................... 42,700 318,542 ------------ 1,534,251 ------------ COMPUTER SOFTWARE--1.7% McAfee Inc.* ............................... 25,187 498,199 Sybase, Inc.* .............................. 19,545 260,535 ------------ 758,734 ------------ CONSUMER PRODUCTS--0.5% Newell Rubbermaid, Inc. .................... 10,000 215,300 ------------ DATA PROCESSING SERVICES--1.3% MoneyGram International, Inc.* ............. 35,500 592,850 ------------ Number of Shares Value --------- ------------ ELECTRONICS--4.5% Amis Holdings, Inc.* ....................... 47,200 $ 568,288 Arrow Electronics, Inc.* ................... 20,300 439,292 Avnet, Inc.* ............................... 23,100 366,828 Diebold, Inc. .............................. 13,700 669,793 ------------ 2,044,201 ------------ FINANCIAL SERVICES--3.6% A.G. Edwards, Inc. ......................... 23,500 817,330 Affiliated Managers Group, Inc.* ........... 11,950 586,147 Student Loan Corp., (The) .................. 1,500 215,625 ------------ 1,619,102 ------------ FOODS--4.0% Bunge Ltd. ................................. 10,500 418,845 Delta and Pine Land Co. .................... 21,300 541,233 Smithfield Foods, Inc.* .................... 32,800 842,960 ------------ 1,803,038 ------------ HEALTH CARE - DRUGS--1.6% Hospira, Inc.* ............................. 18,800 520,760 Shire Pharmaceuticals Group PLC - ADR* ............................... 8,300 215,136 ------------ 735,896 ------------ HEALTH CARE - SERVICES--3.4% Apria Healthcare Group, Inc.* .............. 18,605 525,405 Express Scripts, Inc.* ..................... 8,200 518,240 WellChoice, Inc.* .......................... 14,200 506,230 ------------ 1,549,875 ------------ HEALTH CARE - SUPPLIES--1.8% C.R. Bard, Inc. ............................ 4,300 241,230 Pall Corp. ................................. 23,100 562,716 ------------ 803,946 ------------ INSURANCE - LIFE--1.9% Conseco, Inc.* ............................. 18,700 317,900 UnumProvident Corp. ........................ 32,400 524,232 ------------ 842,132 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 43 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ INSURANCE - OTHER--11.4% Allmerica Financial Corp.* ................. 15,370 $ 445,730 Assurant, Inc.* ............................ 10,300 273,362 Assured Guaranty Ltd. ...................... 43,400 695,702 Bristol West Holdings, Inc.* ............... 40,900 676,077 IPC Holdings Ltd. .......................... 7,100 257,659 MBIA, Inc. ................................. 5,600 320,712 Mercury General Corp. ...................... 9,565 479,685 PMI Group, Inc., (The) ..................... 6,800 282,404 Radian Group, Inc. ......................... 25,000 1,107,500 White Mountains Insurance Group Ltd. ..................................... 1,155 580,884 ------------ 5,119,715 ------------ INTERNET SERVICES--2.8% EarthLink, Inc.* ........................... 58,400 584,584 United Online, Inc.* ....................... 71,100 681,138 ------------ 1,265,722 ------------ LEISURE & LODGING--4.8% Argosy Gaming Co.* ......................... 6,400 213,952 GTECH Holdings Corp. ....................... 33,300 782,550 Harrah's Entertainment, Inc. ............... 10,300 496,357 Hilton Hotels Corp. ........................ 38,400 685,440 ------------ 2,178,299 ------------ MACHINERY--2.7% Terex Corp.* ............................... 12,920 466,800 W.W. Grainger, Inc. ........................ 13,695 731,450 ------------ 1,198,250 ------------ MANUFACTURING--8.0% Dover Corp. ................................ 10,300 388,619 Federal Signal Corp. ....................... 45,100 825,781 GrafTech International Ltd.* ............... 49,100 523,406 ITT Industries, Inc. ....................... 6,700 529,970 Spartech Corp. ............................. 35,400 857,742 York International Corp. ................... 14,300 465,608 ------------ 3,591,126 ------------ METALS & MINING--0.8% Freeport-McMoRan Copper & Gold, Inc., Class B ........................ 9,400 353,722 ------------ Number of Shares Value --------- ------------ OIL & GAS EXPLORATION--1.6% Kerr-McGee Corp. ........................... 4,900 $ 258,622 Vintage Petroleum, Inc. .................... 27,000 442,800 ------------ 701,422 ------------ OIL SERVICES--3.9% Diamond Offshore Drilling, Inc. ............ 16,000 406,720 ENSCO International, Inc. .................. 27,100 790,236 Nabors Industries Ltd.* .................... 12,200 538,020 ------------ 1,734,976 ------------ PAPER FOREST PRODUCTS & PACKAGING--1.9% Pactiv Corp.* .............................. 9,200 217,580 Sealed Air Corp.* .......................... 12,600 618,912 ------------ 836,492 ------------ PUBLISHING--3.2% Lamar Advertising Co.* ..................... 15,505 677,413 Media General, Inc., Class A ............... 5,700 331,683 Valassis Communications, Inc.* ............. 15,000 423,900 ------------ 1,432,996 ------------ REAL ESTATE--3.0% Maguire Properties, Inc. (REIT) ............ 16,025 394,215 St. Joe Co., (The) ......................... 9,300 450,120 Ventas, Inc. (REIT) ........................ 19,025 520,334 ------------ 1,364,669 ------------ RECREATIONAL PRODUCTS - TOYS--0.6% WMS Industries, Inc.* ...................... 13,575 274,351 ------------ RESTAURANTS--1.5% Wendy's International, Inc. ................ 19,600 673,652 ------------ RETAIL - HARD GOODS--3.0% Hollywood Entertainment Corp.* ............. 45,100 455,059 Michaels Stores, Inc. ...................... 15,800 905,814 ------------ 1,360,873 ------------ RETAIL - SOFT GOODS--2.1% Abercrombie & Fitch Co., Class A .................................. 8,800 246,400 Foot Locker, Inc. .......................... 31,300 700,181 ------------ 946,581 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 44 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- MID CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ------------ SAVINGS & LOANS--1.3% People's Bank .............................. 7,700 $ 254,023 Westcorp ................................... 7,700 316,239 ------------ 570,262 ------------ SERVICES - BUSINESS--1.0% Sirva, Inc.* ............................... 21,300 451,134 ------------ TELECOMMUNICATIONS--1.5% CenturyTel, Inc. ........................... 21,200 682,428 ------------ TOBACCO--0.6% Loews Corp. - Carolina Group ............... 11,400 281,352 ------------ TRUCKING--0.8% Laidlaw International, Inc.* ............... 23,400 367,380 ------------ UTILITIES - ELECTRIC--3.8% Constellation Energy Group, Inc. ........... 9,300 382,230 NSTAR ...................................... 4,900 239,120 PPL Corp. .................................. 6,800 325,244 Sierra Pacific Resources* .................. 90,300 776,580 ------------ 1,723,174 ------------ TOTAL COMMON STOCK (Cost $37,504,751) ..................... 43,236,389 ------------ Number of Shares Value --------- ------------ SHORT TERM INVESTMENTS--33.1% PNC Money Market Deposit Account 1.150% 09/01/04 .......................... 9,074,956 $ 9,074,956 Galaxy Institutional Money Market Fund Fund 1.370% 09/01/04 ..................... 2,922,308 2,922,308 Wilmington Money Market Fund 0.773% 09/01/04 .......................... 2,922,308 2,922,308 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $14,919,572) ..................... 14,919,572 ------------ TOTAL INVESTMENTS--129.1% (Cost $52,424,323) ......................... 58,155,961 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(29.1)% ...................... (13,096,998) ------------ NET ASSETS--100.0% ........................... $ 45,058,963 ============ ---------- * -- Non-income producing. ADR -- American Depository Receipt. REIT -- Real Estate Investment Trust. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 45 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ---------- COMMON STOCK--93.4% AIR TRANSPORT--0.4% ExpressJet Holdings, Inc.* ................. 2,310 $ 24,833 ---------- APPAREL--4.0% Jones Apparel Group, Inc. .................. 1,730 61,744 Liz Claiborne, Inc. ........................ 1,690 64,338 Polo Ralph Lauren Corp. .................... 605 22,101 Reebok International Ltd. .................. 1,730 58,768 V. F. Corp. ................................ 535 26,397 ---------- 233,348 ---------- BEVERAGES--0.5% Constellation Brands, Inc., Class A* ................................. 790 29,048 ---------- BUILDING MATERIALS--1.2% Makita Corp. - ADR ......................... 3,270 48,756 Watsco, Inc. ............................... 815 23,700 ---------- 72,456 ---------- CLOSED END INVESTMENT COMPANIES--0.7% Apollo Investment Corp.* ................... 2,660 37,320 Morgan Stanley Asia-Pacific Fund, Inc. ..................................... 360 3,996 ---------- 41,316 ---------- COMPUTER EQUIPMENT & SERVICES--3.0% Global Payments, Inc. ...................... 1,015 45,026 GTECH Holdings Corp. ....................... 3,380 79,430 Hewlett-Packard Co. ........................ 2,745 49,108 ---------- 173,564 ---------- COMPUTER SOFTWARE--0.5% Microsoft Corp. ............................ 1,040 28,392 ---------- CONSUMER PRODUCTS--0.9% Blyth, Inc. ................................ 845 25,359 National Presto Industries, Inc. ........... 650 26,455 ---------- 51,814 ---------- DIVERSIFIED OPERATIONS--0.1% Viad Corp. ................................. 345 8,215 ---------- Number of Shares Value --------- ---------- ELECTRONICS--0.3% Amphenol Corp., Class A .................... 640 $ 19,238 ---------- FINANCIAL SERVICES--9.7% BKF Capital Group, Inc.* ................... 605 16,783 Countrywide Financial Corp. ................ 5,424 192,823 Fannie Mae ................................. 985 73,333 Freddie Mac ................................ 2,105 141,288 Leucadia National Corp. .................... 920 49,680 MCG Capital Corp. .......................... 875 15,137 MoneyGram International, Inc.* ............. 1,330 22,211 Wesco Financial Corp. ...................... 160 55,360 ---------- 566,615 ---------- FOODS--1.2% Lancaster Colony Corp. ..................... 1,015 41,899 Nestle S.A. - ADR .......................... 470 27,753 ---------- 69,652 ---------- HEALTH CARE - DRUGS--6.2% Bristol-Myers Squibb Co. ................... 1,480 35,120 Johnson & Johnson .......................... 435 25,273 Merck & Co., Inc. .......................... 1,150 51,716 Pfizer, Inc. ............................... 4,966 162,239 Shire Pharmaceuticals Group PLC - ADR* ............................... 3,290 85,277 ---------- 359,625 ---------- HEALTH CARE - SERVICES--2.4% Lincare Holdings, Inc.* .................... 1,655 53,192 Renal Care Group, Inc.* .................... 2,745 86,934 ---------- 140,126 ---------- HEALTH CARE - SUPPLIES--2.6% Alcon, Inc. ................................ 520 38,917 Becton, Dickinson and Co. .................. 1,270 61,112 C.R. Bard, Inc. ............................ 930 52,173 ---------- 152,202 ---------- INSURANCE - LIFE--1.0% Scottish Re Group Ltd. ..................... 2,640 56,074 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 46 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ---------- INSURANCE - OTHER--17.2% ACE Ltd. ................................... 4,450 $ 171,547 Alleghany Corp.* ........................... 416 108,164 Allmerica Financial Corp.* ................. 1,770 51,330 Assurant, Inc.* ............................ 1,655 43,924 Assured Guaranty Ltd. ...................... 3,768 60,401 IPC Holdings Ltd. .......................... 2,140 77,661 MBIA, Inc. ................................. 1,970 112,822 Merchants Group, Inc. ...................... 70 1,690 Millea Holdings, Inc. - ADR ................ 270 18,571 PartnerRe Ltd. ............................. 345 17,709 Quanta Capital Holdings Ltd.* .............. 6,385 58,998 Radian Group, Inc. ......................... 2,260 100,118 White Mountains Insurance Group Ltd. ............................... 295 148,364 Willis Group Holdings Ltd. ................. 870 30,424 ---------- 1,001,723 ---------- MANUFACTURING--1.0% Tyco International Ltd. .................... 1,815 56,846 ---------- MEDIA & ENTERTAINMENT--1.7% 4Kids Entertainment, Inc.* ................. 765 13,334 Liberty Media Corp., Class A* .............. 5,044 44,942 Liberty Media International, Inc., Class A* ................................. 1,120 37,849 ---------- 96,125 ---------- METALS & MINING--1.0% CONSOL Energy, Inc. ........................ 1,805 57,904 ---------- OIL & GAS - INTEGRATED MAJORS--2.5% Eni S.p.A. - ADR ........................... 480 49,382 Petroleo Brasileiro S.A. - ADR ............. 1,445 44,434 Royal Dutch Petroleum Co. - ADR ............ 965 48,916 ---------- 142,732 ---------- OIL & GAS - REFINING & MARKETING--1.2% Marathon Oil Corp. ......................... 1,960 71,089 ---------- OIL & GAS EXPLORATION--5.8% Anadarko Petroleum Corp. ................... 1,575 93,271 Burlington Resources, Inc. ................. 1,035 37,498 EOG Resources, Inc. ........................ 710 41,017 Number of Shares Value --------- ---------- OIL & GAS EXPLORATION--(CONTINUED) Kerr-McGee Corp. ........................... 1,270 $ 67,031 Occidental Petroleum Corp. ................. 1,970 101,750 ---------- 340,567 ---------- REAL ESTATE--6.1% Affordable Residential Communities (REIT) ....................... 790 12,245 American Financial Realty Trust (REIT) ................................... 3,015 42,361 American Financial Realty Trust 144A (REIT) .............................. 2,850 40,042 Ashford Hospitality Trust (REIT) ........... 1,600 13,760 Consolidated-Tomoka Land Co. ............... 390 14,044 Diamondrock Hospitality Co. 144A (REIT) .............................. 2,070 20,700 Fieldstone Investment Corp. (REIT) 144A .............................. 1,175 19,094 Friedman, Billings, Ramsey Group, Inc., Class A (REIT) ........................... 3,339 62,940 KKR Financial Corp. (REIT) 144A ............ 1,580 15,800 Luminent Mortgage Capital, Inc. (REIT) ................................... 610 7,387 Luminent Mortgage Capital, Inc. 144A (REIT) .............................. 685 8,295 Medical Property Trust 144A (REIT).................................... 950 9,500 National Health Investors, Inc. (REIT) ................................... 1,410 40,664 Provident Senior Trust 144A ................ 1,725 25,875 Ventas, Inc. (REIT) ........................ 790 21,607 ---------- 354,314 ---------- RECREATIONAL PRODUCTS - TOYS--0.9% Mattel, Inc. ............................... 3,205 51,568 ---------- RESTAURANTS--0.9% CEC Entertainment, Inc.* ................... 550 18,519 Yum! Brands, Inc.* ......................... 800 31,768 ---------- 50,287 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 47 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND (continued) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ---------- RETAIL - HARD GOODS--2.7% Barnes & Noble, Inc.* ...................... 1,905 $ 65,837 Borders Group, Inc.* ....................... 1,425 34,058 Hollywood Entertainment Corp.* ............. 4,360 43,992 Home Depot, Inc., (The) .................... 375 13,710 ---------- 157,597 ---------- RETAIL - SOFT GOODS--1.3% Abercrombie & Fitch Co., Class A* .......... 1,400 39,200 BJ's Wholesale Club, Inc. .................. 745 18,864 Claire's Stores, Inc. ...................... 795 19,350 ---------- 77,414 ---------- SERVICES - BUSINESS--1.5% D & B Corp.* ............................... 735 40,528 Harland (John H.) Co. ...................... 1,660 48,787 ---------- 89,315 ---------- TELECOMMUNICATIONS--3.6% AT&T Wireless Services, Inc.* .............. 4,040 59,065 CenturyTel, Inc. ........................... 2,580 83,050 Vodafone Group PLC - ADR ................... 1,220 27,938 West Corp.* ................................ 1,595 41,119 ---------- 211,172 ---------- TELECOMMUNICATIONS EQUIPMENT--1.4% Nokia Oyj - ADR ............................ 2,500 29,700 Tellabs, Inc.* ............................. 5,700 51,699 ---------- 81,399 ---------- TOBACCO--6.7% Loews Corp. ................................ 2,720 154,496 Universal Corp. ............................ 965 43,550 UST, Inc. .................................. 4,775 191,573 ---------- 389,619 ---------- UTILITIES - ELECTRIC--2.1% Korea Electric Power (KEPCO) Corp. - ADR .............................. 5,085 51,053 Sierra Pacific Resources* .................. 8,395 72,197 ---------- 123,250 ---------- Number of Shares Value --------- ---------- UTILITIES - GAS & WATER--1.1% El Paso Corp. .............................. 7,700 $ 62,986 ---------- TOTAL COMMON STOCK (Cost $4,627,180) ...................... 5,442,425 ---------- PREFERRED STOCK--1.4% BUILDING & CONSTRUCTION--0.3% Fleetwood Capital Trust 6.0% 10/10/03 $51.12 .......................... 395 16,195 ---------- FOODS--0.1% Constellation Brands, Inc. 5.75% 09/01/06 ................................. 215 6,839 ---------- INSURANCE - OTHER--0.8% Hartford Financial Services Group, Inc., (The) 7.00% 8/16/06 ................ 180 10,856 Scottish Re Group 5.875% 05/21/07 ................................. 300 8,058 UnumProvident Corp. 8.25% 5/15/06 .................................. 815 27,221 ---------- 46,135 ---------- OFFICE EQUIPMENT & SUPPLIES--0.2% Xerox Corp. 6.25% 07/01/06 ................. 105 13,009 ---------- TOTAL PREFERRED STOCK (Cost $66,647) ......................... 82,178 ---------- Par (000) ----------- CORPORATE BONDS--0.7% Sierra Pacific Resources 144A 7.25% 02/14/10 ........................... $ 19 40,565 ---------- TOTAL CORPORATE BONDS (Cost $19,340) ......................... 40,565 ---------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 48 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- ALL-CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS -------------------------------------------------------------------------------- Number of Shares Value --------- ---------- RIGHTS/WARRANTS--0.2% BANKS - MAJOR--0.2% Citigroup, Inc. Litigation Tracking Warrants ................................. 8,840 $ 12,199 ---------- TOTAL RIGHTS/WARRANTS (Cost $10,070) ......................... 12,199 ---------- SHORT TERM INVESTMENTS--7.1% Galaxy Institutional Money Market Fund 1.370% 09/01/04 .......................... 301,438 301,438 Wilmington Money Market Fund 0.773% 09/01/04 .......................... 109,522 109,522 ---------- TOTAL SHORT TERM INVESTMENTS (Cost $410,960) ........................ 410,960 ---------- Number of Contracts Value ------------ ---------- OPTIONS--(0.5%) El Paso Corp. Call Option $7.00 expires 01/21/05 ................... (53) $ (8,204) El Paso Corp. Call Option $7.00 expires 03/18/05 ................... (24) (4,014) GTECH Holdings Corp. Call Option $22.5 expires 01/21/05 ......................... (14) (3,091) Nokia Oyj Call Option $12.5 expires 07/15/05 ................... (25) (2,681) Tellabs, Inc. Call Option $7.50 expires 01/22/05 ................... (57) (11,543) ---------- TOTAL OPTIONS (Cost $(31,266)) ....................... (29,533) ---------- TOTAL INVESTMENTS--102.3% (Cost $5,102,931) .......................... 5,958,794 ---------- LIABILITIES IN EXCESS OF OTHER ASSETS--(2.3)% .................... (132,059) ---------- NET ASSETS--100.0% ............................ $5,826,735 ========== ---------- * -- Non-income producing. ADR -- American Depository Receipt. 144A -- Security was purchased pursuant to Rule 144A under Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. As of August 31, 2004, these sucurities amounted to 3.09% of net assets. REIT -- Real Estate Investment Trust. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 49 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- STATEMENTS OF ASSETS AND LIABILITIES --------------------------------------------------------------------------------
SMALL CAP LONG/SHORT LARGE CAP MID CAP ALL-CAP VALUE FUND II EQUITY FUND VALUE FUND VALUE FUND VALUE FUND ------------- ----------- ---------- ---------- ---------- ASSETS Investments, at value (cost--$412,076,097, $74,928,678, $43,574,961, $52,424,323 and $5,134,197 respectively) ............................. $461,772,333 $ 75,637,016 $50,185,347 $58,155,961 $5,988,327 Cash ................................................... -- 4,737 -- -- -- Receivable from Investment Advisor ..................... -- -- -- -- 13,571 Deposits with brokers for securities sold short ........ -- 27,832,023 -- -- -- Receivable for investments sold ........................ 244,615 3,416,292 -- 239,058 8,188 Receivable for Fund shares sold. ....................... 103,213 34,071 23,847 68 44,748 Dividends and interest receivable ...................... 226,895 211,773 57,703 37,741 4,400 Prepaid expenses and other assets ...................... 45,559 14,443 10,682 13,405 14,089 ------------ ------------ ----------- ----------- ---------- Total assets ......................................... 462,392,615 107,150,355 50,277,579 58,446,233 6,073,323 ------------ ------------ ----------- ----------- ---------- LIABILITIES Payable for investments purchased ...................... 654,054 1,981,740 -- 91,922 186,243 Securities sold-short (proceeds $36,817,567) ........... -- 32,288,588 -- -- -- Options written, at value (premiums received $31,266) .. -- -- -- -- 29,533 Payable to Investment Adviser .......................... 489,639 129,524 21,151 24,975 -- Payable for Fund shares redeemed ....................... 394,805 64,425 31,927 13,216,361 -- Other accrued expenses and liabilities ................. 225,216 67,008 46,215 54,012 30,812 Payable for dividends on securities sold-short ......... -- 3,807 -- -- -- ------------ ------------ ----------- ----------- ---------- Total liabilities .................................... 1,763,714 34,535,092 99,293 13,387,270 246,588 ------------ ------------ ----------- ----------- ---------- NET ASSETS Capital stock, $0.001 par value ........................ 20,376 4,945 3,951 3,425 439 Paid-in capital ........................................ 367,208,064 75,481,709 46,461,946 32,644,979 4,696,614 Undistributed net investment income .................... -- -- 355,715 30,352 9,757 Accumulated net realized gain/(loss) from investments and foreign exchange transactions, if any ............ 43,704,225 (8,108,708) (3,253,712) 6,648,569 264,062 Net unrealized appreciation on investments and foreign exchange transactions, if any. ....................... 49,696,236 708,338 6,610,386 5,731,638 855,863 Net unrealized appreciation on investments sold short .. -- 4,528,979 -- -- -- ------------ ------------ ----------- ----------- ---------- Net assets ............................................. $460,628,901 $ 72,615,263 $50,178,286 $45,058,963 $5,826,735 ============ ============ =========== =========== ========== INSTITUTIONAL CLASS Net assets ............................................. $133,060,084 $ 58,293,057 $42,065,987 $42,239,956 $5,177,362 ------------ ------------ ----------- ----------- ---------- Shares outstanding ..................................... 5,835,170 3,964,957 3,320,569 3,208,848 389,682 ------------ ------------ ----------- ----------- ---------- Net asset value, offering and redemption price per share ...................................... $22.80 $14.70 $12.67 $13.16 $13.29 ============ ============ =========== =========== ========== INVESTOR CLASS Net assets ............................................. $327,568,817 $ 14,322,206 $ 8,112,299 $ 2,819,007 $ 649,373 ------------ ------------ ----------- ----------- ---------- Shares outstanding ..................................... 14,541,239 979,721 630,651 216,541 48,968 ------------ ------------ ----------- ----------- ---------- Net asset value, offering and redemption price per share ...................................... $22.53 $14.62 $12.86 $13.02 $13.26 ============ ============ =========== =========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 50 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS --------------------------------------------------------------------------------
SMALL CAP LONG/SHORT LARGE CAP MID CAP ALL-CAP VALUE FUND II EQUITY FUND VALUE FUND VALUE FUND VALUE FUND ------------- ----------- ---------- ---------- ---------- INVESTMENT INCOME Dividends 1 ................................... $ 4,570,692 $ 548,672 $ 891,277 $ 625,929 $ 75,910 Interest ...................................... -- 448 88 -- 1,307 ----------- ----------- ---------- ----------- --------- 4,570,692 549,120 891,365 625,929 77,217 ----------- ----------- ---------- ----------- --------- Advisory fees ................................. 5,923,228 1,624,185 388,598 469,007 44,027 Administration fees and expenses .............. 571,609 103,022 83,394 85,489 75,336 Administrative services fees .................. 44,732 6,864 4,919 5,571 414 Transfer agent fees and expenses .............. 180,086 83,561 74,385 75,890 72,079 Custodian fees and expenses ................... 57,990 43,069 17,286 18,234 23,556 Printing ...................................... 49,338 8,254 8,980 18,139 712 Federal and state registration fees ........... 35,574 24,948 22,226 23,498 24,236 Audit and legal fees .......................... 120,942 25,703 22,504 29,242 12,914 Distribution fees ............................. 846,938 35,347 17,518 9,294 691 Directors' and Officer's fees and expenses .... 45,387 8,271 5,961 7,239 978 Insurance ..................................... 22,199 4,828 3,091 3,493 183 Dividend expense .............................. -- 375,054 -- -- -- Other ......................................... 915 915 732 677 1,007 ----------- ----------- ---------- ----------- --------- Total expenses before waivers and reimbursements ............................ 7,898,938 2,344,021 649,594 745,773 256,133 Less: waivers and reimbursements ............ -- (128,969) (113,946) (150,220) (200,408) ----------- ----------- ---------- ----------- --------- Total expenses after waivers and reimbursements ............................ 7,898,938 2,215,052 535,648 595,553 55,725 ----------- ----------- ---------- ----------- --------- Net investment income/(loss) .................. (3,328,246) (1,665,932) 355,717 30,376 21,492 ----------- ----------- ---------- ----------- --------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investments ................................. 52,836,308 20,799,826 4,311,506 10,307,118 315,617 Investments sold short ...................... -- (15,593,975) -- -- -- Foreign currency related transactions ....... -- 42 -- -- -- Net change in unrealized appreciation/ (depreciation) on: Investments ................................. 3,428,711 (1,907,109) 4,174,456 (2,720,095) 461,867 ----------- ----------- ---------- ----------- --------- Net realized and unrealized gain from investments ................................. 56,265,019 3,298,784 8,485,962 7,587,023 777,484 ----------- ----------- ---------- ----------- --------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................................. $52,936,773 $ 1,632,852 $8,841,679 $ 7,617,399 $ 798,976 =========== =========== ========== =========== ========= ---------- 1 Net of foreign taxes of $19,535, $3,078, $6,845, $717 and $1,480 for the Small Cap Value Fund II, Long/Short Equity Fund, Large Cap Value Fund, Mid Cap Value Fund and All-Cap Value Fund, respectively.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2004 | 51 BOSTON PARTNERS FAMILY OF FUNDS AUGUST 31, 2004 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------------------------------------------
SMALL CAP VALUE FUND II LONG/SHORT EQUITY FUND ------------------------------- ------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) ......................... $ (3,328,246) $(1,928,867) $(1,665,932) $ (2,007,713) Net realized gain/(loss) from investments and foreign exchange transactions, if any .............. 52,836,308 5,302,281 5,205,893 (12,815,174) Net change in unrealized appreciation from investments 3,428,711 65,896,478 (1,907,109) 13,245,664 ------------ ------------ ----------- ------------ Net increase/(decrease) in net assets resulting from operations ......................................... 52,936,773 69,269,892 1,632,852 (1,577,223) ------------ ------------ ----------- ------------ LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional shares ........... -- -- -- -- Net investment income Investor shares ................ -- -- -- -- Net realized capital gains Institutional shares ...... (1,196,652) (13,998) -- (2,067,148) Net realized capital gains Investor shares ........... (2,970,276) (57,054) -- (1,519,486) Tax return of capital Institutional shares ........... -- (807,035) Tax return of capital Investor shares ................ -- (508,389) ------------ ------------ ----------- ------------ Total dividends and distributions to shareholders .... (4,166,928) (71,052) -- (4,902,058) ------------ ------------ ----------- ------------ INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 4) ................ 33,882,663 14,463,939 (1,749,267) (36,024,347) ------------ ------------ ----------- ------------ Total increase/(decrease) in net assets .............. 82,652,508 83,662,779 (116,415) (42,503,628) ------------ ------------ ----------- ------------ NET ASSETS Beginning of period .................................. 377,976,393 294,313,614 72,731,678 115,235,306 ------------ ------------ ----------- ------------ End of period* ....................................... $460,628,901 $377,976,393 $72,615,263 $ 72,731,678 ============ ============ =========== ============ LARGE CAP VALUE FUND MID CAP VALUE FUND -------------- --------------- --------------- --------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) ......................... $ 355,717 $ 456,136 $ 30,376 $ 293,385 Net realized gain/(loss) from investments and foreign exchange transactions, if any .............. 4,311,506 (5,079,850) 10,307,118 (2,354,765) Net change in unrealized appreciation from investments 4,174,456 7,821,931 (2,720,095) 12,356,003 ----------- ----------- ------------ ----------- Net increase/(decrease) in net assets resulting from operations ......................................... 8,841,679 3,198,217 7,617,399 10,294,623 ----------- ----------- ------------ ----------- LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional shares ........... (415,914) (262,849) (282,692) (1,576) Net investment income Investor shares ................ (40,176) (26,147) (10,717) -- Net realized capital gains Institutional shares ...... -- (380,478) -- -- Net realized capital gains Investor shares ........... -- (56,805) -- -- Tax return of capital Institutional shares ........... -- -- Tax return of capital Investor shares ................ -- -- ----------- ----------- ------------ ----------- Total dividends and distributions to shareholders .... (456,090) (726,279) (293,409) (1,576) ----------- ----------- ------------ ----------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 4) ................ (7,045,262) (6,593,547) (22,476,157) (6,386,579) ----------- ----------- ------------ ----------- Total increase/(decrease) in net assets .............. 1,340,327 (4,121,609) (15,152,167) 3,906,468 ----------- ----------- ------------ ----------- NET ASSETS Beginning of period .................................. 48,837,959 52,959,568 60,211,130 56,304,662 ----------- ----------- ------------ ----------- End of period* ....................................... $50,178,286 $48,837,959 $ 45,058,963 $60,211,130 =========== =========== ============ =========== ALL-CAP VALUE FUND ---------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) ......................... $ 21,492 $ 15,648 Net realized gain/(loss) from investments and foreign exchange transactions, if any .............. 315,617 (42,196) Net change in unrealized appreciation from investments 461,867 479,313 ---------- ---------- Net increase/(decrease) in net assets resulting from operations ......................................... 798,976 452,765 ---------- ---------- LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional shares ........... (20,303) (6,990) Net investment income Investor shares ................ (385) (181) Net realized capital gains Institutional shares ...... -- -- Net realized capital gains Investor shares ........... -- -- Tax return of capital Institutional shares ........... -- Tax return of capital Investor shares ................ -- ---------- ---------- Total dividends and distributions to shareholders .... (20,688) (7,171) ---------- ---------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 4) ................ 2,052,711 656,211 ---------- ---------- Total increase/(decrease) in net assets .............. 2,830,999 1,101,805 ---------- ---------- NET ASSETS Beginning of period .................................. 2,995,736 1,893,931 ---------- ---------- End of period* ....................................... $5,826,735 $2,995,736 ========== ========== *Includes undistributed net investment income/(loss) as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- Small Cap Value Fund II ........... $ -- $ -- Long/Short Equity Fund ............ -- (80) Large Cap Value Fund .............. 355,715 456,088 Mid Cap Value Fund Fund ........... 30,352 293,405 All-Cap Value Fund ................ 9,757 8,953 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 52 and 53 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS PER SHARE OPERATING PERFORMANCE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
NET DIVIDENDS TO DISTRIBUTIONS TO DISTRIBUTIONS TO ASSET NET REALIZED SHAREHOLDERS SHAREHOLDERS SHAREHOLDERS VALUE, NET AND UNREALIZED FROM NET FROM NET FROM BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED TAX RETURN REDEMPTION OF PERIOD INCOME/(LOSS) INVESTMENTS INCOME GAINS OF CAPITAL FEES ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP VALUE FUND II ----------------------- INSTITUTIONAL CLASS 8/31/04 $20.19 $(0.12)** $ 2.92** $ -- $(0.20) $ -- $0.01** 8/31/03 15.71 (0.09)** 4.55** -- -- 3 -- 0.02** 8/31/02 17.17 (0.13)** (1.23)** -- (0.21) -- 0.11** 8/31/01 11.39 (0.05)** 6.05** -- (0.29) -- 0.07** 8/31/00 8.67 (0.01) 2.73 -- -- -- -- INVESTOR CLASS 8/31/04 $20.00 $(0.18)** $ 2.90** $ -- $(0.20) $ -- $0.01** 8/31/03 15.61 (0.12)** 4.49** -- -- 3 -- 0.02** 8/31/02 17.09 (0.17)** (1.21)** -- (0.21) -- 0.11** 8/31/01 11.36 (0.09)** 6.04** -- (0.29) -- 0.07** 8/31/00 8.65 (0.03) 2.74 -- -- -- -- ------------------------------------------------------------------------------------------------------------------------------------ LONG/SHORT EQUITY FUND ---------------------- INSTITUTIONAL CLASS 8/31/04 $14.31 $(0.32)** $ 0.69** $ -- $ -- $ -- $0.02** 8/31/03 15.17 (0.28)** 0.10** -- (0.51) (0.20) 0.03** 8/31/02 15.88 0.05** (0.31)** (0.02) (0.50) -- 0.07** 8/31/01 10.57 0.07** 5.14** (0.13) -- -- 0.23** 8/31/00 9.46 0.13 1.12 (0.14) -- -- -- INVESTOR CLASS 8/31/04 $14.27 $(0.36)** $ 0.69** $ -- $ -- $ -- $0.02** 8/31/03 15.13 (0.31)** 0.10** -- (0.51) (0.17) 0.03** 8/31/02 15.87 0.04** (0.33)** (0.01) (0.50) -- 0.06** 8/31/01 10.57 0.03** 5.18** (0.11) -- -- 0.20** 8/31/00 9.43 0.11 1.16 (0.13) -- -- -- RATIO OF RATIO OF RATIO OF EXPENSES TO EXPENSES TO EXPENSES TO AVERAGE NET AVERAGE NET AVERAGE NET NET NET ASSETS WITH ASSETS WITH ASSETS WITHOUT ASSET ASSETS, WAIVERS AND WAIVERS AND WAIVERS AND VALUE, TOTAL END OF REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS BEEND OF INVESTMENT PERIOD (INCLUDING (EXCLUDING (EXCLUDING OFPERIOD RETURN 1,2 (000) DIVIDEND EXPENSE) DIVIDEND EXPENSE) DIVIDEND EXPENSE) ---------------------------------------------------------------------------------------------------------------------- SMALL CAP VALUE FUND II ----------------------- INSTITUTIONAL CLASS 8/31/04 $22.80 13.96% $133,060 1.49% --% --% 8/31/03 20.19 28.55 98,383 1.55 -- -- 8/31/02 15.71 (7.39) 40,475 1.55 -- -- 8/31/01 17.17 54.57 21,547 1.55 -- -- 8/31/00 11.39 31.43 1,965 1.55 -- -- INVESTOR CLASS 8/31/04 $22.53 13.69% $327,569 1.74% --% --% 8/31/03 20.00 28.16 279,593 1.80 -- -- 8/31/02 15.61 (7.54) 253,838 1.79 -- -- 8/31/01 17.09 54.27 230,507 1.77 -- -- 8/31/00 11.36 31.33 382 1.77 -- -- ---------------------------------------------------------------------------------------------------------------------- LONG/SHORT EQUITY FUND ---------------------- INSTITUTIONAL CLASS 8/31/04 $14.70 2.73% $ 58,293 3.02% 2.50% 2.68% 8/31/03 14.31 (1.13) 57,351 3.05 2.50 2.90 8/31/02 15.17 (1.17) 65,951 3.04 2.50 2.85 8/31/01 15.88 51.85 25,857 3.22 2.50 4.25 8/31/00 10.57 13.74 1,080 3.22 2.86 21.86 INVESTOR CLASS 8/31/04 $14.62 2.45% $ 14,322 3.27% 2.75% 2.93% 8/31/03 14.27 (1.32) 15,381 3.32 2.75 3.12 8/31/02 15.13 (1.44) 49,284 3.29 2.75 3.06 8/31/01 15.87 51.51 11,244 3.44 2.72 4.35 8/31/00 10.57 13.87 310 3.44 3.08 21.96 RATIO OF RATIOS OF NET EXPENSES TO INVESTMENT AVERAGE NET INCOME TO ASSETS WITHOUT AVERAGE WAIVERS AND NET ASSETS REIMBURSEMENTS WITH WAIVERS PORTFOLIO (INCLUDING AND TURNOVER DIVIDEND EXPENSE) REIMBURSEMENTS RATE ------------------------------------------------------------------------------ SMALL CAP VALUE FUND II ----------------------- INSTITUTIONAL CLASS 8/31/04 1.49% (0.53)% 47.06% 8/31/03 1.79 (0.54) 72.72 8/31/02 1.71 (0.76) 119.30 8/31/01 2.03 (0.32) 35.50 8/31/00 14.23 (0.18) 161.75 INVESTOR CLASS 8/31/04 1.74% (0.77)% 47.06% 8/31/03 2.04 (0.77) 72.72 8/31/02 1.92 (1.00) 119.30 8/31/01 2.13 (0.54) 35.50 8/31/00 14.33 (0.40) 161.75 ------------------------------------------------------------------------------ LONG/SHORT EQUITY FUND ---------------------- INSTITUTIONAL CLASS 8/31/04 3.20% (2.26)% 239.06% 8/31/03 3.44 (1.94) 282.36 8/31/02 3.39 0.30 219.52 8/31/01 4.97 0.46 332.25 8/31/00 22.22 1.12 363.34 INVESTOR CLASS 8/31/04 3.45% (2.50)% 239.06% 8/31/03 3.69 (2.13) 282.36 8/31/02 3.60 0.27 219.52 8/31/01 5.07 0.24 332.25 8/31/00 22.32 0.90 363.34 ---------- ** Calculated based on average shares outstanding for the period. 1 Total return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. 2 Redemption fees are reflected in total return calculations. 3 Amount is less than $.01 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 54 and 55 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
NET DIVIDENDS TO DISTRIBUTIONS TO NET ASSET NET REALIZED SHAREHOLDERS SHAREHOLDERS ASSET VALUE, NET AND UNREALIZED FROM NET FROM NET VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED END OF OF PERIOD INCOME/(LOSS) INVESTMENTS INCOME GAINS PERIOD --------------------------------------------------------------------------------------------------------------------------------- LARGE CAP VALUE FUND -------------------- INSTITUTIONAL CLASS 8/31/04 $10.84 $ 0.09** $ 1.84** $(0.10) $ -- $12.67 8/31/03 10.33 0.09** 0.57** (0.06) (0.09) 10.84 8/31/02 13.52 0.08** (1.54)** (0.12) (1.61) 10.33 8/31/01 12.82 0.12** 1.10** (0.13) (0.39) 13.52 8/31/00 12.24 0.14 1.25 (0.11) (0.70) 12.82 INVESTOR CLASS 8/31/04 $11.01 $ 0.05** $ 1.88** $(0.08) $ -- $12.86 8/31/03 10.50 0.07** 0.57** (0.04) (0.09) 11.01 8/31/02 13.73 0.04** (1.56)** (0.10) (1.61) 10.50 8/31/01 13.02 0.09** 1.13** (0.12) (0.39) 13.73 8/31/00 12.36 0.10 1.27 (0.01) (0.70) 13.02 --------------------------------------------------------------------------------------------------------------------------------- MID CAP VALUE FUND ------------------ INSTITUTIONAL CLASS 8/31/04 $11.57 $ 0.01** $ 1.65** $(0.07) $ -- $13.16 8/31/03 9.69 0.05** 1.83** -- 2 -- 11.57 8/31/02 12.55 0.00** (0.94)** (0.06) (1.86) 9.69 8/31/01 11.66 0.04** 0.91** (0.06) -- 12.55 8/31/00 11.47 0.06 0.29 (0.02) (0.14) 11.66 INVESTOR CLASS 8/31/04 $11.43 $(0.02)** $ 1.65** $(0.04) $ -- $13.02 8/31/03 9.58 0.02** 1.83** -- -- 11.43 8/31/02 12.43 (0.02)** (0.94)** (0.03) (1.86) 9.58 8/31/01 11.55 0.01** 0.91** (0.04) -- 12.43 8/31/00 11.38 0.03 0.28 -- (0.14) 11.55 --------------------------------------------------------------------------------------------------------------------------------- RATIO OF RATIO OF RATIOS OF NET NET EXPENSES TO EXPENSES TO INVESTMENT ASSETS, AVERAGE NET AVERAGE NET INCOME TO AVERAGE TOTAL END OF ASSETS WITH ASSETS WITHOUT NET ASSETS PORTFOLIO INVESTMENT PERIOD WAIVERS AND WAIVERS AND WITH WAIVERS TURNOVER RETURN 1 (000) REIMBURSEMENTS REIMBURSEMENTS AND REIMBURSEMENTS RATE ------------------------------------------------------------------------------------------------------------------------------- LARGE CAP VALUE FUND -------------------- INSTITUTIONAL CLASS 8/31/04 17.87% $ 42,066 1.00% 1.22% 0.73% 47.21% 8/31/03 6.54 43,722 1.00 1.41 0.94 81.13 8/31/02 (12.67) 45,067 1.00 1.40 0.62 88.65 8/31/01 9.65 40,368 1.00 1.43 0.89 105.71 8/31/00 11.99 39,897 1.00 1.43 0.92 120.99 INVESTOR CLASS 8/31/04 17.53% $ 8,112 1.25% 1.47% 0.43% 47.21% 8/31/03 6.22 5,116 1.25 1.66 0.66 81.13 8/31/02 (12.87) 7,893 1.25 1.61 0.37 88.65 8/31/01 9.45 3,746 1.22 1.53 0.67 105.71 8/31/00 11.67 1,414 1.22 1.53 0.70 120.99 ------------------------------------------------------------------------------------------------------------------------------- MID CAP VALUE FUND ------------------ INSTITUTIONAL CLASS 8/31/04 14.39% $ 42,240 1.00% 1.26% 0.07% 67.40% 8/31/03 19.41 57,052 1.00 1.40 0.55 77.87 8/31/02 (8.97) 50,073 1.00 1.33 0.01 99.23 8/31/01 8.23 116,605 1.00 1.30 0.29 234.52 8/31/00 3.21 152,696 1.00 1.24 0.53 206.65 INVESTOR CLASS 8/31/04 14.08% $ 2,819 1.25% 1.51% (0.18)% 67.40% 8/31/03 19.31 3,159 1.25 1.65 0.21 77.87 8/31/02 (9.26) 6,232 1.25 1.57 (0.18) 99.23 8/31/01 7.96 1,787 1.22 1.40 0.07 234.52 8/31/00 2.90 1,929 1.22 1.34 0.31 206.65 ------------------------------------------------------------------------------------------------------------------------------- ---------- ** Calculated based on average shares outstanding for the period. 1 Total return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and will include reinvestments of dividends and distributions, if any. 2 Amount is less than $.01 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 56 and 57 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements. -------------------------------------------------------------------------------
NET DIVIDENDS TO DISTRIBUTIONS TO NET ASSET NET REALIZED SHAREHOLDERS SHAREHOLDERS ASSET VALUE, NET AND UNREALIZED FROM NET FROM NET VALUE, BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED END OF OF PERIOD INCOME/(LOSS) INVESTMENTS INCOME GAINS PERIOD --------------------------------------------------------------------------------------------------------------------------------- ALL-CAP VALUE FUND ------------------ INSTITUTIONAL CLASS 8/31/04 $10.82 $ 0.06 $ 2.48 $(0.07) $ -- $13.29 8/31/03 9.45 0.06 1.34 (0.03) -- 10.82 7/1/02* to 8/31/02 10.00 -- (0.55) -- -- 9.45 INVESTOR CLASS 8/31/04 $10.80 $ 0.02 $ 2.48 (0.04) $ -- $13.26 8/31/03 9.44 0.04 1.34 (0.02) -- 10.80 7/1/02* to 8/31/02 10.00 -- (0.56) -- -- 9.44 --------------------------------------------------------------------------------------------------------------------------------- RATIO OF RATIO OF RATIOS OF NET NET EXPENSES TO EXPENSES TO INVESTMENT ASSETS, AVERAGE NET AVERAGE NET INCOME TO AVERAGE TOTAL END OF ASSETS WITH ASSETS WITHOUT NET ASSETS PORTFOLIO INVESTMENT PERIOD WAIVERS AND WAIVERS AND WITH WAIVERS TURNOVER RETURN 1 (000) REIMBURSEMENTS REIMBURSEMENTS AND REIMBURSEMENTS RATE ---------------------------------------------------------------------------------------------------------------------------------- ALL-CAP VALUE FUND ------------------ INSTITUTIONAL CLASS 8/31/04 23.50% $5,177 1.25% 5.82% 0.51% 27.40% 8/31/03 14.84 2,890 1.25 9.49 0.62 38.36 7/1/02* to 8/31/02 (5.50) 1,810 1.25 2 14.54 2 0.16 2 6.61 2 INVESTOR CLASS 8/31/04 23.13% $ 649 1.50% 5.84% 0.14% 27.40% 8/31/03 14.63 106 1.50 9.88 0.41 38.36 7/1/02* to 8/31/02 (5.60) 84 1.50 2 15.34 2 (0.01) 2 6.61 2 ---------------------------------------------------------------------------------------------------------------------------------- ---------- * Commencement of operations. 1 Total return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. 2 Annualized.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 58 and 59 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. RBB is a "series fund", which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the 1940 Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has fourteen active investment portfolios, including Boston Partners Small Cap Value Fund II ("Small Cap Value Fund II"), Boston Partners Long/Short Equity Fund ("Long/Short Equity Fund"), Boston Partners Large Cap Value Fund ("Large Cap Value Fund"), Boston Partners Mid Cap Value Fund ("Mid Cap Value Fund") and Boston Partners All-Cap Value Fund ("All-Cap Value Fund") (each a "Fund", collectively the "Funds"). The Funds each offer two classes of shares, Institutional Class and Investor Class. RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion are currently classified into ninety-seven classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. PORTFOLIO VALUATION -- The Funds' net asset value ("NAV") is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Securities held by the Funds are valued using the closing price or the last sale price on a national securities exchange or on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there were no sales on that day or the securities are traded on other over-the-counter markets, the mean of the last bid and ask price prior to the market close are used. Short-term debt securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Debt securities having a remaining maturity of greater than 60 days are valued at the mean between the bid and ask prices. With the approval of the Company's Board of Directors, the Funds may use a pricing service, bank or broker/dealer experience in providing valuations to value the Funds' securities. If market quotations are unavailable or deemed unreliable, securities will be valued by the Funds' Valuation Committee as determined by procedures adopted by the Board of Directors. USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. REPURCHASE AGREEMENTS -- The Funds may agree to purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("Repurchase Agreements"). The financial institutions with whom the Funds enter into Repurchase Agreements are banks and broker/dealers that Boston Partners Asset Management, LLC (the "Investment Adviser" or "Boston Partners") considers creditworthy. The seller under a Repurchase Agreement will be required to maintain the value of the securities as collateral, subject to the agreement, at not less than the repurchase price plus accrued interest. Boston Partners marks to market daily the value of the collateral, and, if necessary, requires the seller to deposit additional collateral by the next day of business, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Funds to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. There were no Repurchase Agreements outstanding as of August 31, 2004. 60 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES -- The Funds record security transactions based on trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes in determining realized gains and losses on investments. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. The Funds' investment income, expenses (other than class specific distribution fees) and unrealized and realized gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all of the RBB families (such as director or professional fees) are charged to all funds in proportion to their net assets of the RBB funds, or in such other manner as the Board of Directors deems fair or equitable. Expenses and fees, including investment advisory and administration fees are accrued daily and taken into account for the purpose of determining the net asset value of the Funds. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income and distributions from net realized capital gains, if any, are declared and paid at least annually to shareholders and recorded on ex-date. Income and capital gain distributions are determined in accordance with U.S. federal income tax regulations which may differ from generally accepted accounting principles. These differences include the treatment of non-taxable dividends, expiring capital loss carryforwards, foreign currency gain/loss, and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. The following permanent differences as of August 31, 2004, primarily attributable to net investment loss and nondeductible expenses, were reclassified to the following accounts:
INCREASE/(DECREASE) INCREASE/(DECREASE) ACCUMULATED INCREASE/(DECREASE) UNDISTRIBUTED NET REALIZED ADDITIONAL NET INVESTMENT GAIN/(LOSS) PAID-IN INCOME/(LOSS) ON INVESTMENTS CAPITAL ------------------- ------------------- ------------------- Small Cap Value Fund II $3,328,246 $(3,328,246) $ -- Long/Short Equity Fund 1,666,012 (49,452) (1,616,560) Mid Cap Value Fund (20) -- 20
U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is the Funds' intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from U.S. income and excise taxes. OTHER -- In the normal course of business, the Funds may enter into contracts that provide general indemnifications. The Funds' maximum exposure under these arrangements is dependent on claims that may be made against the Funds in the future, and, therefore, cannot be estimated; however, based on experience, the risk of material loss for such claims is considered remote. SHORT SALES -- In the Long/Short Equity Fund and the All-Cap Value Fund, when the Investment Adviser believes 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 buys and replaces such borrowed security. A Fund will realize a gain if there is a decline in price of the security between those dates where decline exceeds costs of the borrowing of the security and other transaction costs. There can be no assurance that a Fund will be able to close out a short position at ANNUAL REPORT 2004 | 61 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- 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 unlimited in size. 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. OPTIONS -- The All-Cap Value Fund may buy put and call options and write covered call and secured put options. Such options may relate to particular securities or domestic stock indices, and may or may not be listed on a domestic securities exchange or issued by the Options Clearing Corporation. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The risk in purchasing an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction at an acceptable price if a liquid secondary market does not exist. The Fund also may write over-the-counter options where completing the obligation depends upon the credit standing of the other party. Option contracts also involve the risk that they may result in loss due to unanticipated developments in market conditions or other causes. Options purchased are recorded as an asset and written options are recorded as liabilities to the extent of premiums paid or received. The All-Cap Value Fund will realize a gain or loss when the option transaction expires or closes. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of the premium received or paid. The All-Cap Value Fund had transactions in options written during the year ended August 31, 2004 as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- -------- Options outstanding at August 31, 2003 54 $ 15,517 Options written 173 31,266 Options terminated in closing purchase transactions (7) (1,925) Options expired -- -- Options exercised (47) (13,592) ---- -------- Options outstanding at August 31, 2004 173 $ 31,266 ==== ========
FOREIGN CURRENCY TRANSLATION -- The books and records of the portfolios are maintained in U.S. dollars as follows: (1) the foreign currency market value of investment securities and other assets and liabilities stated in foreign currencies are translated at the exchange rate prevailing at the end of the period; and (2) purchases, sales, income and expenses are translated at the rate of exchange prevailing on the respective dates of such transactions. The resulting exchange gains and losses are included in the Statement of Operations. LINE OF CREDIT -- Each portfolio may borrow an amount up to its prospectus-defined limitations, from a committed line of credit available to the Funds in the Boston Partners Fund Family. Borrowings from the line of credit will bear interest at the Federal Funds Rate. The Boston Partners Fund Family paid an annual initiation fee of $5,000. Each Fund is allocated a portion of this fee based on its net assets relative to the net assets of the Boston Partners Fund Family. The Funds had no outstanding borrowings at August 31, 2004 or at any time during the year ended August 31, 2004. 62 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Boston Partners, a wholly owned subsidiary of Robeco, USA, serves as the Funds' Investment Adviser. For its advisory services, Boston Partners is entitled to receive 1.25% of the Small Cap Value Fund II's average daily net assets, 2.25% of the Long/Short Equity Fund's average daily net assets, 0.75% of the Large Cap Value Fund's average daily net assets, 0.80% of the Mid Cap Value Fund's average daily net assets and 1.00% of the All-Cap Value Fund's average daily net assets and, each accrued daily and payable monthly. The adviser has agreed to limit the Small Cap Value Fund II's total operating expenses to the extent that such expenses exceed 1.55% and 1.80% of the Small Cap Value Fund II's average daily net assets for the Institutional and Investor Classes, respectively. The adviser has agreed to limit the Long/Short Equity Fund's total operating expenses to the extent that such expenses exceed 2.50% and 2.75%, excluding short sale dividend expense of the Long/Short Equity Fund's average daily net assets for the Institutional and Investor Classes, respectively. The adviser has agreed to limit the Large Cap Value Fund's and the Mid Cap Value Fund's total operating expenses to the extent that such expenses exceeded 1.00% and 1.25% of the Large Cap Value Fund's and the Mid Cap Value Fund's average daily net assets for the Institutional and Investor Classes, respectively. The adviser has agreed to limit the All-Cap Value Fund's total operating expenses to the extent that such expenses exceeded 1.25% and 1.50% of the All-Cap Value Fund's average daily net assets for the Institutional and Investor Classes, respectively. This limitation is effected in waivers of advisory fees and reimbursements of expenses exceeding the advisory fee as necessary. For the year ended August 31, 2004, investment advisory fees, waivers and reimbursements of expenses were as follows:
GROSS NET EXPENSE FUND ADVISORY FEES WAIVERS ADVISORY FEES REIMBURSEMENT ---- ------------- --------- ------------- ------------- Small Cap Value Fund II $5,923,228 $ -- $5,923,228 $ -- Long/Short Equity Fund 1,624,185 (128,969) 1,495,216 -- Large Cap Value Fund 388,598 (113,946) 274,652 -- Mid Cap Value Fund 469,007 (150,220) 318,787 -- All-Cap Value Fund 44,027 (44,027) -- 92,214
The Funds will not pay the adviser at a later time for any amounts they waived or any amounts they assumed. PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., serves as administrator for the Funds. For providing accounting and administration services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.1125% of the Funds' first $200 million of average net assets; and 0.095% of average net assets in excess of $200 million with a minimum of $70,000 annually. For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by RBB and PFPC. This agreement commenced on June 1, 2003. This fee is charged to all funds in proportion to their net assets of the RBB funds. For the year ended August 31, 2004 the Funds' portions of this fee were $76,572, $9,389, $9,150, $10,248 and $620 for the Small Cap Value Fund II, Long/Short Equity Fund, Large Cap Value Fund, Mid Cap Value Fund and All-Cap Value Fund, respectively. ANNUAL REPORT 2004 | 63 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- PFPC voluntarily waived a portion of its accounting and administrative services fees for the Funds. For the year ended August 31, 2004, fees and waivers for the All-Cap Value Fund were as follows: GROSS ACCOUNTING NET ACCOUNTING AND ADMINISTRATION AND ADMINISTRATION FUND FEES WAIVERS FEES ---- ------------------ --------- ------------------ All-Cap Value Fund $75,336 $(29,167) $46,169 In addition, PFPC serves as the Funds' transfer and disbursing agent. PFPC, at its discretion, voluntarily agreed to waive a portion of its transfer agency fees for the All-Cap Value Fund. For the year ended August 31, 2004, PFPC's transfer agency fees and waivers for the All-Cap Value Fund were as follows: GROSS TRANSFER NET TRANSFER FUND AGENCY FEES WAIVERS AGENCY FEES ---- -------------- --------- ------------ All-Cap Value Fund $72,079 $(30,000) $42,079 PFPC Distributors, Inc., provides certain administrative services to the Funds. As compensation for such administrative services, PFPC Distributors, Inc. is entitled to receive a monthly fee of $5,208 which is allocated to the Funds in proportion to their net assets. PFPC Trust Co., a wholly owned subsidiary of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., provides certain custodial services to the Funds. As compensation for such custodial services, PFPC Trust Co. is entitled to receive a monthly fee equal to an annual rate of 0.010% of the Funds' average daily gross assets or a minimum fee of $12,000 annually. PFPC Trust Co. voluntarily waived a portion of its custodial fees for the All-Cap Value Fund. For the year ended August 31, 2004, custodial fees and waivers for the All-Cap Value Fund were as follows: GROSS CUSTODIAL NET CUSTODIAL FUND FEES WAIVERS FEES ---- -------------- -------- ------------- All-Cap Value Fund $23,556 $(5,000) $18,556 The Funds will not pay PFPC or PFPC's affiliates at a later time for any amounts they waived or any amounts they assumed. At August 31, 2004, PFPC and its affiliates were due fees for their services of $79,172, $20,052, $15,772, $17,114 and $16,017 from the Small Cap Value Fund II, Long/Short Equity Fund, Large Cap Value Fund, Mid Cap Value Fund and All-Cap Value Fund, respectively. 64 |ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- 3. INVESTMENT IN SECURITIES For the year ended August 31, 2004, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: INVESTMENT SECURITIES ------------------------------ FUND PURCHASES SALES ---- ------------ ------------ Small Cap Value Fund II $244,379,335 $212,411,049 Long/Short Equity Fund 164,238,162 179,516,743 Large Cap Value Fund 23,629,371 30,570,229 Mid Cap Value Fund 36,544,978 56,185,902 All-Cap Value Fund 3,094,814 1,156,378 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2004, each class of each Fund has 100,000,000 shares of $0.001 par value common stock authorized. Transactions in capital shares for the respective periods were as follows:
SMALL CAP VALUE FUND II --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- --------------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------- INSTITUTIONAL CLASS Sales ......................... 2,387,080 $ 53,304,432 3,602,488 $ 57,745,065 Repurchases ................... (1,473,382) (33,782,982) (1,306,616) (20,258,455) Redemption Fees* .............. -- 84,971 -- 65,586 Reinvestments ................. 48,875 1,094,808 810 12,113 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ 962,573 $ 20,701,229 2,296,682 $ 37,564,309 ========== ============ ========== ============= INVESTOR CLASS Sales ......................... 3,838,683 $ 87,385,969 4,837,896 $ 82,360,580 Repurchases ................... (3,407,848) (77,326,018) (7,128,794) (105,829,090) Redemption Fees* .............. -- 212,236 -- 312,382 Reinvestments ................. 131,225 2,909,247 3,757 55,758 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ 562,060 $ 13,181,434 (2,287,141) $ (23,100,370) ========== ============ ========== =============
ANNUAL REPORT 2004 | 65 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------------------------------------------------
LONG/SHORT EQUITY FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- --------------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------- INSTITUTIONAL CLASS Sales ......................... 2,351,039 $ 33,801,598 1,681,429 $ 24,544,313 Repurchases ................... (2,393,312) (34,290,765) (2,215,274) (32,149,027) Redemption Fees* .............. -- 77,888 -- 116,881 Reinvestments ................. -- -- 193,425 2,827,683 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ (42,273) $ (411,279) (340,420) $ (4,660,150) ========== ============ ========== ============= INVESTOR CLASS Sales ......................... 437,505 $ 6,280,742 382,088 $ 5,541,664 Repurchases ................... (536,016) (7,637,790) (2,697,620) (38,976,974) Redemption Fees* .............. -- 19,060 -- 79,825 Reinvestments ................. -- -- 136,483 1,991,288 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ (98,511) $ (1,337,988) (2,179,049) $ (31,364,197) ========== ============ ========== ============= LARGE CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- --------------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------- INSTITUTIONAL CLASS Sales ......................... 339,870 $ 4,050,338 1,283,473 $ 12,551,509 Repurchases ................... (1,087,011) (13,535,453) (1,677,587) (17,136,986) Reinvestments ................. 34,867 415,263 65,681 642,365 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ (712,274) $ (9,069,852) (328,433) $ (3,943,112) ========== ============ ========== ============= INVESTOR CLASS Sales ......................... 354,277 $ 4,391,409 183,613 $ 1,870,286 Repurchases ................... (191,544) (2,406,983) (478,804) (4,601,207) Reinvestments ................. 3,317 40,164 8,081 80,486 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ 166,050 $ 2,024,590 (287,110) $ (2,650,435) ========== ============ ========== =============
66 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------------------------------------------------
MID CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- --------------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------- INSTITUTIONAL CLASS Sales ......................... 465,320 $ 6,083,536 1,958,419 $ 18,368,866 Repurchases ................... (2,202,125) (27,985,385) (2,199,168) (21,583,778) Reinvestments ................. 16,114 203,846 127 1,202 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ (1,720,691) $(21,698,003) (240,622) $ (3,213,710) ========== ============ ========== ============= INVESTOR CLASS Sales ......................... 109,413 $ 1,410,651 167,694 $ 1,797,768 Repurchases ................... (170,037) (2,199,393) (541,625) (4,970,637) Reinvestments ................. 846 10,588 -- -- ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ (59,778) $ (778,154) (373,931) $ (3,172,869) ========== ============ ========== ============= ALL-CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ------------------------- --------------------------- SHARES VALUE SHARES VALUE ---------- ------------ ---------- ------------- INSTITUTIONAL CLASS Sales ......................... 121,535 $ 1,527,587 78,400 $ 677,906 Repurchases ................... (249) (3,089) (3,504) (32,342) Reinvestments ................. 1,362 16,593 604 5,490 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ 122,648 $ 1,541,091 75,500 $ 651,054 ========== ============ ========== ============= INVESTOR CLASS Sales ......................... 47,851 $ 625,002 2,792 $ 24,996 Repurchases ................... (8,691) (113,767) (1,916) (20,020) Reinvestments ................. 31 385 20 181 ---------- ------------ ---------- ------------- Net Increase / (Decrease) ........ 39,191 $ 511,620 896 $ 5,157 ========== ============ ========== ============= ---------- * There is a 1.00% redemption fee on shares redeemed which have been held 365 days or less on the Small Cap Value Fund II. There is a 2.00% redemption fee on shares redeemed which have been held 365 days or less on the Long/Short Equity Fund. The redemption fees are retained by the Fund for the benefit of the remaining shareholders and recorded as paid-in capital.
ANNUAL REPORT 2004 | 67 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------------------------------------------------- 5. FEDERAL INCOME TAX INFORMATION At August 31, 2004, Federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by each Fund were as follows:
NET UNREALIZED FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION/ FUND COST APPRECIATION DEPRECIATION DEPRECIATION ------ ------------ ------------ ------------- -------------- Small Cap Value Fund II $413,856,514 $77,431,848 $(29,516,029) $47,915,819 Long/Short Equity Fund 38,439,810 11,584,568 (6,675,950) 4,908,618 Large Cap Value Fund 43,698,699 7,454,549 (967,901) 6,486,648 Mid Cap Value Fund 52,809,549 6,524,937 (1,178,525) 5,346,412 All-Cap Value Fund 5,103,561 916,574 (61,341) 855,233
As of August 31, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM FUND INCOME GAINS ------ ------------ ------------- Small Cap Value Fund II $12,812,167 $32,672,464 Long/Short Equity Fund -- -- Large Cap Value Fund 355,713 -- Mid Cap Value Fund 2,724,236 4,339,904 All-Cap Value Fund 14,022 260,428 At August 31, 2004, the Funds had capital loss carryforwards available to offset future capital gains through the indicated expiration dates: EXPIRING AUGUST 31, FUND 2010 2011 2012 ------ -------- ---------- ---------- Long/Short Equity Fund -- $1,343,012 $6,436,997 Large Cap Value Fund -- 3,129,974 -- During the year ended August 31, 2004, the Large Cap Value Fund, Mid Cap Value Fund and All-Cap Value Fund utilized $841,587, $1,961,884 and $26,692, respectively, of prior year capital loss carryforwards. Under Federal tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as having arisen on the first day of the following fiscal year. For the year ended August 31, 2004, there were no post-October capital losses or post-October currency losses incurred by the Funds. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term and foreign currency gains are reported as ordinary income for federal tax purposes. 68 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (concluded) -------------------------------------------------------------------------------- The tax character of dividends and distributions paid during the last two fiscal years were as follows:
TAX ORDINARY LONG-TERM RETURN OF FUND INCOME GAINS CAPITAL TOTAL ---- ---------- ---------- ---------- ---------- Small Cap Value Fund II 2004 $1,705,172 $2,461,756 -- $4,166,928 2003 -- 71,052 -- 71,052 Long/Short Equity Fund 2004 $ -- $ -- $ -- $ -- 2003 3,586,634 -- 1,315,424 4,902,058 Large Cap Value Fund 2004 $ 456,090 $ -- -- $ 456,090 2003 289,984 436,295 -- 726,279 Mid Cap Value Fund 2004 $ 293,409 $ -- -- $ 293,409 2003 1,576 -- -- 1,576 All-Cap Value Fund 2004 $ 20,688 $ -- -- $ 20,688 2003 7,171 -- -- 7,171
ANNUAL REPORT 2004 | 69 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- To the Shareholders and Board of Directors of The RBB Fund, Inc.: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Boston Partners Small Cap Value Fund II, Boston Partners Long/Short Equity Fund, Boston Partners Large Cap Value Fund, Boston Partners Mid Cap Value Fund and Boston Partners All-Cap Value Fund, separately managed portfolios of The RBB Fund, Inc. (the "Fund"), at August 31, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the Standards of the Public Company Accounting Oversight Board (United States). Those standards 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 at August 31, 2004 by correspondence with the custodians and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 29, 2004 70 |ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- SHAREHOLDER TAX INFORMATION (Unaudited) -------------------------------------------------------------------------------- SMALL CAP VALUE FUND II LONG/SHORT EQUITY FUND LARGE CAP VALUE FUND MID CAP VALUE FUND ALL-CAP VALUE FUND Each Fund is required by subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Fund's fiscal year end (August 31, 2004) as to the U.S. federal tax status of distributions received by each Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2004, the following dividends and distributions per share were paid by each of the Funds:
ORDINARY INCOME CAPITAL GAINS ------------------------ ------------------------ INSTITUTIONAL INVESTOR INSTITUTIONAL INVESTOR FUND CLASS CLASS CLASS CLASS ------ ------------- -------- ------------- -------- Boston Partners Small Cap Value Fund II ....... $0.08 $0.08 $0.12 $0.12 Boston Partners Large Cap Value Fund .......... 0.10 0.07 -- -- Boston Partners Mid Cap Value Fund ............ 0.07 0.04 -- -- Boston Partners All-Cap Value Fund ............ 0.07 0.04 -- --
The percentage of total ordinary income dividends qualifying for the corporate dividends received deduction for each Fund is as follows: Boston Partners Small Cap Value Fund II ............. 100% Boston Partners Long/Short Equity Fund .............. N/A Boston Partners Large Cap Value Fund ................ 100% Boston Partners Mid Cap Value Fund .................. 100% Boston Partners All-Cap Value Fund .................. 100% These amounts were reported to shareholders as income in 2003. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2005. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Fund, if any. In general, dividends received by tax exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. ANNUAL REPORT 2004 | 71 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- OTHER INFORMATION (Unaudited) -------------------------------------------------------------------------------- PROXY VOTING Policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities as well as information regarding how the Funds voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling (888) 261-4073 and on the Securities and Exchange Commission's website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULE The Funds will file a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Funds' Forms N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 72 | ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND MANAGEMENT (Unaudited) -------------------------------------------------------------------------------- The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The Statement of Additional Information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (888) 261-4073.
------------------------------------------------------------------------------------------------------------------------------------ TERM OF NUMBER OF POSITION(S) OFFICE PRINCIPAL OCCUPATION(S) DURING PAST PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH 5 YEARS FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND OF TIME OVERSEEN BY HELD BY SERVED 1 DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to Since 1969, Director and Vice Chairman, Comcast 14 Director, Comcast Corporation present Corporation (cable television and Comcast 1500 Market Street, communications); Director, NDS Group PLC Corporation 35th Floor (provider of systems and applications for digital Philadelphia, PA 19102 pay TV). DOB: 7/16/33 ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to Since 2000, Vice President, Fox Chase Cancer 14 None Fox Chase Cancer Center present Center (biomedical research and medical care); 333 Cottman Avenue prior to 2000, Executive Vice President, Fox Philadelphia, PA 19111 Chase Cancer Center. DOB: 12/06/35 ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director 1991 to Since December 2000, Director, Gabelli Partners, 14 None 106 Pierrepont Street present L.P. (an investment partnership); Chief Operating Brooklyn, NY 11201 Officer and member of the Board of Directors of DOB: 5/21/48 Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Manage-ment Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to Since 1974, Chairman, Director and President, 14 Director, Moyco Technologies, Inc. present Moyco Technologies, Inc. (manufacturer of Moyco 200 Commerce Drive precision coated and industrial abrasives). Since Technologies, Montgomeryville, PA 18936 1999, Director, Pennsylvania Business Bank. Inc. DOB: 3/24/34 ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
ANNUAL REPORT 2004 | 73 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND MANAGEMENT (Unaudited) (continued) --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------ TERM OF NUMBER OF POSITION(S) OFFICE PRINCIPAL OCCUPATION(S) DURING PAST PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH 5 YEARS FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND OF TIME OVERSEEN BY HELD BY SERVED 1 DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to Since July 2002, Senior Vice President and prior 14 None Oppenheimer & Company, Inc. present thereto, Executive Vice President of Oppenheimer 200 Park Avenue & Co., Inc., formerly Fahnestock & Co., Inc. (a New York, NY 10166 registered broker-dealer). DOB: 4/16/38 ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to Director of PFPC Inc. from January 1987 to April 14 None 400 Bellevue Parkway present 2002, Chairman and Chief Executive Officer of Wilmington, DE 19809 PFPC Inc. until April 2002, Executive Vice DOB: 9/25/38 President of PNC Bank, National Association from October 1981 to April 2002, Director of PFPC International Ltd. (financial services) from August 1993 to April 2002, Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
74 |ANNUAL REPORT 2004 BOSTON PARTNERS FAMILY OF FUNDS -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- FUND MANAGEMENT (Unaudited) (concluded) --------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------ TERM OF NUMBER OF POSITION(S) OFFICE PRINCIPAL OCCUPATION(S) DURING PAST PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH 5 YEARS FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND OF TIME OVERSEEN BY HELD BY SERVED 1 DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to Certified Public Accountant; Vice Chairman of the N/A N/A 400 Bellevue Parkway and present Board, Fox Chase Cancer Center; Trustee Emeritus, 4th Floor Treasurer and Pennsylvania School for the Deaf; Trustee Wilmington, DE 19809 1988 to Emeritus, Immaculata University; President or DOB: 6/29/24 present Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary Since Since 2000, Vice President and Counsel, PFPC Inc. N/A N/A 301 Bellevue Parkway 2003 (financial services company); Associate, 2nd Floor Stradley, Ronon, Stevens & Young, LLC (law firm) Wilmington, DE 19809 from 1996 to 2000. DOB: 1/27/68 ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since Senior Legal Counsel, PFPC Inc. from 2002 to N/A N/A Vigilant Compliance Compliance 2004 2004; Chief Legal Counsel, Corviant Corporation 186 Dundee Drive, Suite 700 Officer (Investment Adviser, Broker/Dealer and Service Williamstown, NJ 08094 Provider to Investment Advisers and Separate DOB: 12/25/62 Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation and the Company's principal underwriter, PFPC Distributors, Inc. are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
ANNUAL REPORT 2004 | 75 [THIS PAGE INTENTIONALLY LEFT BLANK] [GRAPHIC OMITTED] bp BOSTON PARTNERS ASSET MANAGEMENT, LLC -------------------------------------------- ONE PHILOSOPHY o ONE CULTURE o ONE FOCUS This report is submitted for the general information of the shareholders of each Fund. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in the Funds will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. Current performance may be lower or higher than the performance data provided in the report. UNION BUG HERE INVESTMENT ADVISER --------------------------- Boston Partners Asset Management, LLC 28 State Street Boston, MA 02109 ADMINISTRATOR ----------------------- PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT ----------------------- PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR ----------------------- PFPC Distributors, Inc. 760 Moore Rd. King of Prussia, PA 19406 CUSTODIAN ----------------------- PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------- PricewaterhouseCoopers LLP Two Commerce Square, Suite 1700 2001 Market Street Philadelphia, PA 19103-7042 COUNSEL ---------------------------- Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 ================================================================================ THE SCHNEIDER FUNDS ================================================================================ SCHNEIDER SMALL CAP VALUE FUND SCHNEIDER VALUE FUND ================== ANNUAL REPORT AUGUST 31, 2004 ================== [LOGO OMITTED] S -------------------------------- SCHNEIDER CAPITAL MANAGEMENT THE SCHNEIDER FUNDS PRIVACY NOTICE THE SCHNEIDER FUNDS of The RBB Fund, Inc. (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (888) 520-3277. October 2004 THE SCHNEIDER FUNDS ANNUAL INVESTMENT ADVISER'S REPORT AUGUST 31, 2004 Dear Fellow Shareholder: We are pleased to provide you with the annual report for the Schneider Funds for the fiscal year ended August 31, 2004. INVESTMENT CLIMATE AND OUTLOOK U.S. stocks posted positive returns during the twelve months ending August 31, 2004. The Russell 3000 Index, which represents the broad U.S. equity market, rose 11.3% during the period. Stock prices rose broadly during the first half of the fiscal year before peaking in March 2004 and tailing off during the rest of the period. Investor optimism became muted by evidence that we have entered into a period of both global monetary tightening and slower economic growth as the U.S. shifted from the recovery to normal expansion phase of the current business cycle. Investors also had to consider to what degree the dramatic rise in the price of oil might restrain future global economic activity. SCHNEIDER SMALL CAP VALUE FUND -- INVESTMENT REVIEW AND PORTFOLIO STRATEGY The Small Cap Value Fund generated exceptionally strong results during the year ended August 31, 2004, returning 37.99% versus 19.49% for the Russell 2000 Value Index. Since inception on September 2, 1998, the Fund performed notably well in delivering a 29.42% annualized return versus 13.13% for the benchmark index. Timely investments in economically-sensitive industrial stocks played a major part in the fiscal year results. Favorable stock selection and an overweight position in Materials & Processing stocks had a major impact on Fund returns. Investments in select agricultural and industrial commodities such as fertilizer, iron ore, steel, uranium and copper experienced significant price appreciation as rigorous cost cuts, industry consolidation, and limited capacity positioned these companies for an earnings rebound as demand recovered from depressed levels. We maintain an overweight position in the sector. Investments in select areas of technology, real estate and energy special situations also contributed to the outperformance of the Fund. During the period we significantly trimmed our successful investments in semiconductor-related companies. The stocks had appreciated substantially and approached our price targets. We established our positions during a period when the industry was under severe stress, and benefited from the cyclical upturn in capacity utilization, orders and margins. SCHNEIDER VALUE FUND -- INVESTMENT REVIEW AND PORTFOLIO STRATEGY The Value Fund delivered strong performance during the year ended August 31, 2004, returning 28.21% versus 17.52% for the Russell 1000 Value Index. Since inception on September 30, 2002, the Fund produced exceptionally favorable results of 39.88% relative to the 22.51% annualized return for the benchmark index. Favorable stock selection in several industries and special situations factored into the strong performance for the fiscal year. The biggest individual contributors were J.C. Penney and AT&T Wireless Services. 2 THE SCHNEIDER FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2004 J.C. Penney rose 80% as dramatically improved fundamentals confirmed the successful turnaround of the department store unit. Senior management has raised operating margins dramatically, and profits have improved every year since Allen Questrom took the helm in September 2000. AT&T Wireless jumped 70% during the fiscal year. The company put itself up for sale in January 2004, and in February agreed to an offer from Cingular to pay a total of $41 billion for the wireless carrier. We made our investment in 2003 in anticipation of a favorable upturn in industry fundamentals. The acquisition was icing on the cake. Performance in the Materials & Processing sector was boosted by key holdings in select agricultural and industrial commodities such as fertilizer, steel, and copper. Rigorous cost cuts, industry consolidation, and limited capacity positioned these companies for an earnings rebound as demand recovered from depressed levels. Our timely investments in several late-cycle capital goods companies also performed strongly as investors became more confident in the durability of the economic expansion. Tyco International and Boeing were significant contributors. During the period we significantly trimmed our successful investments in semiconductor-related companies. The stocks had appreciated substantially and approached our price targets. We made our initial investments during a period when the industry was under severe stress, and benefited from the eventual upturn in capacity utilization, orders and profitability. We appreciate your support as we focus daily on uncovering promising new investment ideas in the belief that that the broader market is often slow to react to positive change, particularly where out-of-favor stocks are concerned. We seek to purchase these stocks before they experience a rebound in earnings and come to the attention of other investors. /s/ Arnold C. Schneider III Arnold C. Schneider III, CFA Portfolio Manager Schneider Capital Management ----------------- Past performance is not a guarantee of future performance. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. This material must be preceded or accompanied by a current prospectus. Investing in small companies can involve more volatility, less liquidity, and less publicly available information than investing in large companies. 3 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2004 Comparison of Change in Value of $10,000 Investment in Schneider Small Cap Value Fund (1)(2) vs. Russell 2000 Value Index [CHART OMITTED - EDGAR INTERPRETATION OF DATA IS AS FOLLOWS] Schneider Small Cap Russell 2000 Value Fund Value Index 09/02/98 10000.00 10000.00 09/30/98 10000.00 10362.46 10/31/98 11930.00 10670.14 11/30/98 12410.00 10958.97 12/31/98 12470.71 11302.59 01/31/99 13785.55 11046.05 02/28/99 12531.39 10291.88 03/31/99 13006.76 10206.99 04/30/99 15221.75 11138.79 05/31/99 16233.16 11481.15 06/30/99 18043.59 11896.87 07/31/99 18731.35 11614.52 08/31/99 18245.87 11189.98 09/30/99 17517.66 10966.27 10/31/99 16759.10 10746.81 11/30/99 17456.97 10802.52 12/31/99 18340.82 11134.43 01/31/00 17832.99 10843.25 02/29/00 18069.19 11505.98 03/31/00 19391.91 11559.95 04/30/00 19391.91 11628.35 05/31/00 19769.82 11450.93 06/30/00 19840.68 11785.51 07/31/00 19734.39 12178.19 08/31/00 20750.05 12722.64 09/30/00 20844.53 12650.54 10/31/00 20490.23 12605.62 11/30/00 19415.52 12349.02 12/31/00 21494.55 13675.90 01/31/01 24177.81 14053.39 02/28/01 23127.22 14034.00 03/31/01 22034.04 13808.88 04/30/01 23325.98 14448.03 05/31/01 24546.94 14819.59 06/30/01 25100.63 15415.83 07/31/01 24873.48 15070.14 08/31/01 24887.67 15017.92 09/30/01 20855.67 13360.11 10/31/01 21863.67 13709.06 11/30/01 23950.66 14694.12 12/31/01 25657.04 15593.79 01/31/02 25477.20 15800.78 02/28/02 25447.23 15897.00 03/31/02 28414.57 17087.52 04/30/02 29388.70 17689.99 05/31/02 29088.97 17103.97 06/30/02 27785.14 16725.28 07/31/02 22824.58 14240.28 08/31/02 22210.13 14177.00 9/30/02 19767.30 13164.30 10/31/02 19887.20 13362.30 11/30/02 23484.00 14428.60 12/31/02 21848.00 13812.20 1/31/03 20911.90 13423.30 2/28/03 20292.80 12972.05 3/31/03 20126.74 13110.59 4/30/03 23010.62 14355.89 5/31/03 26664.53 15821.69 6/30/03 27313.78 16089.78 7/31/03 30469.44 16892.13 8/31/03 34002.57 17533.79 9/30/03 33202.00 17333.00 10/31/03 38366.00 18746.00 11/30/03 42292.00 19466.00 12/31/03 45017.00 20170.00 1/31/04 46405.00 20867.00 2/29/04 47518.00 21271.00 3/31/04 47743.00 21565.00 4/30/04 46114.00 20450.00 5/31/04 46388.00 20697.00 6/30/04 48985.00 21748.00 7/31/04 47340.00 20748.00 8/31/04 46921.00 20952.00 Past performance is not predictive of future results. For Period Ended August 31, 2004 Average Annual Total Return
VALUE 1 YEAR 3 YEAR 5 YEAR SINCE INCEPTION (3) ------- ------- ------- ------- ------------------- Schneider Small Cap Value $46,921 37.99% 23.54% 20.79% 29.42% Russell 2000 Value Index $20,952 19.49% 11.74% 13.36% 13.13%
The Fund's annualized total return since inception is based on an increase in net asset value from $10.00 per share on September 2, 1998 (inception) to $29.09 per share on August 31, 2004, adjusted for dividends and distributions totaling $8.32 per share paid from net investment income and realized gains. ----------------- (1) The chart assumes a hypothetical $10,000 initial investment in the Fund made on September 2, 1998 (inception) and reflects Fund expenses. Investors should note that the Fund is a professionally managed mutual fund while the Russell 2000 Value Index is unmanaged, does not incur sales charges and/or expenses and is not available for investment. (2) Schneider Capital Management waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, as necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) Annualized return for the period September 2, 1998 (inception) through August 31, 2004. 4 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONCLUDED) AUGUST 31, 2004 Comparison of Change in Value of $10,000 Investment in Schneider Value Fund (1)(2) vs. Russell 1000 Value Index Schneider Value Russell 1000 Value Index 9/30/02 10000.00 10000.00 10/31/02 10660.00 10740.90 11/30/02 11950.00 11417.50 12/31/02 11237.20 10921.60 1/31/03 10635.80 10657.30 2/28/03 10565.60 10373.10 3/31/03 10796.20 10390.50 4/30/03 11638.20 11304.90 5/31/03 13041.60 12034.70 6/30/03 13252.10 12185.30 7/31/03 13983.90 12366.80 8/31/03 14846.00 12559.40 9/30/03 14495.00 12437.00 10/31/03 15628.00 13198.00 11/30/03 16430.00 13377.00 12/31/03 17738.00 14201.00 1/31/04 18396.00 14451.00 2/29/04 18929.00 14761.00 3/31/04 18950.00 14632.00 4/30/04 18438.00 14274.00 5/31/04 19044.00 14420.00 6/30/04 19775.00 14760.00 7/31/04 19023.00 14553.00 8/31/04 19034.00 14760.00 Past performance is not predictive of future results. For Period Ended August 31, 2004 Average Annual Total Return VALUE 1 YEAR SINCE INCEPTION (3) ------- ------- ------------------- Schneider Value $19,034 28.21% 39.88% Russell 1000 Value Index $14,760 17.52% 22.51% The Fund's aggregate total return since inception is based on an increase in net asset value from $10.00 per share on September 30, 2002 (inception) to $18.22 per share on August 31, 2004, adjusted for dividends and distributions totaling $0.71 per share paid from net investment income and realized gains. --------------- (1) The chart assumes a hypothetical $10,000 initial investment in the Fund made on September 30, 2002 (inception) and reflects Fund expenses. Investors should note that the Fund is a professionally managed mutual fund while the Russell 1000 Value Index is unmanaged, does not incur sales charges and/or expenses and is not available for investment. (2) Schneider Capital Management waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, as necessary, to maintain the expense limitation, as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no assumption of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) Annualized return for the period September 30, 2002 (inception) through August 31, 2004. 5 SCHNEIDER CAPITAL MANAGEMENT FUND EXPENSE EXAMPLES As a shareholder of the Fund(s), you incur two types of costs: (1) transaction costs, redemption fees; and (2) ongoing costs, including management fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. 6 SCHNEIDER CAPITAL MANAGEMENT FUND EXPENSE EXAMPLES (CONCLUDED)
SCHNEIDER SMALL CAP VALUE FUND ---------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2004 AUGUST 31, 2004 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $ 987.40 $5.50 Hypothetical (5% return before expenses) 1,000.00 1,019.50 5.60 SCHNEIDER VALUE FUND ---------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2004 AUGUST 31, 2004 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,005.50 $4.28 Hypothetical (5% return before expenses) 1,000.00 1,020.77 4.33 * Expenses are equal to an annualized expense ratio of 1.10% for the Schneider Small Cap Value Fund and 0.85% for the Schneider Value Fund, which includes waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period.
7 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE % OF NET ASSETS VALUE --------- ----------- Common Stock: Aerospace & Defense ......................... 4.0% $ 1,938,695 Agriculture ................................. 1.6% 792,626 Aircraft Parts & Auxiliary Equipment, Nec ........................... 2.3% 1,131,302 Aluminum .................................... 0.4% 194,291 Automobile Parts & Equipment ................ 3.0% 1,480,948 Banks ....................................... 0.4% 203,676 Biotech ..................................... 0.2% 82,389 Chemicals ................................... 5.5% 2,690,347 Communications & Media ...................... 0.1% 60,560 Computer Components ......................... 0.3% 123,984 Computer Software ........................... 0.6% 285,572 Construction ................................ 1.3% 660,103 Diversified ................................. 1.2% 573,202 Electric Products ........................... 0.3% 127,092 Electrical Equipment ........................ 4.1% 2,004,774 Electrical Work ............................. 1.2% 568,278 Electronic Components & Accessories ............................ 0.3% 145,302 Electronics ................................. 0.6% 283,764 Energy & Utilities .......................... 5.2% 2,528,013 Entertainment ............................... 0.4% 217,800 Fertilizers ................................. 0.7% 324,417 Finance ..................................... 0.4% 193,881 Food ........................................ 0.9% 440,432 Footwear .................................... 0.4% 182,899 General Industrial Machinery & Equipment .............................. 1.1% 556,742 Health Care Diversified ..................... 0.2% 106,003 Homebuilding ................................ 2.8% 1,359,515 Hotels & Restaurants ........................ 1.1% 557,179 Industrial Goods & Materials ................ 0.0% 21,134 Insurance ................................... 1.8% 887,755 Machinery ................................... 1.9% 953,151 Manufactured Housing ........................ 0.9% 465,466 Manufacturing ............................... 4.2% 2,076,110 Metals & Mining ............................. 2.6% 1,277,726 Office Furnishings .......................... 1.3% 625,785 Oil & Gas Field Services .................... 1.9% 911,020 Oil Refining ................................ 0.8% 378,051 Paper ....................................... 1.1% 550,312 Paper & Forestry Products ................... 1.6% 787,668 % OF NET ASSETS VALUE --------- ----------- Racetracks .................................. 0.5% $ 227,885 Real Estate ................................. 6.9% 3,368,974 Real Estate Investment Trust ................ 6.5% 3,163,858 Restaurants ................................. 1.2% 610,505 Retail ...................................... 1.4% 665,825 Retail - Specialty Stores ................... 0.3% 130,008 Retail Merchandising ........................ 1.0% 482,049 Semiconductor Equipment ..................... 5.2% 2,524,943 Semiconductors & Related .................... 2.2% 1,094,546 Telecommunications & Equipment .............................. 0.8% 378,679 Transportation .............................. 2.8% 1,355,880 Truck Trailers .............................. 0.9% 423,154 Utilities ................................... 1.7% 839,575 Canadian Common Stock .......................... 1.4% 663,821 Preferred Stocks ............................... 0.3% 161,642 Corporate Bonds ................................ 1.7% 852,829 Exchange Traded Funds .......................... 2.5% 1,195,920 Short-Term Investments ......................... 3.7% 1,786,146 Other Assets in Excess Of Liabilities ....................... 0.3% 170,330 ----- ----------- NET ASSETS -- 100.% ............................ 100.0% $48,844,533 ===== =========== The accompanying notes are an integral part of the financial statements. 8 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE % OF NET ASSETS VALUE --------- ----------- Common Stock: Aerospace & Defense ......................... 6.2% $ 2,368,177 Agriculture ................................. 0.9% 331,377 Automobile Parts & Equipment .............................. 1.5% 573,562 Banks ....................................... 3.5% 1,339,993 Broadcasting & Cable Television ............................... 4.4% 1,686,016 Chemicals ................................... 3.3% 1,279,583 Chemicals - Diversified ..................... 1.0% 394,440 Chemicals - Specialty ....................... 1.1% 414,187 Computers, Software & Servicing .............................. 3.3% 1,271,001 Electric & Other Services ................... 1.8% 699,830 Electronic Components & Accessories ............................ 5.1% 1,962,540 Electronics ................................. 0.6% 229,087 Energy & Utilities .......................... 2.9% 1,102,572 Financial Services .......................... 2.7% 1,041,054 Food ........................................ 2.8% 1,065,217 Food & Beverage ............................. 1.3% 514,642 Home Furnishings & Housewares ............................. 1.4% 525,870 Hotels & Restaurants ........................ 3.6% 1,398,930 Industrial Goods & Materials .............................. 4.9% 1,884,681 Insurance ................................... 2.2% 840,941 Leisure & Entertainment ..................... 2.6% 1,014,249 Life & Health Insurance ..................... 1.6% 603,482 Manufacturing ............................... 3.6% 1,367,981 Medical & Medical Services .................. 1.7% 638,486 Metals ...................................... 1.6% 630,161 Metals & Mining ............................. 1.2% 470,036 Oil Refining ................................ 1.7% 648,806 Paper & Forestry Products ................... 3.2% 1,239,069 Power, Distribution & Specialty Transformers ............................. 2.0% 772,008 Real Estate ................................. 3.1% 1,206,013 Real Estate Investment Trust ................ 1.4% 519,824 Retail - Consumer Electronics Stores ................................... 0.4% 165,432 Retail - Department Stores .................. 3.6% 1,398,204 Semiconductors & Related .................... 0.6% 231,795 % OF NET ASSETS VALUE --------- ----------- Telecommunications & Equipment .............................. 2.7% $ 1,055,124 Transportation .............................. 3.9% 1,483,543 Utilities ................................... 0.8% 298,782 Wholesale - Drug Distribution ............... 1.4% 520,713 Canadian Common Stock .......................... 0.8% 315,108 Corporate Bonds ................................ 0.2% 89,537 Exchange Traded Funds .......................... 3.0% 1,139,669 Short-Term Investments ......................... 5.0% 1,899,935 Liabilities in Excess of Other Assets ............................. (0.6)% (226,015) ----- ----------- NET ASSETS -- 100.% ............................ 100.0% $38,405,642 ===== =========== The accompanying notes are an integral part of the financial statements. 9 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 % OF NET ASSETS VALUE --------- ----------- DOMESTIC COMMON STOCKS -- 90.1% AEROSPACE & DEFENSE -- 4.0% AAR CORP.* ..................................... 35,675 $ 381,722 BE Aerospace, Inc.* ............................ 127,825 1,354,945 CAE, Inc. ...................................... 46,125 202,028 ----------- 1,938,695 ----------- AGRICULTURE -- 1.6% Corn Products International, Inc. .............. 17,175 792,626 ----------- AIRCRAFT PARTS & AUXILIARY EQUIPMENT, NEC -- 2.3% HEICO Corp. .................................... 21,887 265,927 Triumph Group, Inc.* ........................... 26,875 865,375 ----------- 1,131,302 ----------- ALUMINUM -- 0.4% Commonwealth Industries, Inc.* ................. 23,075 194,291 ----------- AUTOMOBILE PARTS & EQUIPMENT -- 3.0% Exide Technologies* ............................ 26,475 419,894 Visteon Corp. .................................. 113,725 1,061,054 ----------- 1,480,948 ----------- BANKS -- 0.4% Integra Bank Corp. ............................. 9,950 203,676 ----------- BIOTECH -- 0.2% Telik, Inc.* ................................... 4,350 82,389 ----------- CHEMICALS -- 5.5% Airgas, Inc. ................................... 5,550 123,487 IMC Global, Inc. ............................... 66,375 1,058,017 Millennium Chemicals, Inc.* .................... 44,600 831,790 PolyOne Corp.* ................................. 41,775 296,603 Sensient Technologies Corp. .................... 3,200 67,200 Westlake Chemical Corp.* ....................... 17,900 313,250 ----------- 2,690,347 ----------- COMMUNICATIONS & MEDIA -- 0.1% CIENA Corp.* ................................... 33,275 60,560 ----------- COMPUTER COMPONENTS -- 0.3% Lexar Media, Inc.* ............................. 21,600 123,984 ----------- % OF NET ASSETS VALUE --------- ----------- COMPUTER SOFTWARE -- 0.6% MSC. Software Corp.* ........................... 32,575 $ 237,472 NetIQ Corp.* ................................... 5,000 48,100 ----------- 285,572 ----------- CONSTRUCTION -- 1.3% Shaw Group, Inc. (The)* ........................ 64,150 660,103 ----------- DIVERSIFIED -- 1.2% Acuity Brands, Inc. ............................ 19,375 445,819 Viad Corp. ..................................... 5,350 127,383 ----------- 573,202 ----------- ELECTRIC PRODUCTS -- 0.3% Encore Wire Corp.* ............................. 10,200 127,092 ----------- ELECTRICAL EQUIPMENT -- 4.1% EMCOR Group, Inc.* ............................. 23,525 955,115 General Cable Corp.* ........................... 45,750 481,747 GrafTech International, Ltd.* .................. 53,275 567,912 ----------- 2,004,774 ----------- ELECTRICAL WORK -- 1.2% Integrated Electrical Services, Inc.* .......... 117,900 568,278 ----------- ELECTRONIC COMPONENTS & ACCESSORIES-- 0.3% Avnet, Inc.* ................................... 9,150 145,302 ----------- ELECTRONICS -- 0.6% Curtiss-Wright Corp. ........................... 4,200 229,530 Plexus Corp. ................................... 4,600 54,234 ----------- 283,764 ----------- ENERGY & UTILITIES -- 5.2% Allegheny Energy, Inc.* ........................ 40,675 597,516 Reliant Resources, Inc.* ....................... 193,825 1,930,497 ----------- 2,528,013 ----------- ENTERTAINMENT -- 0.4% Gaylord Entertainment Co.* ..................... 7,500 217,800 ----------- FERTILIZERS -- 0.7% LESCO, Inc. .................................... 25,850 324,417 ----------- The accompanying notes are an integral part of the financial statements. 10 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 SHARES VALUE ------- ----------- FINANCE -- 0.4% AmeriCredit Corp.* ............................. 2,700 $ 56,457 Metris Companies, Inc. ......................... 16,800 137,424 ----------- 193,881 ----------- FOOD -- 0.9% Interstate Bakeries Corp. ...................... 38,850 200,855 Tate & Lyle P.L.C. -- ADR ...................... 9,300 239,577 ----------- 440,432 ----------- FOOTWEAR -- 0.4% Barry (R.G.) Corp. ............................. 71,725 182,899 ----------- GENERAL INDUSTRIAL MACHINERY & EQUIPMENT -- 1.1% Manitowoc Company, Inc. (The) .................. 9,000 298,440 Metso Corp. .................................... 19,900 258,302 ----------- 556,742 ----------- HEALTH CARE DIVERSIFIED -- 0.2% NeighborCare, Inc.* ............................ 4,175 106,003 ----------- HOMEBUILDING -- 2.8% Champion Enterprises, Inc.* .................... 141,175 1,359,515 ----------- HOTELS & RESTAURANTS -- 1.1% Interstate Hotels & Resorts, Inc.* ............. 95,175 397,831 Triarc Companies, Inc. ......................... 14,700 159,348 ----------- 557,179 ----------- INDUSTRIAL GOODS & MATERIALS -- 0.0% Albany International Corp., Class A ............ 725 21,134 ----------- INSURANCE -- 1.8% Assured Guaranty, Ltd. ......................... 5,450 87,364 NCRIC Group, Inc.* ............................. 14,798 125,191 ProAssurance Corp.* ............................ 20,000 675,200 ----------- 887,755 ----------- MACHINERY -- 1.9% Flowserve Corp.* ............................... 22,650 519,591 Terex Corp.* ................................... 12,000 433,560 ----------- 953,151 ----------- SHARES VALUE ------- ----------- MANUFACTURED HOUSING -- 0.9% Fleetwood Enterprises, Inc.* ................... 36,450 $ 465,466 ----------- MANUFACTURING -- 4.2% Navistar International Corp.* .................. 23,100 826,518 Trinity Industries, Inc. ....................... 25,289 701,770 York International Corp. ....................... 16,825 547,822 ----------- 2,076,110 ----------- METALS & MINING -- 2.6% Brush Engineered Materials, Inc.* .............. 45,500 932,295 Cleveland-Cliffs, Inc.* ........................ 5,175 345,431 ----------- 1,277,726 ----------- OFFICE FURNISHINGS -- 1.3% Interface, Inc.* ............................... 87,645 625,785 ----------- OIL & GAS FIELD SERVICES -- 1.9% Global Industries, Ltd.* ....................... 59,200 316,720 Willbros Group, Inc.* .......................... 42,450 594,300 ----------- 911,020 ----------- OIL REFINING -- 0.8% Premcor, Inc.* ................................. 11,275 378,051 ----------- PAPER -- 1.1% Glatfelter ..................................... 43,400 550,312 ----------- PAPER & FORESTRY PRODUCTS -- 1.6% Longview Fibre Co. ............................. 42,200 522,436 Votorantim Celulose e Papel S.A. -- ADR ................................. 7,550 265,232 ----------- 787,668 ----------- RACETRACKS -- 0.5% Magna Entertainment Corp.* ..................... 38,300 227,885 ----------- REAL ESTATE -- 6.9% American Real Estate Partners, L.P.* ........... 59,575 1,295,756 Jones Lang LaSalle, Inc.* ...................... 36,550 1,193,358 MI Developments, Inc.* ......................... 37,925 879,860 ----------- 3,368,974 ----------- The accompanying notes are an integral part of the financial statements. 11 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 SHARES VALUE ------- ----------- REAL ESTATE INVESTMENT TRUST -- 6.5% Boykin Lodging Co. ............................. 163,675 $ 1,369,960 CRT Properties, Inc. ........................... 38,075 849,834 MeriStar Hospitality Corp.* .................... 163,900 944,064 ----------- 3,163,858 ----------- RESTAURANTS -- 1.2% Triarc Companies, Inc. ......................... 55,050 610,505 ----------- RETAIL -- 1.4% MarineMax, Inc. ................................ 17,350 340,060 Warnaco Group, Inc. (The)* ..................... 16,175 325,765 ----------- 665,825 ----------- RETAIL - SPECIALTY STORES -- 0.3% Linens 'n Things, Inc.* ........................ 1,475 36,993 Pep Boys-Manny, Moe & Jack (The) ............... 5,850 93,015 ----------- 130,008 ----------- RETAIL MERCHANDISING -- 1.0% Dillard's, Inc. ................................ 8,575 162,925 Great Atlantic & Pacific Tea Company, Inc. (The) .................................. 49,400 319,124 ----------- 482,049 ----------- SEMICONDUCTOR EQUIPMENT -- 5.2% Alliance Semiconductor Corp.* .................. 162,350 620,177 Axcelis Technologies, Inc.* .................... 16,100 125,580 BE Semiconductor Industries N.V.* .............. 345,743 1,711,428 LTX Corp.* ..................................... 5,300 27,242 Ultratech, Inc.* ............................... 2,545 40,516 ----------- 2,524,943 ----------- SEMICONDUCTORS & RELATED -- 2.2% Amkor Technology, Inc.* ........................ 21,800 82,840 ASM International N.V.* ........................ 53,075 730,312 ZiLOG, Inc.* ................................... 36,450 281,394 ----------- 1,094,546 ----------- SHARES VALUE ------- ----------- TELECOMMUNICATIONS & EQUIPMENT -- 0.8% Boston Communications Group, Inc.* ............. 15,800 $ 124,030 Triton PCS Holdings, Inc.* ..................... 21,575 52,859 UnitedGlobalCom, Inc.* ......................... 29,675 201,790 ----------- 378,679 ----------- TRANSPORTATION -- 2.8% Alexander & Baldwin, Inc. ...................... 3,875 119,311 Covenant Transport, Inc., Class A* ............. 13,600 265,200 Stolt-Nielsen S.A. -- ADR ...................... 39,375 631,575 U.S. Xpress Enterprises, Inc., Class A* ........ 9,125 151,749 Werner Enterprises, Inc. ....................... 10,612 188,045 ----------- 1,355,880 ----------- TRUCK TRAILERS -- 0.9% Wabash National Corp.* ......................... 15,950 423,154 ----------- UTILITIES -- 1.7% Sierra Pacific Resources* ...................... 97,625 839,575 ----------- TOTAL DOMESTIC COMMON STOCKS (Cost $35,055,792) ........................ 44,013,845 ----------- CANADIAN COMMON STOCK -- 1.4% Cameco Corp. ................................... 10,200 663,821 ----------- TOTAL CANADIAN COMMON STOCK (Cost $207,228) ........................... 663,821 ----------- PREFERRED STOCKS -- 0.3% UTILITIES -- 0.3% Sierra Pacific Resources 9.00% ................. 4,150 161,642 ----------- TOTAL PREFERRED STOCKS (Cost $139,900) ........................... 161,642 ----------- The accompanying notes are an integral part of the financial statements. 12 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2004 PAR VALUE ------- ----------- CORPORATE BONDS -- 1.7% Mercer International, Inc. SR SB CV 144A 8.50%, 10/15/10 ............................. $500 $ 667,500 Northwest Airlines Corp. (Caa1, CCC+) 6.63%, 05/15/23 ............................. 219 185,329 ----------- TOTAL CORPORATE BONDS (Cost $717,455) ........................... 852,829 ----------- SHARES ---------- EXCHANGE TRADED FUNDS -- 2.5% FINANCE -- 2.5% iShares Russell 2000 Value Index Fund .......... 7,200 1,195,920 ----------- TOTAL EXCHANGE TRADED FUNDS (Cost $1,132,957) ......................... 1,195,920 ----------- SHORT-TERM INVESTMENTS -- 3.7% Galaxy Money Market Fund ....................... 1,786,146 1,786,146 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $1,786,146) ......................... 1,786,146 ----------- TOTAL INVESTMENTS -- 99.7% (Cost $39,039,478) .......................... 48,674,203 ----------- ASSETS IN EXCESS OF OTHER LIABILITIES -- 0.3% ................... 170,330 ----------- NET ASSETS -- 100.0% ........................... $48,844,533 =========== ------------------ * Non-income producing. 144A - Security was purchased pursuant to Rule 144A under Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. As of August 31, 2004, these securities amounted to 1.37% of net assets. ADR - American Depository Receipt. The Moody's Investor Service, Inc. & Standard & Poor's Rating Group ratings indicated are the most recent ratings available at August 31, 2004 and are unaudited. The accompanying notes are an integral part of the financial statements. 13 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 SHARES VALUE ---------- ----------- DOMESTIC COMMON STOCKS -- 91.6% AEROSPACE & DEFENSE -- 6.2% Boeing Co. (The) ............................... 45,350 $ 2,368,177 ----------- AGRICULTURE -- 0.9% Archer-Daniels-Midland Co. ..................... 20,750 331,377 ----------- AUTOMOBILE PARTS & EQUIPMENT -- 1.5% Visteon Corp. .................................. 61,475 573,562 ----------- BANKS -- 3.5% Bank of America Corp. .......................... 11,136 500,897 J.P. Morgan Chase & Co. ........................ 21,200 839,096 ----------- 1,339,993 ----------- BROADCASTING & CABLE TELEVISION -- 4.4% Liberty Media Corp.* ........................... 115,095 1,025,496 Liberty Media International, Inc., Class A* .................................... 19,542 660,520 ----------- 1,686,016 ----------- CHEMICALS -- 3.3% IMC Global, Inc. ............................... 80,275 1,279,583 ----------- CHEMICALS - DIVERSIFIED -- 1.0% Bayer AG -- ADR ................................ 15,200 394,440 ----------- CHEMICALS - SPECIALTY -- 1.1% Dow Chemical Co. (The) ......................... 9,675 414,187 ----------- COMPUTERS, SOFTWARE & SERVICING -- 3.3% BearingPoint, Inc.* ............................ 56,175 453,332 Electronic Data Systems Corp. .................. 31,150 598,703 Ingram Micro, Inc., Class A* ................... 14,775 218,966 ----------- 1,271,001 ----------- ELECTRIC & OTHER SERVICES -- 1.8% PG&E Corp.* .................................... 23,975 699,830 ----------- ELECTRONIC COMPONENTS & ACCESSORIES -- 5.1% Avnet, Inc.* ................................... 39,075 620,511 Micron Technology, Inc.* ....................... 21,200 244,012 Sanmina-SCI Corp.* ............................. 149,000 1,031,080 Vishay Intertechnology, Inc.* .................. 5,250 66,937 ----------- 1,962,540 ----------- SHARES VALUE ---------- ----------- ELECTRONICS -- 0.6% Agilent Technologies, Inc.* .................... 11,175 $ 229,087 ----------- ENERGY & UTILITIES -- 2.9% Reliant Resources, Inc.* ....................... 110,700 1,102,572 ----------- FINANCIAL SERVICES -- 2.7% CIT Group, Inc. ................................ 15,475 553,076 PMI Group, Inc. (The) .......................... 11,750 487,978 ----------- 1,041,054 ----------- FOOD -- 2.8% Tate & Lyle P.L.C. -- ADR ...................... 41,350 1,065,217 ----------- FOOD & BEVERAGE -- 1.3% Smithfield Foods, Inc.* ........................ 20,025 514,642 ----------- HOME FURNISHINGS & HOUSEWARES -- 1.4% Newell Rubbermaid, Inc. ........................ 24,425 525,870 ----------- HOTELS & RESTAURANTS -- 3.6% Starwood Hotels & Resorts Worldwide, Inc. ............................. 31,650 1,398,930 ----------- INDUSTRIAL GOODS & MATERIALS -- 4.9% Tyco International, Ltd. ....................... 60,175 1,884,681 ----------- INSURANCE -- 2.2% Aon Corp. ...................................... 16,975 440,501 Loews Corp. .................................... 7,050 400,440 ----------- 840,941 ----------- LEISURE & ENTERTAINMENT -- 2.6% Carnival Corp. ................................. 22,150 1,014,249 ----------- LIFE & HEALTH INSURANCE -- 1.6% Genworth Financial, Inc., Class A* ............. 26,550 603,482 ----------- MANUFACTURING -- 3.6% Brunswick Corp. ................................ 10,725 421,600 Navistar International Corp.* .................. 26,450 946,381 ----------- 1,367,981 ----------- MEDICAL & MEDICAL SERVICES -- 1.7% Tenet Healthcare Corp.* ........................ 61,275 638,486 ----------- The accompanying notes are an integral part of the financial statements. 14 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 SHARES VALUE ---------- ----------- METALS -- 1.6% Alcan, Inc. .................................... 14,550 $ 630,161 ----------- METALS & MINING -- 1.2% Freeport-McMoRan Copper & Gold, Inc., Class B ............................... 12,491 470,036 ----------- OIL REFINING -- 1.7% Premcor, Inc.* ................................. 19,350 648,806 ----------- PAPER & FORESTRY PRODUCTS -- 3.2% Abitibi-Consolidated, Inc. ..................... 55,225 326,932 Domtar, Inc. ................................... 36,250 437,900 International Paper Co. ........................ 11,850 474,237 ----------- 1,239,069 ----------- POWER, DISTRIBUTION & SPECIALTY TRANSFORMERS -- 2.0% NRG Energy, Inc.* .............................. 28,227 772,008 ----------- REAL ESTATE -- 3.1% CB Richard Ellis Group, Inc., Class A* ......... 25,175 490,661 St. Joe Co. (The) .............................. 14,780 715,352 ----------- 1,206,013 ----------- REAL ESTATE INVESTMENT TRUST -- 1.4% Crescent Real Estate Equities Co., REIT ........................................ 32,550 519,824 ----------- RETAIL - CONSUMER ELECTRONICS STORES -- 0.4% Circuit City Stores, Inc. ...................... 12,755 165,432 ----------- RETAIL - DEPARTMENT STORES -- 3.6% J.C. Penney Co., Inc. .......................... 24,350 933,092 Kohl's Corp.* .................................. 9,400 465,112 ----------- 1,398,204 ----------- SEMICONDUCTORS & RELATED -- 0.6% ON Semiconductor Corp.* ........................ 25,850 77,033 Teradyne, Inc.* ................................ 12,025 154,762 ----------- 231,795 ----------- SHARES VALUE ---------- ----------- TELECOMMUNICATIONS & EQUIPMENT -- 2.7% AT&T Wireless Services, Inc.* .................. 31,725 $ 463,819 Nextel Communications, Inc.* ................... 5,550 128,705 Telephone & Data Systems, Inc. ................. 6,000 462,600 ----------- 1,055,124 ----------- TRANSPORTATION -- 3.9% CSX Corp. ...................................... 27,375 864,502 Swift Transportation Co.* ...................... 12,425 225,887 Werner Enterprises, Inc. ....................... 22,187 393,154 ----------- 1,483,543 ----------- UTILITIES -- 0.8% First Energy Corp. ............................. 7,425 298,782 ----------- WHOLESALE - DRUG DISTRIBUTION -- 1.4% AmerisourceBergen Corp. ........................ 9,625 520,713 ----------- TOTAL DOMESTIC COMMON STOCKS (Cost $30,667,466) ........................ 35,187,408 ----------- CANADIAN COMMON STOCK -- 0.8% Bombardier, Inc., Class B ...................... 137,025 315,108 ----------- TOTAL CANADIAN COMMON STOCK (Cost $452,889) ........................... 315,108 ----------- PAR (000) --------- CORPORATE BONDS -- 0.2% Delta Air Lines, Inc. (Ca, CC) 8.00%, 06/03/23 ............................. $247 89,537 ----------- TOTAL CORPORATE BONDS (Cost $180,068) ........................... 89,537 ----------- The accompanying notes are an integral part of the financial statements. 15 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2004 SHARES VALUE ---------- ----------- EXCHANGE TRADED FUNDS -- 3.0% FINANCE -- 3.0% iShares Russell 1000 Value Index Fund ........................................ 18,985 $ 1,139,669 ----------- TOTAL EXCHANGE TRADED FUNDS (Cost $1,113,283) ......................... 1,139,669 ----------- SHORT-TERM INVESTMENTS -- 5.0% Galaxy Money Market Fund ....................... 1,899,935 1,899,935 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $1,899,935) ......................... 1,899,935 ----------- TOTAL INVESTMENTS -- 100.6% (Cost $34,313,641) .......................... 38,631,657 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.6)% ...................... (226,015) ----------- NET ASSETS -- 100.0% ........................... $38,405,642 =========== ------------------ *Non-income producing. ADR - American Depository Receipt. REIT - Real Estate Investment Trust. The Moody's Investor Service, Inc. & Standard & Poor's Rating Group ratings indicated are the most recent ratings available at August 31, 2004 and are unaudited. The accompanying notes are an integral part of the financial statements. 16 THE SCHNEIDER FUNDS STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2004
SCHNEIDER SCHNEIDER SMALL CAP VALUE FUND VALUE FUND -------------------- ----------- ASSETS Investments, at value (cost -- $39,039,478 and $34,313,641, respectively) ..... $48,674,203 $38,631,657 Receivable for investments sold ............................................... 282,586 251,784 Receivable for fund shares sold ............................................... -- 59,000 Dividends and interest receivable ............................................. 34,549 44,573 Prepaid expenses and other assets ............................................. 14,693 15,061 ----------- ----------- Total Assets ................................................................ 49,006,031 39,002,075 ----------- ----------- LIABILITIES Payable for investments purchased ............................................. 86,320 551,859 Payable to Investment Adviser ................................................. 19,826 4,716 Payable for fund shares redeemed .............................................. 3,985 -- Accrued expenses payable and other liabilities ................................ 51,367 39,858 ----------- ----------- Total Liabilities ........................................................... 161,498 596,433 ----------- ----------- NET ASSETS Capital stock, $0.001 par value ............................................... 1,679 2,108 Additional Paid-in capital .................................................... 22,426,485 32,436,154 Undistributed net investment income ........................................... 21 69,050 Accumulated net realized gain from investments and foreign exchange transactions, if any ................................... 16,781,623 1,580,314 Net unrealized appreciation on investments and foreign exchange transactions, if any ....................................... 9,634,725 4,318,016 ----------- ----------- Net assets applicable to shares outstanding ................................... $48,844,533 $38,405,642 =========== =========== Shares outstanding ............................................................... 1,678,928 2,108,282 =========== =========== Net asset value, offering and redemption price per share ......................... $29.09 $18.22 =========== ===========
The accompanying notes are an integral part of the financial statements. 17 THE SCHNEIDER FUNDS STATEMENT OF OPERATIONS
SCHNEIDER SCHNEIDER SMALL CAP VALUE FUND VALUE FUND -------------------- --------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2004 --------------- --------------- INVESTMENT INCOME Dividends ................................................................... $ 250,897* $ 278,560* Interest .................................................................... 62,536 15,754 ---------- ---------- Net Investment Income ..................................................... 313,433 294,314 ---------- ---------- EXPENSES Advisory fees ............................................................... 510,947 171,115 Administration fees and expenses ............................................ 113,786 107,422 Administrative services fees ................................................ 76,642 36,667 Custodian fees and expenses ................................................. 61,150 42,575 Transfer Agent fees ......................................................... 43,292 40,098 Printing fees ............................................................... 29,499 23,743 Audit and Legal fees ........................................................ 26,403 19,159 Federal and State Registration fees ......................................... 19,754 31,008 Directors' and Officer's fees ............................................... 6,106 3,150 Insurance fees .............................................................. 2,589 842 Amortization of Offering costs .............................................. -- 1,432 Miscellaneous fees .......................................................... 910 717 ---------- ---------- Total expenses before waivers and reimbursements .......................... 891,078 477,928 Less: waivers ............................................................... (329,049) (253,932) Less: reimbursements ........................................................ 0 (16,214) ---------- ---------- Total expenses after waivers and reimbursements ........................... 562,029 207,782 ---------- ---------- Net investment income/(loss) ................................................... (248,596) 86,532 ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain/(loss) from: Investments ............................................................... 22,868,085 1,739,447 Foreign currency transactions ............................................. 16 (21) Net change in unrealized appreciation/(depreciation) on: Investments ............................................................... (6,067,230) 2,256,274 Foreign currency transactions ............................................. (4) -- ---------- ---------- Net realized and unrealized gain on investments and foreign currency transactions ..................................................... 16,800,867 3,995,700 ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $16,552,271 $4,082,232 =========== ========== ------------------ * Net of foreign withholding taxes of $2,040 and $3,335, for the Small Cap Value Fund and Value Fund, respectively.
The accompanying notes are an integral part of the financial statements. 18 THE SCHNEIDER FUNDS STATEMENT OF CHANGES INNET ASSETS
SCHNEIDER SMALL CAP VALUE FUND ----------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ----------------- ----------------- INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Net investment income/(loss) ................................................ $ (248,596) $ 212,476 Net realized gain/(loss) from investments and foreign currency transactions, if any ...................................................... 22,868,101 (1,556,261) Net change in unrealized appreciation/(depreciation) on investments and foreign currency transactions, if any ................................. (6,067,234) 18,896,189 ------------ ----------- Net increase in net assets resulting from operations ........................ 16,552,271 17,552,404 ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ....................................................... (213,220) (84,186) Net realized capital gains .................................................. (3,215,235) (224,403) ------------ ----------- Total dividends and distributions to shareholders ......................... (3,428,455) (308,589) ------------ ----------- DECREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (SEE NOTE 4) ................................................... (13,199,746) (13,591,750) ------------ ----------- Total increase/(decrease) in net assets ................................... (75,930) 3,652,065 NET ASSETS Beginning of period ......................................................... 48,920,463 45,268,398 ------------ ----------- End of period* .............................................................. $ 48,844,533 $48,920,463 ============ =========== ------------------ * Includes undistributed net investment income of $21 and $213,208 for the year ended August 31, 2004 and for the year ended August 31, 2003, respectively.
The accompanying notes are an integral part of the financial statements. 19 THE SCHNEIDER FUNDS STATEMENT OF CHANGES INNET ASSETS
SCHNEIDER VALUE FUND ------------------------------------------- FOR THE PERIOD FOR THE SEPTEMBER 30, 2002* YEAR ENDED THROUGH AUGUST 31, 2004 AUGUST 31, 2003 ----------------- -------------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS Net investment income ....................................................... $ 86,532 $ 37,671 Net realized gain from investments and foreign currency transactions, if any ...................................................... 1,739,426 451,547 Net change in unrealized appreciation on investments and foreign currency transactions, if any ................................. 2,256,274 2,061,742 ----------- ----------- Net increase in net assets resulting from operations ........................ 4,082,232 2,550,960 ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ....................................................... (54,680) (9,472) Net realized capital gains .................................................. (610,325) (355) ----------- ----------- Total dividends and distributions to shareholders ......................... (665,005) (9,827) ----------- ----------- INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (SEE NOTE 4) ................................................... 23,200,846 9,246,436 ----------- ----------- Total increase in net assets .............................................. 26,618,073 11,787,569 NET ASSETS Beginning of period ......................................................... 11,787,569 -- ----------- ----------- End of period** ............................................................. $38,405,642 $11,787,569 =========== =========== ------------------ * Commencement of operations. ** Includes undistributed net investment income of $69,050 and $35,787 for the year ended August 31, 2004 and for the period ended August 31, 2003, respectively.
The accompanying notes are an integral part of the financial statements. 20 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Contained below is per share operating performance data for each share outstanding, total investment return, ratios to average net assets and other supplemental data for the period. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
FOR THE YEAR ENDED AUGUST 31, -------------------------------------------------------- 2004 2003 2002 2001 2000 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE* Net asset value, beginning of period ......................... $ 22.52 $ 14.82 $ 17.53 $ 17.57 $ 18.04 Net investment income/(loss) ................................. (0.13) 0.10 0.03 0.09 0.07 Net realized and unrealized gain/(loss) on investments and foreign currency transactions, if any(1) .............. 8.50 7.71 (1.83) 2.75 1.94 ------- ------- ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ........................................... 8.37 7.81 (1.80) 2.84 2.01 ------- ------- ------- ------- ------- Dividends and distributions to shareholders from: Net investment income ........................................ (0.11) (0.03) (0.07) (0.08) -- Net realized capital gains ................................... (1.69) (0.08) (0.84) (2.80) (2.48) ------- ------- ------- ------- ------- Total dividends and distributions to shareholders ............ (1.80) (0.11) (0.91) (2.88) (2.48) ------- ------- ------- ------- ------- Net asset value, end of period ............................... $ 29.09 $ 22.52 $ 14.82 $ 17.53 $ 17.57 ======= ======= ======= ======= ======= Total investment return(2) ................................... 37.99% 53.10% (10.76)% 19.94% 13.72% ======= ======= ======= ======= ======= RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) .................... $48,845 $48,920 $45,268 $38,912 $19,394 Ratio of expenses to average net assets(3) ................... 1.10% 1.10% 1.10% 1.10% 1.10% Ratio of expenses to average net assets without waivers and expense reimbursements ........................ 1.74% 1.85% 1.65% 2.02% 2.37% Ratio of net investment income to average net assets(3) ...... (0.49)% 0.53% 0.34% 0.71% 0.44% Portfolio turnover rate ...................................... 110.69% 85.33% 102.46% 79.30% 84.93% ------------------ * Calculated based on shares outstanding on the first and last day of the respective period, except for dividends and distributions, if any, which are based on actual shares outstanding on the dates of distributions. (1) The amounts shown for each share outstanding throughout the respective period are not in accord with the changes in the aggregate gains and losses on investments during the respective period because of the timing of sales and repurchases of Fund shares in relation to fluctuating net asset value during the respective period. (2) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. (3) Reflects waivers and reimbursements.
The accompanying notes are an integral part of the financial statements. 21 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Contained below is per share operating performance data for each share outstanding, total investment return, ratios to average net assets and other supplemental data for the period. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
FOR THE FOR THE PERIOD YEAR ENDED SEPTEMBER 30, 2002* AUGUST 31, 2004 THROUGH AUGUST 31, 2003 --------------- ----------------------- PER SHARE OPERATING PERFORMANCE** Net asset value, beginning of period .............................. $14.81 $10.00 Net investment income ............................................. 0.04 0.07 Net realized and unrealized gain on investments and foreign currency transactions, if any(1) ................... 4.05 4.77 ------ ------ Net increase in net assets resulting from operations .............. 4.09 4.84 ------ ------ Dividends and distributions to shareholders from: Net investment income ............................................. (0.06) (0.03) Net realized capital gains ........................................ (0.62) 0.00 ------ ------ Total dividends and distributions to shareholders ................. (0.68) (0.03) ------ ------ Net asset value, end of period .................................... $18.22 $14.81 ====== ====== Total investment return(2) ........................................ 28.21% 48.46% ====== ====== RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) ......................... $38,406 $11,788 Ratio of expenses to average net assets(3) ........................ 0.85% 0.85%(4) Ratio of expenses to average net assets without waivers and expense reimbursements ............................. 1.96% 4.01%(4) Ratio of net investment income to average net assets(3) ........... 0.35% 0.72%(4) Portfolio turnover rate ........................................... 116.60% 98.06% ------------------ * Commencement of operations. ** Calculated based on shares outstanding on the first and last day of the respective period, except for dividends and distributions, if any, which are based on actual shares outstanding on the dates of distributions. (1) The amounts shown for each share outstanding throughout the respective period are not in accord with the changes in the aggregate gains and losses on investments during the respective period because of the timing of sales and repurchases of Fund shares in relation to fluctuating net asset value during the respective period. (2) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. (3) Reflects waivers and reimbursements. (4) Annualized.
The accompanying notes are an integral part of the financial statements. 22 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2004 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988 and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the 1940 Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has fourteen active investment portfolios, including the Schneider Small Cap Value Fund (the "Small Cap Value Fund") and the Schneider Value Fund (the "Value Fund") (each a "Fund", collectively the "Funds"), which commenced investment operations on September 2, 1998 and September 30, 2002, respectively. As of the date hereof, each Fund offers the Institutional Class. RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion are currently classified into ninety-seven classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. PORTFOLIO VALUATION -- The Funds' net asset value ("NAV") is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Securities held by the Funds are valued using the closing price or the last sale price on a national securities exchange or on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there were no sales on that day or the securities are traded on other over-the-counter markets, the mean of the last bid and ask price prior to the market close are used. Short-term debt securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Debt securities having a remaining maturity of greater than 60 days are valued at the mean between the bid and ask prices. If the Funds hold foreign equity securities, the calculation of the Funds' NAV will not occur at the same time as the determination of the value of the foreign equity securities in the Funds' portfolio, since these securities are traded on foreign exchanges. With the approval of the Company's Board of Directors, the Funds may use a pricing service, bank or broker/dealer experience in providing valuations to value the Funds' securities. If market quotations are unavailable or deemed unreliable, securities will be valued by the Funds' Valuation Committee as determined by procedures adopted by the Board of Directors. USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. REPURCHASE AGREEMENTS -- The Funds may purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The financial institutions with whom a Fund enters into repurchase agreements are banks and broker/dealers that Schneider Capital Management, LP ("Adviser" or "SCM") considers creditworthy. The seller under a repurchase agreement will be required to maintain the value of the securities as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. SCM marks to market daily the value of the collateral, and, if necessary, requires the seller to deposit additional securities by the next Fund business day. Default by or bankruptcy of the seller would, however, expose a Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. For the year ended August 31, 2004, the Funds did not enter into any repurchase agreements. 23 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 INVESTMENT TRANSACTIONS, INVESTMENT INCOME, AND EXPENSES -- 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 in determining realized gains and losses on investments. Interest income is accrued as earned. Dividend income is recorded on the ex-dividend date. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all of the RBB families (such as director or professional fees) are charged to all funds in proportion to their average net assets of the RBB funds, or in such other manner as the Board of Directors deems fair or equitable. Expenses and fees, including investment advisory and administration fees, are accrued daily and taken into account for the purpose of determining the net asset value of the Funds. FOREIGN CURRENCY TRANSLATION -- Foreign securities, other assets and liabilities are valued using the foreign currency exchange rate effective at the end of the reporting period. The books and records of the Funds are maintained in U.S. dollars. Cost of investments is translated at the currency exchange rate effective at the trade date. The gain or loss resulting from a change in currency exchange rates between the trade and settlement dates of a portfolio transaction is treated as a gain or loss on foreign currency. Likewise, the gain or loss resulting from a change in currency exchange rates, between the date income is accrued and paid, is treated as a gain or loss on foreign currency. DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income and from net realized capital gains, if any, are declared, recorded on ex-date and paid at least annually to shareholders. Income and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from generally accepted accounting principles. These differences include the treatment of non-taxable dividends, expiring capital loss carryforwards, foreign currency gain/loss, partnerships, and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. The following permanent differences as of August 31, 2004, primarily attributable to net investment losses, nondeductible expenses and foreign currency transactions, were reclassified to the following accounts:
INCREASE/(DECREASE) INCREASE ACCUMULATED INCREASE/(DECREASE) UNDISTRIBUTED NET REALIZED ADDITIONAL NET INVESTMENT GAIN/(LOSS) PAID-IN LOSS ON INVESTMENTS CAPITAL -------------- ------------------- ------------------- Schneider Small Cap Value Fund $248,628 $(248,686) $ 58 Schneider Value Fund 1,411 21 (1,432)
U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is each Fund's intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from U.S. income and excise taxes. OTHER -- In the normal course of business, the Funds may enter into contracts that provide general indemnifications. The Funds' maximum exposure under these arrangements is dependent on claims that may be made against the Funds in the future, and, therefore, cannot be estimated; however, based on experience, the risk of material loss for such claims is considered remote. 24 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES SCM serves as each Fund's investment adviser. For its advisory services, SCM is entitled to receive 1.00% of the Small Cap Value Fund's average daily net assets and 0.70% of the Value Fund's average daily net assets, computed daily and payable monthly. The adviser agreed to limit the Small Cap Value Fund's and the Value Fund's operating expenses for the current fiscal year to the extent that such expenses exceeded 1.10% and 0.85%, of the Fund's average daily net assets, respectively. As necessary, this limitation is effected in waivers of advisory fees and reimbursements of other fund expenses. For the year ended August 31, 2004, investment advisory fees and waivers of expenses were as follows:
EXPENSE GROSS ADVISORY WAIVERS NET ADVISORY REIMBURSEMENT -------------- ---------- ------------ ------------- Schneider Small Cap Value Fund $510,947 $(255,626) $255,321 -- Schneider Value Fund 171,115 (156,597) 14,518 $(16,214)
The Funds will not pay SCM at a later time for any amounts it may waive or any amounts that SCM has assumed. PFPC Inc. ("PFPC"), serves as administrator for the Funds. PFPC Trust Co. serves as custodian of the Funds. Both PFPC and PFPC Trust Co. are wholly-owned subsidiaries of PFPC Worldwide, Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. For providing administration and accounting services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.125% of each Fund's average daily net assets, subject to a minimum monthly fee of $8,333 per Fund plus out of pocket expenses. PFPC, at its discretion, voluntarily agreed to waive a portion of its administration and accounting fees for the Funds. For the year ended August 31, 2004, PFPC's administration and accounting fees and related waivers were as follows:
GROSS ADMINISTRATION NET ADMINISTRATION AND ACCOUNTING AND ACCOUNTING SERVICE FEES AND EXPENSES WAIVERS SERVICE FEES AND EXPENSES ------------------------- --------- ------------------------- Schneider Small Cap Value Fund $113,786 $ (7,000) $106,786 Schneider Value Fund 107,422 (50,000) 57,422
For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by the Fund and PFPC. This agreement commenced on June 1, 2003. This fee is allocated among all funds in proportion to their net assets of the RBB Funds. The Schneider Small Cap Value Fund and Value Fund portions of these fees for the period September 1, 2003 to August 31, 2004 were $8,484 and $3,963, respectively. 25 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 In addition, PFPC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agency services, PFPC is entitled to receive a monthly fee, subject to a minimum monthly fee of $2,000 per Fund, plus out of pocket expenses. PFPC, at its discretion, voluntarily agreed to waive a portion of its transfer agency fees for the Value Fund. For the year ended August 31, 2004, transfer agency fees and related waivers for the Funds were as follows:
GROSS TRANSFER NET TRANSFER AGENCY FEES WAIVERS AGENCY FEES -------------- --------- ------------ Schneider Small Cap Value Fund $43,292 -- $43,292 Schneider Value Fund 40,098 $(12,000) 28,098
For providing custodial services, PFPC Trust Co. is entitled to receive a monthly fee equal to an annual rate of .015% of each Fund's average daily gross assets. PFPC Trust Co., at its discretion, voluntarily agreed to waive a portion of their custodial fees for the Value Fund. For the year ended August 31, 2004, custodial fees and related waivers for the Funds were as follows:
GROSS CUSTODIAL NET CUSTODIAL FEES AND EXPENSES WAIVERS FEES AND EXPENSES ----------------- --------- ----------------- Schneider Small Cap Value Fund $61,150 -- $61,150 Schneider Value Fund 42,575 $(6,001) 36,574
PFPC Distributors, Inc., ("PFPC Distributors"), a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., provided certain administrative services to the Funds. As compensation for such administrative services, PFPC Distributors receives a monthly fee equal to an annual rate of 0.15% of each Fund's average daily net assets. PFPC Distributors, at its discretion, voluntarily agreed to waive a portion of its administrative services fees for the Funds. For the year ended August 31, 2004, administrative services fees and related waivers for the Funds were as follows:
GROSS ADMINISTRATIVE NET ADMINISTRATIVE SERVICES FEES WAIVERS SERVICES FEES -------------- --------- ------------------ Schneider Small Cap Value Fund $76,642 $(66,423) $10,219 Schneider Value Fund 36,667 (29,334) 7,333
As of August 31, 2004, the Small Cap Value Fund and Value Fund owed PFPC and affiliates $20,320 and $12,684, respectively, for their services. 3. INVESTMENT IN SECURITIES For the year ended August 31, 2004, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: PURCHASES SALES ----------- ----------- Schneider Small Cap Value Fund $54,035,020 $70,412,104 Schneider Value Fund 49,261,994 27,642,139 26 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2004 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2004 each Fund has 100,000,000 shares of $0.001 par value common stock authorized. Transactions in capital shares for the years ended August 31, 2004 and 2003 were as follows:
SCHNEIDER SMALL CAP VALUE FUND -------------------------------------------------------------------------- FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR ENDED ------------------------------ ------------------------------ AUGUST 31, 2004 AUGUST 31, 2003 ------------------------------ ------------------------------ SHARES AMOUNT SHARES AMOUNT --------- ------------ --------- ------------ Sales ........................... 28,284 $ 806,401 86,783 $ 1,296,246 Reinvestments ................... 120,295 3,183,023 19,345 285,921 Redemption Fees* ................ -- 2,059 -- 31,531 Repurchases ..................... (641,974) (17,191,229) (987,915) (15,205,448) --------- ------------ --------- ------------ Net increase/(decrease) ......... (493,395) $(13,199,746) (881,787) $(13,591,750) ========= ============ ========= ============ SCHNEIDER VALUE FUND -------------------------------------------------------------------------- FOR THE PERIOD ------------------------------ FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2002 ------------------------------ ------------------------------ AUGUST 31, 2004 THROUGH AUGUST 31, 2003 ------------------------------ ------------------------------ SHARES AMOUNT SHARES AMOUNT --------- ----------- -------- ---------- Sales ........................... 1,447,520 $25,410,225 846,089 $9,869,042 Reinvestments ................... 35,275 567,932 450 5,128 Redemption Fees* ................ -- 7,400 -- 6,217 Repurchases ..................... (170,583) (2,784,711) (50,469) (633,951) --------- ----------- ------- ---------- Net increase .................... 1,312,212 $23,200,846 796,070 $9,246,436 ========= =========== ======= ========== * There is a 1.75% redemption fee on shares redeemed which have been held less than one year in the Schneider Small Cap Value Fund. There is a 1.00% redemption fee on shares redeemed which have been held less than 90 days in the Schneider Value Fund. The redemption fees are retained by the Funds for the benefit of the remaining shareholders and recorded as paid-in capital.
27 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONCLUDED) FEBRUARY 29, 2004 (UNAUDITED) 5. FEDERAL INCOME TAX INFORMATION At August 31, 2004, Federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Funds were as follows:
NET UNREALIZED FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION/ COST APPRECIATION DEPRECIATION DEPRECIATION ----------- ------------ ------------ -------------- Schneider Small Cap Value Fund $40,931,575 $10,383,606 $(2,640,978) $7,742,628 Schneider Value Fund 34,661,500 5,024,887 (1,054,730) 3,970,157
As of August 31, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS --------------- --------------- Schneider Small Cap Value Fund $6,542,048 $12,131,714 Schneider Value Fund 1,508,511 488,734 At August 31, 2004, the Funds had no capital loss carryforwards available to offset future capital gains. Under Federal tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as having arisen on the first day of the following fiscal year. For the year ended August 31, 2004, there were post-October currency losses incurred of $21 and $21 for the Schneider Small Cap Value Fund and the Schneider Value Fund, respectively. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term and foreign currency gains are reported as ordinary income for federal tax purposes. The tax character of dividends and distributions paid during the last two fiscal years were as follows: ORDINARY LONG-TERM INCOME GAINS TOTAL ---------- ---------- ---------- Schneider Small Cap Value Fund 2004 $2,094,392 $1,334,064 $3,428,456 2003 84,186 224,403 308,589 Schneider Value Fund 2004 $ 665,005 $ -- $ 665,005 2003 9,827 -- 9,827 28 SCHNEIDER CAPITAL MANAGEMENT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC.: In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Schneider Small Cap Value Fund and Schneider Value Fund, separately managed portfolios of The RBB Fund, Inc. (the "Fund"), at August 31, 2004, the results of each of their operations for the year then ended and the changes in each of their net assets and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the Standards of the Public Company Accounting Oversight Board (United States). Those standards 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 at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 29, 2004 29 THE SCHNEIDER FUNDS FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The statement of additional information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (888) 520-3277.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 14 Director, Comcast Comcast Corporation Vice Chairman, Comcast Corporation. 1500 Market Street, Corporation (cable television 35th Floor and communications); Director, Philadelphia, PA 19102 NDS Group PLC (provider of DOB: 7/16/33 systems and applications for digital pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, 14 None Fox Chase Cancer Center Fox Chase Cancer Center 333 Cottman Avenue (biomedical research and Philadelphia, PA 19111 medical care); prior to DOB: 12/06/35 2000, Executive Vice President, Fox Chase Cancer Center. ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director 1991 to present Since December 2000, Director, 14 None 106 Pierrepont Street Gabelli Partners, L.P. (an Brooklyn, NY 11201 investment partnership); Chief DOB: 5/21/48 Operating Officer and member of the Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 14 Director, Moyco Technologies, Inc. and President, Moyco Moyco 200 Commerce Drive Technologies, Inc. Technologies, Montgomeryville, PA 18936 (manufacturer of precision Inc. DOB: 3/24/34 coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
30 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONTINUED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Oppenheimer & Company, Inc. Director 1991 to present Since July 2002, Senior Vice 14 None 200 Park Avenue President and prior thereto, New York, NY 10166 Executive Vice President of DOB: 4/16/38 Oppenheimer & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 14 None 400 Bellevue Parkway January 1987 to April 2002, Wilmington, DE 19809 Chairman and Chief DOB: 9/25/38 Executive Officer of PFPC Inc. until April 2002, Executive Vice President of PNC Bank, National Association from October 1981 to April 2002, Director of PFPC International Ltd. (financial services) from August 1993 to April 2002, Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------
31 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF PRINCIPAL PORTFOLIOS IN OTHER TERM OF OFFICE OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF DURING PAST OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present Certified Public Accountant; N/A N/A 400 Bellevue Parkway and and Vice Chairman of the Board, 4th Floor Treasurer 1988 to present Fox Chase Cancer Center; Wilmington, DE 19809 Trustee Emeritus, Pennsylvania DOB: 6/29/24 School for the Deaf; Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary Since 2003 Since 2000, Vice President N/A N/A 301 Bellevue Parkway and Counsel, PFPC Inc. 2nd Floor (financial services company); Wilmington, DE 19809 Associate, Stradley, Ronon, DOB: 1/27/68 Stevens & Young, LLC (law firm) from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 Senior Legal Counsel, PFPC, Vigilant Compliance Compliance Inc. from 2002 to 2004; Chief 186 Dundee Drive, Suite 700 Officer Legal Counsel, Corviant Williamstown, NJ 08094 Corporation (Investment DOB: 12/25/62 Adviser, Broker/Dealer and Service Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001). ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation and the Company's principal underwriter, PFPC Distributors, Inc. are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
32 SCHNEIDER SMALL CAP VALUE FUND SHAREHOLDER TAX INFORMATION (UNAUDITED) Each Fund is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of each Fund's fiscal year end (August 31) as of the U. S. federal tax status of distributions received by each Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2004, the following dividends and distributions per share were paid by each of the Funds:
NET INVESTMENT INCOME SHORT-TERM GAINS LONG-TERM GAINS --------------------- ---------------- --------------- Schneider Small Cap Value Fund $0.11 $0.99 $0.70 Schneider Value Fund 0.06 0.62 --
The percentage of total ordinary income dividends qualifying for the corporate dividends received deduction is 14% for the Schneider Small Cap Value Fund and 43% for the Schneider Value Fund. These amounts were reported to shareholders as income in 2003. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2005. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Funds, if any. In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Funds. 33 THE SCHNEIDER FUNDS OTHER INFORMATION (UNAUDITED) 1. PROXY VOTING Policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities as well as information regarding how the Funds voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling (888) 520-3277 and on the Securities and Exchange Commission's website at http://www.sec.gov. 2. QUARTERLY PORTFOLIO SCHEDULES The Funds will file a complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Funds' Forms N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 34 [THIS PAGE INTENTIONALLY LEFT BLANK.] INVESTMENT ADVISER Schneider Capital Management 460 E. Swedesford Road Wayne, PA 19087 ADMINISTRATOR PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Two Commerce Square, Suite 1700 2001 Market Street Philadelphia, PA 19103-7042 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 This report is submitted for the general information of the shareholders of the Funds. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in a Fund will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. Current performance may be lower or higher than the performance data provided in the report. =================== BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND ANNUAL REPORT AUGUST 31, 2004 =================== BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PRIVACY NOTICE (UNAUDITED) The BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND of The RBB Fund, Inc. (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (877) 264-5346. October 2004 -------------------------------------------------------------------------------- BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND ANNUAL REPORT -------------------------------------------------------------------------------- Fellow Shareholder: Equity market performance for the fiscal year ending August 31, 2004 was a tale of two markets. Continuing a run that began in March of 2003, small cap growth stocks dominated through January of 2004, but struggled from February through August, in both absolute terms and relative to other market segments. Also, our perception is that investors shifted focus during the fiscal year from stock specific, fundamental factors, to broader macroeconomic issues such as interest rates, the election, and the price of oil. For the fiscal year ended August 31, 2004, the Fund's Investor shares advanced +9.98%, the Institutional shares gained +10.04%, and the unmanaged Russell 2000 Index of small cap stocks returned +11.35%. The Fund lagged its benchmark for the period due to poor performance from February 2004 through August, which eclipsed the positive relative performance the Fund experienced in the first five months of the fiscal year. Over the longer term, since inception (October 1, 1999 through August 31, 2004), the Fund has significantly outperformed the Russell 2000. Since inception, the Fund's annualized return of +16.82% for the Investor shares and +16.90% for the Institutional shares is well ahead of the annualized gain of +6.54% for the benchmark Russell 2000. These returns, as reflected by the dollar value of a $10,000 investment made at the start of the Fund, compared to the same investment in the benchmark, are shown in the charts on the next two pages. The balance of this letter, our fifth annual report to shareholders, covers the market environment, performance attribution, Fund characteristics, our fiscal year "report card," and an update on the mutual fund business at Bogle Investment Management, L.P. MARKET ENVIRONMENT. As mentioned above, we observed the mood of the market change early this year, as investors grew concerned with macroeconomic factors. The Federal Reserve hiked the Federal Funds Rate twice (though modestly), despite mixed economic data. As the year progressed, new issues arose such as increasing oil prices, which reached historic highs this summer. Geopolitical events and the upcoming election added to the feeling of uncertainty. These concerns seemed to shift attention away from company fundamentals, to a focus on larger themes, as indicated by the narrow breadth of small cap market returns and increased correlation between stock returns. For our fiscal year, small cap and large cap stocks, as measured by the Russell 2000 and 1000, finished up almost even with each other; the Russell 2000 Index advanced +11.35% while the Russell 1000 earned +11.33%. The similarity in these numbers masks the fact that small caps outperformed large caps by about six percentage points through March, but then began to struggle as investors became more defensive and the riskier smaller stocks were penalized. Within small cap stocks, value outperformed growth in eight out of twelve months, and the Russell 2000 Value Index outperformed the Russell 2000 Growth Index by more than 16 percentage points (up +19.50% versus +3.37%). Not surprisingly, technology stocks also struggled for the fiscal year, specifically in the last seven months. PERFORMANCE ATTRIBUTION. For the fiscal year, the Fund's Investor Class of shares underperformed the benchmark Russell 2000 by -1.37%, net of all fees, and the Institutional Class of shares underperformed by -1.31%, net of all fees. This underperformance was attributed primarily to poor performance in the February through May period and the month of August. (Commentary continues on page 5) 2 COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND INSTITUTIONAL CLASS(1)(2) VS. RUSSELL 2000 INDEX -------------------------------------------------------------------------------- TOTAL RETURNS ------------------------------------------------------ GROWTH OF $10,000 ONE YEAR ENDED AVERAGE ON AUGUST 31, 2004 AUGUST 31, 2004 ANNUAL(3) ------------------ --------------- --------- BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND-- INSTITUTIONAL CLASS $21,551 10.04% 16.90% RUSSELL 2000 INDEX $13,655 11.35% 6.54% -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: BOGLE INSTITUTIONAL SHARES RUSSELL 2000 INDEX October 1, 1999 $10,000.00 $10,000.00 October 31, 1999 10,325.00 10,041.00 November 30, 1999 11,350.00 10,640.50 December 31, 1999 13,016.70 11,845.00 January 31, 2000 12,583.30 11,654.20 February 29, 2000 14,825.00 13,578.40 March 31, 2000 15,100.00 12,683.50 April 30, 2000 14,691.70 11,920.00 May 31, 2000 14,258.30 11,225.10 June 30, 2000 15,933.30 12,203.90 July 31, 2000 15,758.30 11,810.90 August 31, 2000 17,425.00 12,712.10 Sept. 30, 2000 17,116.70 12,338.40 Oct. 31, 2000 17,091.70 11,788.10 Nov. 30, 2000 15,221.30 10,577.40 Dec. 31, 2000 16,506.30 11,486.00 Jan. 31, 2001 16,851.20 12,084.50 Feb. 28, 2001 15,850.80 11,291.70 Mar. 31, 2001 15,074.70 10,739.50 Apr. 30, 2001 16,644.20 11,579.40 May 31, 2001 17,196.20 11,864.20 Jun. 30, 2001 17,541.10 12,273.50 Jul. 31, 2001 17,385.90 11,609.50 Aug. 31, 2001 16,834.00 11,234.60 Sept. 30, 2001 15,195.40 9,722.39 Oct. 31, 2001 15,954.30 10,291.20 Nov. 30, 2001 16,601.10 11,087.70 Dec. 31, 2001 17,368.70 11,771.80 Jan. 31, 2002 17,670.50 11,649.40 Feb. 28, 2002 17,282.40 11,330.20 Mar. 31, 2002 18,515.60 12,241.10 Apr. 30, 2002 18,903.70 12,352.50 May 31, 2002 18,144.80 11,804.10 Jun. 30, 2002 17,523.90 11,218.60 Jul. 31, 2002 15,178.20 9,524.58 Aug. 31, 2002 15,376.50 9,500.77 Sep. 30, 2002 14,212.20 8,818.61 Oct. 31, 2002 14,358.80 9,101.69 Nov. 30, 2002 14,902.10 9,913.56 Dec. 31, 2002 14,315.70 9,361.38 Jan. 31, 2003 14,212.20 9,102.07 Feb. 28, 2003 13,824.10 8,827.18 Mar. 31, 2003 13,858.60 8,941.05 Apr. 30, 2003 15,134.90 9,788.67 May 31, 2003 16,695.90 10,839.00 Jun. 30, 2003 17,239.20 11,035.20 Jul. 31, 2003 18,670.70 11,726.00 Aug. 31, 2003 19,584.90 12,263.00 Sep. 30, 2003 19,395.20 12,036.20 Oct. 31, 2003 21,395.90 13,047.20 Nov. 30, 2003 22,465.30 13,510.40 Dec. 31, 2003 22,732.60 13,784.60 Jan. 31, 2004 24,224.50 14,382.90 Feb. 29, 2004 24,224.50 14,512.30 Mar. 31, 2004 23,991.70 14,647.30 Apr. 30, 2004 22,534.30 13,900.30 May 31, 2004 22,706.70 14,121.30 Jun. 30, 2004 23,707.10 14,715.80 Jul. 31, 2004 22,275.50 13,725.40 Aug. 31, 2004 21,551.10 13,655.40 ---------- (1) The chart and table assume a hypothetical $10,000 initial investment in the Fund made on October 1, 1999 (commencement of operations) and reflect fund expenses. Investors should note that the Fund is an actively managed mutual fund while the index is either unmanaged and does not incur expenses and/or is not available for investment. (2) Bogle Investment Management waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and reimbursements of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) For the period October 1, 1999 (commencement of operations) through August 31, 2004. 3 COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND INVESTOR CLASS(1)(2) VS. RUSSELL 2000 INDEX -------------------------------------------------------------------------------- TOTAL RETURNS ------------------------------------------------------ GROWTH OF $10,000 ONE YEAR ENDED AVERAGE ON AUGUST 31, 2004 AUGUST 31, 2004 ANNUAL(3) ------------------ --------------- --------- BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND-- INVESTOR CLASS $21,483 9.98% 16.82% RUSSELL 2000 INDEX $13,655 11.35% 6.54% -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: BOGLE INVESTOR SHARES RUSSELL 2000 INDEX Sept. 30, 1999 $10,000.00 $10,000.00 Oct. 31, 1999 10,325.00 10,041.00 Nov. 30, 1999 11,350.00 10,640.50 Dec. 31, 1999 13,008.30 11,845.00 Jan. 31, 2000 12,583.30 11,654.20 Feb. 29, 2000 14,825.00 13,578.40 Mar. 31, 2000 15,100.00 12,683.50 Apr. 30, 2000 14,691.70 11,920.00 May 31, 2000 14,250.00 11,225.10 June 30, 2000 15,925.00 12,203.90 July 31, 2000 15,750.00 11,810.90 Aug. 31, 2000 17,408.30 12,712.10 Sept. 30, 2000 17,100.00 12,338.40 Oct. 31, 2000 17,075.00 11,788.10 Nov. 30, 2000 15,213.00 10,577.40 Dec. 31, 2000 16,497.90 11,486.00 Jan. 31, 2001 16,842.90 12,084.50 Feb. 28, 2001 15,833.90 11,291.70 Mar. 31, 2001 15,057.70 10,739.50 Apr. 30, 2001 16,627.30 11,579.40 May 31, 2001 17,179.20 11,864.20 Jun. 30, 2001 17,524.20 12,273.50 Jul. 31, 2001 17,369.00 11,609.50 Aug. 31, 2001 16,808.40 11,234.60 Sept. 30, 2001 15,169.80 9,722.39 Oct. 31, 2001 15,937.40 10,291.20 Nov. 30, 2001 16,575.60 11,087.70 Dec. 31, 2001 17,334.50 11,771.80 Jan. 31, 2002 17,644.90 11,649.40 Feb. 28, 2002 17,248.20 11,330.20 Mar. 31, 2002 18,498.70 12,241.10 Apr. 30, 2002 18,878.20 12,352.50 May 31, 2002 18,119.30 11,804.10 Jun. 30, 2002 17,498.30 11,218.60 Jul. 31, 2002 15,161.20 9,524.58 Aug. 31, 2002 15,350.90 9,500.77 Sep. 30, 2002 14,186.60 8,818.61 Oct. 31, 2002 14,333.20 9,101.69 Nov. 30, 2002 14,876.60 9,913.56 Dec. 31, 2002 14,290.10 9,361.38 Jan. 31, 2003 14,186.60 9,102.07 Feb. 28, 2003 13,798.60 8,827.18 Mar. 31, 2003 13,833.10 8,941.05 Apr. 30, 2003 15,109.40 9,788.67 May 31, 2003 16,661.80 10,839.00 Jun. 30, 2003 17,196.50 11,035.20 Jul. 31, 2003 18,628.10 11,726.00 Aug. 31, 2003 19,533.60 12,263.00 Sep. 30, 2003 19,343.90 12,036.20 Oct. 31, 2003 21,344.60 13,047.20 Nov. 30, 2003 22,405.40 13,510.40 Dec. 31, 2003 22,672.80 13,784.60 Jan. 31, 2004 24,156.10 14,382.90 Feb. 29, 2004 24,156.10 14,512.30 Mar. 31, 2004 23,923.30 14,647.30 Apr. 30, 2004 22,465.80 13,900.30 May 31, 2004 22,638.30 14,121.30 Jun. 30, 2004 23,630.00 14,715.80 Jul. 31, 2004 22,207.10 13,725.40 Aug. 31, 2004 21,482.60 13,655.40 ---------- (1) The chart and table assume a hypothetical $10,000 initial investment in the Fund made on October 1, 1999 (commencement of operations) and reflect fund expenses. Investors should note that the Fund is an actively managed mutual fund while the index is either unmanaged and does not incur expenses and/or is not available for investment. (2) Bogle Investment Management waived a portion of its advisory fee and agreed to reimburse a portion of the Fund's operating expenses, if necessary, to maintain the expense limitation as set forth in the notes to the financial statements. Total returns shown include fee waivers and expense reimbursements, if any; total returns would have been lower had there been no waivers and reimbursements of fees and expenses in excess of expense limitations. Returns shown include the reinvestment of all dividends and other distributions. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) For the period October 1, 1999 (commencement of operations) through August 31, 2004. 4 To set our attribution analysis in the context of our process, we utilize three primary investment models in managing the Fund that evaluate financial quality, earnings improvement, and relative valuation. As we remain essentially fully invested and do not attempt to time the market, these fundamentally based, quantitatively implemented tools are intended to be the mainstay of our investment process through which we seek to add value, primarily through stock selection (small sector and factor exposures that derive from our bottom-up stock selection process can also add or detract from performance). In the latest fiscal year, the relative valuation model proved to be the strongest contributor to performance. It added substantial value, while the earnings improvement factor and the financial quality factor failed to add value. Overall, our stock selection for the fiscal year was slightly positive. As mentioned above, we attempt to add value selecting individual stocks, rather than by making significant sector bets. We do, however, allow the Fund to have marginal sector over- or underweights, compared with the benchmark. Our stock selection models tend to overweight the sectors where our models find more stock specific opportunities, and underweight the sectors where they find fewer. Typically these small over- and underweights do not substantially impact relative performance. In the most recent fiscal year, our sector weightings had an adverse impact on performance. Our process modestly favored some of the growth sectors, such as technology, but found fewer opportunities in some of the more value-oriented sectors, such as energy and financials. While these differences were small, the strong market bias towards the value segments of the market detracted from the performance of the relatively growth-oriented Fund. Stock selection was most helpful in the consumer cyclicals and basic industry sectors and least effective in the industrial sector. Within consumer cyclicals, one of the strongest contributors to performance for this period was Vans Incorporated, a company that designs, manufactures and markets casual and active sports gear under the Vans label. Vans targets the 10 to 24 year old market segment offering clothing for youths who have enthusiasm for sports such as snowboarding, skateboarding, surfing and BMX. Vans' solid financials, as well as strong recognition with the young consumer, attracted the attention of VF Corp, which announced the acquisition of Vans in May of 2004. Vans appeared very attractive based on all of our models, but in particular it scored very well according to the financial quality and earnings improvement models. In the basic industry sector, Lone Star Technologies Inc. proved a strong contributor. Lone Star manufactures and markets steel tubular products that are used in the production of oil and natural gas wells. Lone Star scored well in all of our models, particularly due to improving earnings estimates. The company reported strong second quarter performance this summer, and earnings surpassed analysts' estimates, leading to strong market-relative appreciation. Technology tends to be consistently one of the largest sectors in the Fund, but in contrast to other years, a modest overweight detracted from performance in fiscal 2004; however, our stock selection compared to the benchmark was positive. One of the strong performers in this sector was Ditech Communications Corp., a global telecommunications equipment supplier for voice networks. The company's most successful product, and primary revenue source, is an echo canceller that works to eliminate echo in voice networks. The company has scored very well based on improving earnings and strong financial quality. Within the industrial sector, where stock selection was negative for the fiscal year, trucking company Hub Group Inc. has proven to date to be a very poor investment. Hub Group saw its stock drop in July and August as many transportation stocks were under pressure with oil prices rising strongly. The company's improving fundamentals, according to our measures, compel us to continue to hold this position. The company scores well on earnings improvement and financial quality, and the relative valuation score is even more compelling. FUND CHARACTERISTICS. Fund characteristics remain very much in line with the benchmark. As of the end of August, our median market capitalization is modestly below benchmark. By continuing to keep the asset 5 base of the Fund controlled, we benefit from the ability to nimbly invest in the smaller companies, which often provide the best opportunities. The Fund maintains a small bias toward companies with somewhat higher long-term earnings growth rates. Offsetting this exposure, the Fund's price-to-sales is below benchmark, reflecting the influence of our relative valuation model. REPORT CARD. It is our custom to grade ourselves on investment performance and client service over the past year. On our performance we give ourselves a C. We lagged our benchmark for the fiscal year, although just modestly. While we deserve no better grade for underperforming our benchmark, we believe that we understand the sources of underperformance. We have great conviction in our investment process and are confident that we will be rewarded for continuing to follow our investment discipline. Our many years of experience remind us that the worst time to make changes to an investment discipline is during a period of underperformance. On client service we remain at a grade of B. While we are constantly trying to improve our service experience with you, there is always room for improvement in this area, particularly in your day-to-day contact with shareholder services. We encourage you to let us know if we can assist in this area or if you have any feedback on your servicing experience. We are committed to answering your questions promptly and addressing problems quickly. PROGRESS AT BOGLE INVESTMENT MANAGEMENT. At the end of August 2004, assets in the Fund were around $300 million. While the Fund has been closed to new investors for over two years (March 2002), existing investors have continued to modestly add to their Bogle Small Cap Growth positions. As always, we are committed to maintaining the agility afforded by a low level of assets under management; therefore, we continue to monitor our asset level to ensure that we preserve our ability to invest in the less liquid segment of the small cap market, which often provides some of our best investment opportunities. Finally, given the practices that have been uncovered in the mutual fund industry over the last year, and the dramatic changes that have occurred as a result, we felt it would be comforting to our shareholders to know that Bogle Investment Management has always taken compliance issues very seriously. For example, we have always been very serious and diligent about compliance with our code of ethics. Further, we can affirm that: o The Fund's board of directors is completely independent of Bogle Investment Management, with no participation on the part of any affiliate or employee of Bogle Investment Management; o Our Funds do not pay any Rule 12b-1 distribution fees; o We have broad employee ownership of our Fund; o We are not aware of late trading in the history of the Fund; o We have lower than average shareholder turnover in our Fund, compared with peers, testament to the long-term nature of our shareholders. We never contemplated that our commitment to compliance would set us apart and we hope that our approach to the business and to the investment process will continue to serve you well long into the future. -------------------------------------------------------------------------------- FUNDAMENTAL CHARACTERISTICS AUGUST 31, 2004 -------------------------------------------------------------------------------- RUSSELL MEDIAN BOGLX 2000 ------ ----- ------- Median Market Cap ($mil.) $734 $819 Long-Term Estimated Earnings Growth Rate 16.1% 14.2% Price/Historical Earnings 20.7x 20.2x Price/Forward Earnings 15.6x 16.4x Price/Sales 1.1x 1.7x -------------------------------------------------------------------------------- 6 As a reminder, information about the Fund, including historical NAVs, sector allocation, fundamental characteristics, and top ten holdings, can be viewed on our website, www.boglefunds.com. The NAVs are updated daily while the other Fund information is updated quarterly. Please feel free to call on us at any time with questions you may have about the portfolio or anything else that might be on your mind. Respectfully, Bogle Investment Management, L.P. Management Office: 781-283-5000 Shareholder Services Toll Free: 1-877-BOGLEIM (264-5346) -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. THE RUSSELL 2000 IS AN INDEX OF STOCKS 1001 THROUGH 3000 IN THE RUSSELL 3000 INDEX AS RANKED BY TOTAL MARKET CAPITALIZATION. A DIRECT INVESTMENT IN THE INDEX IS NOT POSSIBLE. INVESTING IN SMALL COMPANIES CAN INVOLVE MORE VOLATILITY, LESS LIQUIDITY, AND LESS PUBLICLY AVAILABLE INFORMATION THAN INVESTING IN LARGE COMPANIES. 7 BOGLE INVESTMENT MANAGEMENT SMALL CAP VALUE FUND FUND EXPENSE EXAMPLES As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees; shareholder servicing fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period from March 1, 2004 through August 31, 2004, and held for the entire period. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
INSTITUTIONAL CLASS --------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $ 889.60 $5.94 Hypothetical (5% return before expenses) 1,000.00 1,018.74 6.36
8 BOGLE INVESTMENT MANAGEMENT SMALL CAP VALUE FUND FUND EXPENSE EXAMPLES (CONTINUED)
INVESTOR CLASS --------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $ 889.30 $6.41 Hypothetical (5% return before expenses) 1,000.00 1,018.23 6.87 ---------- *Expenses are equal to the Fund's annualized expense ratio of 1.25% for the Institutional Class and 1.35% for the Investor Class, which includes waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period.
9 BOGLE INVESTMENT MANAGEMENT SMALL CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE % OF NET SECURITY TYPE & SECTOR CLASSIFICATION ASSETS VALUE -------------------------------------------------------------------------------- COMMON STOCK: Basic Industry 6.7% $ 19,927,818 Consumer Cyclical 17.2% 51,566,680 Consumer Growth 17.2% 51,544,460 Energy 5.0% 15,000,129 Financial 17.4% 52,004,759 Industrial 15.3% 45,970,295 Technology 16.9% 50,655,185 Utility 0.7% 2,106,866 SHORT-TERM INVESTMENTS 1.8% 5,353,622 OTHER ASSETS IN EXCESS OF LIABILITIES 1.8% 5,542,950 ------ ------------ NET ASSETS -- 100.0% 100.0% $299,672,764 ====== ============ The accompanying notes are an integral part of the financial statements. 10 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 NUMBER OF SHARES VALUE --------- ------------ COMMON STOCKS--96.4% BASIC INDUSTRY--6.7% Carpenter Technology Corp. .............. 59,700 $ 2,644,710 Crompton Corp. .......................... 365,700 2,519,673 Crown Holdings, Inc.* ................... 231,900 2,249,430 Lone Star Technologies, Inc.* ........... 105,800 3,250,176 OM Group, Inc.* ......................... 84,500 2,877,225 Reliance Steel & Aluminum Co. ................................... 43,800 1,661,334 Ryerson Tull, Inc. ...................... 163,600 2,607,784 Steel Technologies, Inc. ................ 105,400 2,117,486 ------------ 19,927,818 ------------ CONSUMER CYCLICAL--17.2% 7-Eleven, Inc.* ......................... 104,700 2,022,804 Aaron Rents, Inc. ....................... 116,800 2,399,072 Ameristar Casinos, Inc. ................. 43,800 1,192,674 Barnes & Noble, Inc.* ................... 57,600 1,990,656 Brown Shoe Co., Inc. .................... 40,900 1,084,668 Building Materials Holding Corp. ................................. 55,600 1,257,672 Carlisle Cos., Inc. ..................... 31,000 1,892,550 Champion Enterprises, Inc.* ............. 78,300 754,029 Charlotte Russe Holding, Inc.* ................................. 61,700 881,693 Charming Shoppes, Inc.* ................. 252,700 1,733,522 Checkers Drive-In Restaurants, Inc.* .................... 49,000 521,360 Choice Hotels International, Inc. .................................. 18,200 943,852 CKE Restaurants, Inc.* .................. 166,600 1,994,202 Claire's Stores, Inc. ................... 26,900 654,746 CNF, Inc. ............................... 52,500 2,153,550 Covenant Transport, Inc., Class A* .............................. 54,100 1,054,950 Culp, Inc.* ............................. 79,700 604,923 DHB Industries, Inc.* ................... 34,700 439,649 Guess?, Inc.* ........................... 157,100 2,384,778 Guitar Center, Inc.* .................... 48,300 1,978,368 Hollinger International, Inc., Class A ............................... 110,100 1,882,710 Insight Enterprises, Inc.* .............. 86,700 1,387,200 NUMBER OF SHARES VALUE --------- ------------ CONSUMER CYCLICAL--(CONTINUED) Jacuzzi Brands, Inc.* ................... 310,800 $ 2,703,960 Monaco Coach Corp. ...................... 103,900 2,232,811 Navarre Corp.* .......................... 115,000 1,792,850 Pantry, Inc. (The)* ..................... 105,100 2,045,246 Penn National Gaming, Inc.* ............. 71,300 2,770,005 Philadelphia Consolidated Holding Corp.* ........................ 19,600 1,043,896 RC2 Corp.* .............................. 38,200 1,207,502 Rocky Shoes and Boots, Inc.* ............ 44,000 844,800 Smart & Final, Inc.* .................... 131,000 2,136,610 Stanley Furniture Co., Inc. ............. 22,400 904,512 Stein Mart, Inc.* ....................... 163,600 2,674,860 ------------ 51,566,680 ------------ CONSUMER GROWTH--17.2% Advanced Medical Optics, Inc.* ................................. 48,300 1,797,726 Amedisys, Inc.* ......................... 76,400 1,977,232 America Service Group, Inc.* ............ 73,200 2,777,208 Apollo Group, Inc., Class A* ............ 29,778** 2,322,661 Applera Corp. - Celera Genomics Group* ....................... 56,700 610,659 Beverly Enterprises, Inc.* .............. 61,000 437,370 Bright Horizons Family Solutions, Inc.* ...................... 50,000 2,474,500 Core Laboratories N.V.* ................. 104,300 2,281,041 Dade Behring Holdings, Inc.* ................................. 59,900 3,148,943 DRAXIS Health, Inc. ..................... 211,200 944,064 Elizabeth Arden, Inc.* .................. 71,400 1,470,126 Encore Medical Corp.* ................... 202,400 848,056 Endo Pharmaceuticals Holdings, Inc.* ....................... 88,600 1,502,656 Gen-Probe, Inc.* ........................ 68,600 2,476,460 Genencor International, Inc.* ........... 141,800 2,263,128 Haemonetics Corp.* ...................... 82,900 2,621,298 HealthExtras, Inc.* ..................... 112,600 1,332,058 IDX Systems Corp.* ...................... 10,100 292,900 ITT Educational Services, Inc.* ................................. 52,300 1,808,011 The accompanying notes are an integral part of the financial statements. 11 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 NUMBER OF SHARES VALUE --------- ------------ CONSUMER GROWTH--(CONTINUED) Medical Action Industries, Inc.* ................................. 63,842 $ 1,022,110 Molecular Devices Corp.* ................ 89,400 2,056,200 National Medical Health Card Systems, Inc.* ................... 48,900 1,168,221 NeighborCare, Inc.* ..................... 88,000 2,234,320 Ocular Sciences, Inc.* .................. 63,100 2,751,160 PDI, Inc.* .............................. 72,600 1,748,934 PerkinElmer, Inc. ....................... 154,600 2,702,408 Respironics, Inc.* ...................... 40,300 2,143,960 Select Medical Corp. .................... 74,800 993,344 Sybron Dental Specialties, Inc.* ................................. 26,800 747,184 Urologix, Inc.* ......................... 58,700 590,522 ------------ 51,544,460 ------------ ENERGY--5.0% Dawson Geophysical Co.* ................. 45,200 894,960 Giant Industries, Inc.* ................. 97,400 2,172,020 KCS Energy, Inc.* ....................... 114,500 1,436,975 Petroleum Development Corp.* ................................ 74,600 2,314,838 Tesoro Petroleum Corp.* ................. 149,000 3,528,320 Vintage Petroleum, Inc. ................. 171,700 2,815,880 Western Gas Resources, Inc. ............. 65,800 1,837,136 ------------ 15,000,129 ------------ FINANCIAL--17.4% 21st Century Insurance Group ................................. 125,100 1,635,057 Advanta Corp., Class B .................. 103,800 2,439,300 American Equity Investment Life Holding Co.* ..................... 107,100 979,965 American Physicians Capital, Inc.* ................................. 42,800 1,176,144 Arch Capital Group Ltd.* ................ 55,500 2,031,300 Banco Itau Holding Financeira S.A. - ADR ................. 49,800 2,509,920 Bristol West Holdings, Inc. ............. 27,200 449,616 Capital Crossing Bank* .................. 25,600 597,760 NUMBER OF SHARES VALUE --------- ------------ FINANCIAL--(CONTINUED) Cash America International, Inc. .................................. 70,200 $ 1,624,428 E*TRADE Financial Corp.* ................ 96,200 1,133,236 First American Corp. .................... 88,300 2,558,051 First Cash Financial Services, Inc.* ................................. 151,850 2,921,594 First Republic Bank ..................... 20,200 904,758 Infinity Property & Casual Corp. ................................. 67,500 1,850,850 LandAmerica Financial Group, Inc. ........................... 47,600 2,048,704 Max Re Capital Ltd. ..................... 119,700 2,215,647 Ohio Casualty Corp.* .................... 29,800 600,470 PFF Bancorp, Inc. ....................... 16,100 594,090 Providian Financial Corp.* .............. 141,500 2,043,260 R & G Financial Corp., Class B ............................... 79,300 2,742,194 Selective Insurance Group, Inc. .................................. 51,600 1,781,748 StanCorp Financial Group, Inc. .................................. 40,100 2,907,250 State Auto Financial Corp. .............. 66,500 2,000,985 Stewart Information Services Corp. ................................. 64,000 2,338,560 Unibanco-Uniao de Bancos Brasileiros S.A. - GDR ................ 50,600 1,158,740 United Fire & Casualty Co. .............. 32,500 1,969,500 Westcorp ................................ 63,000 2,587,410 WFS Financial, Inc.* .................... 13,600 617,032 Wilshire Bancorp. Inc.* ................. 109,000 3,587,190 ------------ 52,004,759 ------------ INDUSTRIAL--15.3% Applied Industrial Technologies, Inc. .................... 65,000 1,942,200 BEI Technologies, Inc. .................. 87,200 2,427,648 Briggs & Stratton Corp. ................. 22,000 1,652,200 Brink's Co., (The) ...................... 88,900 2,560,320 Consolidated Graphics, Inc.* ............ 64,900 2,651,165 Flowserve Corp.* ........................ 87,500 2,007,250 Franklin Electric Co., Inc. ............. 27,100 1,063,675 The accompanying notes are an integral part of the financial statements. 12 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2004 NUMBER OF SHARES VALUE --------- ------------ INDUSTRIAL--(CONTINUED) Genlyte Group, Inc., (The)* ............. 32,600 $ 1,946,546 Heidrick & Struggles International, Inc.* .................. 65,500 1,746,230 Hub Group, Inc., Class A* ............... 67,500 1,790,100 Hughes Supply, Inc. ..................... 40,200 2,435,718 Kforce, Inc.* ........................... 130,400 856,728 Korn/Ferry International, Inc.* ................................. 102,500 1,821,425 Middleby Corp., (The) ................... 42,500 2,130,100 NCI Building Systems, Inc.* ............. 78,700 2,414,516 Overnite Corp. .......................... 85,000 2,587,400 Pacer International, Inc.* .............. 88,600 1,373,300 Rofin-Sinar Technologies, Inc.* ................................. 76,500 2,149,650 Rollins, Inc. ........................... 64,500 1,506,720 Sirva, Inc.* ............................ 97,400 2,062,932 Source Interlink Companies, Inc.* ................................. 103,800 910,326 Veritas DGC, Inc.* ...................... 51,800 1,213,674 Watsco, Inc. ............................ 67,600 1,965,808 WESCO International, Inc.* .............. 136,100 2,754,664 ------------ 45,970,295 ------------ TECHNOLOGY--16.9% Advent Software, Inc.* .................. 75,100 1,267,688 Aladdin Knowledge Systems Ltd.* ................................. 131,300 2,036,463 Alvarion Ltd.* .......................... 109,100 1,224,102 Applied Signal Technology, Inc ................................... 65,300 2,265,257 Artesyn Technologies, Inc.* ............. 268,700 2,286,637 Aspect Communications Corp.* ................................ 265,300 2,270,968 Avaya, Inc.* ............................ 136,800 1,658,016 Axcelis Technologies, Inc.* ............. 76,400 595,920 BE Aerospace, Inc.* ..................... 196,400 2,081,840 Blackboard, Inc.* ....................... 95,200 1,916,376 Coherent, Inc.* ......................... 81,500 2,072,545 Covansys Corp.* ......................... 44,200 417,690 CyberOptics Corp.* ...................... 96,300 1,686,213 Digi International, Inc.* ............... 195,700 2,201,625 NUMBER OF SHARES VALUE --------- ------------ TECHNOLOGY--(CONTINUED) Ditech Communications Corp.* ................................ 32,100 $ 690,792 ECI Telecom Ltd.* ....................... 369,000 2,546,100 Hypercom Corp.* ......................... 257,600 1,880,480 InFocus Corp.* .......................... 225,900 1,933,704 InfoSpace, Inc.* ........................ 41,000 1,558,000 MapInfo Corp.* .......................... 133,500 1,285,605 MTS Systems Corp. ....................... 43,400 943,950 NMS Communications Corp.* ................................ 96,300 462,240 Orbotech Ltd.* .......................... 100,800 1,682,352 Parametric Technology Corp.* ................................ 482,500 2,349,775 Progress Software Corp.* ................ 109,200 2,199,288 QuickLogic Corp.* ....................... 85,100 223,898 Sigmatel, Inc.* ......................... 3,800 63,802 SkillSoft PLC - ADR* .................... 67,984 422,181 Skyworks Solutions, Inc. ................ 182,200 1,517,726 Standard Microsystems Corp.* ................................ 37,200 590,364 Telesystem International Wireless, Inc.* ....................... 66,100 612,747 Thomas Nelson, Inc. ..................... 29,300 556,700 Transaction Systems Architects, Inc., Class A* ............ 84,900 1,446,696 Vicor Corp. ............................. 101,900 1,206,496 Witness Systems, Inc.* .................. 187,900 2,500,949 ------------ 50,655,185 ------------ UTILITY--0.7% Compania Anonima Nacional Telefonos de Venezuela (CANTV) - ADR ................................... 106,300 2,106,866 ------------ TOTAL COMMON STOCKS (Cost $259,113,469) ................................. 288,776,192 ------------ The accompanying notes are an integral part of the financial statements. 13 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2004 NUMBER OF SHARES VALUE --------- ------------ SHORT TERM INVESTMENTS--1.8% Galaxy Institutional Money Market Fund 1.37% 09/01/04 ........................... 5,353,622 $ 5,353,622 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $5,353,622) ................................... 5,353,622 ------------ TOTAL INVESTMENTS--98.2% (Cost $264,467,091) ..................................... 294,129,814 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--1.8% .................................... 5,542,950 ------------ NET ASSETS--100.0% ......................................... $299,672,764 ============ ---------- * Non-income producing. ** Actual shares at August 31, 2004 were 29,777.709. Cash in lieu of the fractional shares was received on September 3, 2004 in the amount of $53.21. ADR -- American Depository Receipt. GDR -- Global Depository Receipt. The accompanying notes are an integral part of the financial statements. 14 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2004 ASSETS Investments, at value (cost - $264,467,091) ................ $294,129,814 Receivable for investments sold ............................ 16,653,917 Receivable for Fund shares sold ............................ 125,210 Dividends receivable ....................................... 165,269 Prepaid expenses and other assets .......................... 27,979 ------------ Total assets ............................................. 311,102,189 ------------ LIABILITIES Payable for investments purchased .......................... 10,959,514 Payable for Fund shares redeemed ........................... 108,637 Payable to the Adviser ..................................... 240,715 Accrued expenses and other liabilities ..................... 120,559 ------------ Total liabilities ........................................ 11,429,425 ------------ NET ASSETS Capital stock, $0.001 par value ............................ 12,006 Additional paid-in capital ................................. 241,412,579 Accumulated net realized gain from investments ............. 28,585,456 Net unrealized appreciation on investments. ................ 29,662,723 ------------ Net assets ............................................... $299,672,764 ============ INSTITUTIONAL CLASS Net assets ................................................. $175,641,864 ------------ Shares outstanding ......................................... 7,027,226 ------------ Net asset value, offering and redemption price per share ... $ 24.99 ============ INVESTOR CLASS Net assets ................................................. $124,030,900 ------------ Shares outstanding ......................................... 4,978,965 ------------ Net asset value, offering and redemption price per share ... $ 24.91 ============ The accompanying notes are an integral part of the financial statements. 15 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004 --------------- INVESTMENT INCOME Dividends(1) ............................................... $ 1,955,849 ------------ Total investment income .................................. 1,955,849 ------------ EXPENSES Advisory fees .............................................. 3,038,127 Administrative service fees ................................ 455,719 Administration and accounting fees and expenses ............ 429,514 Transfer agent fees and expenses ........................... 151,589 Shareholder servicing fees ................................. 131,684 Custodian fees and expenses ................................ 91,144 Audit and legal fees ....................................... 89,455 Printing fees .............................................. 46,390 Directors' and Officer's fees and expenses ................. 33,530 Federal and state registration fees ........................ 29,371 Insurance and other expenses ............................... 15,478 ------------ Total expenses before waivers and reimbursements ......... 4,512,001 Less: waivers and reimbursements ......................... (582,658) ------------ Net expenses ............................................. 3,929,343 ------------ Net investment loss ........................................ (1,973,494) ------------ NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS Net realized gain from investments ......................... 43,215,406 Net change in unrealized appreciation on investments ....... (19,214,527) ------------ Net realized and unrealized gain from investments .......... 24,000,879 ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......... $ 22,027,385 ============ ---------- (1) Net of foreign taxes withheld of $40,436. The accompanying notes are an integral part of the financial statements. 16 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss ......................................... $ (1,973,494) $ (1,155,006) Net realized gain/(loss) from investments ................... 43,215,406 (8,671,658) Net change in unrealized appreciation on investments ........ (19,214,527) 60,570,492 ------------ ------------ Net increase in net assets resulting from operations ........ 22,027,385 50,743,828 ------------ ------------ LESS DIVIDENDS TO SHAREHOLDERS FROM: Net investment income Institutional shares .................. -- -- Net investment income Investor shares ....................... -- -- ------------ ------------ Total dividends to shareholders ........................... -- -- ------------ ------------ INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 4) ......................... 32,292,113 25,050,315 ------------ ------------ Total increase in net assets ................................ 54,319,498 75,794,143 ------------ ------------ NET ASSETS Beginning of period ......................................... 245,353,266 169,559,123 ------------ ------------ End of period* .............................................. $299,672,764 $245,353,266 ============ ============ ---------- * Includes undistributed net investment losses of $0 and $505,736 for the year ended August 31, 2004, and for the year ended August 31, 2003, respectively.
The accompanying notes are an integral part of the financial statements. 17 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
INSTITUTIONAL CLASS -------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE PERIOD YEAR YEAR YEAR YEAR 10/1/99* ENDED ENDED ENDED ENDED THROUGH 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .......... $ 22.71 $ 17.83 $ 19.52 $ 20.91 $ 12.00 ------- ------- ------- ------- ------- Net investment loss ........................... (0.16)** (0.11)** (0.02) (0.07)** (0.05)** Net realized and unrealized gain (loss) on investments ............................. 2.44** 4.99** (1.67) (0.66)** 8.96** ------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations .................. 2.28 4.88 (1.69) (0.73) 8.91 ------- ------- ------- ------- ------- Distributions to shareholders from: Net investment income ......................... -- -- -- -- -- Net realized capital gains .................... -- -- -- (0.66) -- ------- ------- ------- ------- ------- Net asset value, end of period ................ $ 24.99 $ 22.71 $ 17.83 $ 19.52 $ 20.91 ======= ======= ======= ======= ======= Total investment return(1) .................... 10.04% 27.37% (8.66)% (3.39)% 74.25% ======= ======= ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) ............................ $175,642 $132,845 $80,639 $36,526 $5,593 Ratio of expenses to average net assets with waivers and reimbursements ............ 1.25% 1.25% 1.25% 1.25% 1.25%(2) Ratio of expenses to average net assets without waivers and reimbursements ............................. 1.44% 1.50% 1.50% 1.68% 3.91%(2) Ratio of net investment loss to average net assets ................................. (0.61)% (0.60)% (0.11)% (0.36)% (0.58)%(2) Portfolio turnover rate ....................... 129.18% 122.39% 140.27% 125.99% 94.31% ---------- * Commencement of operations. ** Calculated based on average shares outstanding for the period. (1) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. (2) Annualized.
The accompanying notes are an integral part of the financial statements. 18 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
INVESTOR CLASS ----------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE PERIOD YEAR YEAR YEAR YEAR 10/1/99* ENDED ENDED ENDED ENDED THROUGH 8/31/04 8/31/03 8/31/02 8/31/01 8/31/00 ------- ------- ------- ------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period .......... $ 22.65 $ 17.80 $ 19.49 $ 20.89 $ 12.00 ------- ------- ------- ------- ------- Net investment loss ........................... (0.18)** (0.12)** (0.03) (0.09)** (0.06)** Net realized and unrealized gain (loss) on investments ............................. 2.44** 4.97** (1.66) (0.65)** 8.95** ------- ------- ------- ------- ------- Net increase (decrease) in net assets resulting from operations .................. 2.26 4.85 (1.69) (0.74) 8.89 ------- ------- ------- ------- ------- Distributions to shareholders from: Net investment income ......................... -- -- -- -- -- Net realized capital gains .................... -- -- -- (0.66) -- ------- ------- ------- ------- ------- Net asset value, end of period ................ $ 24.91 $ 22.65 $ 17.80 $ 19.49 $ 20.89 ======= ======= ======= ======= ======= Total investment return(1) .................... 9.98% 27.25% (8.67)% (3.45)% 74.08% ======= ======= ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) ..... $124,031 $112,508 $88,920 $54,255 $19,358 Ratio of expenses to average net assets with waivers and reimbursements ............................. 1.35% 1.35% 1.27% 1.35% 1.35%(2) Ratio of expenses to average net assets without waivers and reimbursements ............................. 1.54% 1.60% 1.60% 1.78% 4.01%(2) Ratio of net investment loss to average net assets ................................. (0.70)% (0.69)% (0.20)% (0.46)% (0.68)%(2) Portfolio turnover rate ....................... 129.18% 122.39% 140.27% 125.99% 94.31% ---------- * Commencement of operations. ** Calculated based on average shares outstanding for the period. (1) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. (2) Annualized.
The accompanying notes are an integral part of the financial statements. 19 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988 and is registered under the Investment Company Act of 1940, as amended, (the "Investment Company Act") as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. The portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently RBB has fourteen active investment portfolios, including the Bogle Investment Management Small Cap Growth Fund (the "Fund"), which commenced investment operations on October 1, 1999. As of the date hereof, the Fund offers two classes of shares, Institutional Class and Investor Class. RBB has authorized capital of thirty billion shares of common stock of which 26.073 billion are currently classified into ninety-seven classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Securities held by the Fund are valued using the closing price or the last sale price on a national securities exchange or on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there were no sales on that day or the securities are traded on other over-the-counter markets, the mean of the last bid and ask price prior to the market close are used. Short-term debt securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Debt securities having a remaining maturity of greater than 60 days are valued at the mean between the bid and ask prices. With the approval of the Company's Board of Directors, the Fund may use a pricing service, bank or broker/dealer experienced in providing valuations to value the Fund's securities. If market quotations are unavailable or deemed unreliable, securities will be valued by the Fund's Valuation Committee as determined by procedures adopted by the Board of Directors. USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. REPURCHASE AGREEMENTS -- The Fund may purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The financial institutions with whom the Fund enters into repurchase agreements are banks and broker-dealers that Bogle Investment Management, L.P. (the "Adviser") considers creditworthy. The seller, under a repurchase agreement, will be required to maintain the value of the securities as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser marks to market daily the value of the 20 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) collateral, and, if necessary, requires the seller to deposit additional collateral by the next day of business, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. For the year ended August 31, 2004, the Fund did not enter into any repurchase agreements. INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES -- The Fund records security transactions based on trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes in determining realized gains and losses on investments. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. The Fund's net investment income (other than class specific shareholder servicing fees) and unrealized and realized gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all of the RBB families (such as director or professional fees) are charged to all funds in proportion to their net assets of the RBB Funds, or in such other manner as the Board of Directors deems fair or equitable. Expenses and fees, including investment advisory and administration fees, are accrued daily and taken into account for the purpose of determining the net asset value of the Fund. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income and distributions from net realized capital gains, if any, will be declared and paid at least annually to shareholders and recorded on ex-date. Income and capital gain distributions are determined in accordance with U.S. federal income tax regulations which may differ from accounting principles generally accepted in the United States. These differences include the treatment of non-taxable dividends, expiring capital loss carryforwards, foreign currency gain/loss, and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. The following permanent differences as of August 31, 2004, primarily attributable to net investment loss were reclassified to the following accounts:
INCREASE DECREASE INCREASE ACCUMULATED ACCUMULATED ADDITIONAL NET INVESTMENT NET REALIZED PAID-IN LOSS GAIN CAPITAL -------------- ------------- ---------- Bogle Investment Management Small Cap Growth Fund $2,479,230 $(2,700,964) $221,734
U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is the Fund's intention to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from U.S. income and excise taxes. 21 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) OTHER -- In the normal course of business, the Fund may enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is dependent on claims that may be made against the Fund in the future, and, therefore, cannot be estimated; however, based on experience, the risk of material loss for such claims is considered remote. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES For its advisory services, the Adviser is entitled to receive 1.00% of the Fund's average daily net assets, computed daily and payable monthly. The Adviser has agreed to limit the Fund's total operating expenses for the current fiscal year to the extent that such expenses exceed 1.25% of the average daily net assets of the Fund's Institutional Class and 1.35% of the average daily net assets of the Fund's Investor Class. As necessary, this limitation is effected in waivers of advisory fees and reimbursements of expenses exceeding the advisory fee. For the year ended August 31, 2004, investment advisory fees and waivers were as follows:
GROSS NET ADVISORY FEES WAIVERS ADVISORY FEES ------------- ---------- ------------- Bogle Investment Management Small Cap Growth Fund $3,038,127 $(149,725) $2,888,402
The Fund will not pay the Adviser at a later time for any amounts they waived or any amounts assumed. In addition to serving as the Fund's investment adviser, Bogle Investment Management, L.P. provides certain shareholder services to the Investor Class of the Fund. As compensation for such services, the Adviser receives a monthly fee equal to an annual rate of 0.10% of the average daily net assets of the Fund's Investor Class. PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc., and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., serves as administrator for the Fund. For providing administrative and accounting services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.115% of the Fund's average daily net assets. In addition, PFPC serves as the Fund's transfer and dividend disbursing agent. For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by the Fund and PFPC. This fee is charged to all funds in proportion to their net assets of the RBB Funds. The Bogle Investment Management Small Cap Growth Fund's portion of this fee for the year ended August 31, 2004 was $49,410. 22 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) PFPC voluntarily agreed to waive a portion of its administration and accounting services fees for the Fund. For the year ended August 31, 2004, administration and accounting services fees and waivers were as follows:
GROSS ADMINISTRATION NET ADMINISTRATION AND AND ACCOUNTING ACCOUNTING SERVICES SERVICES FEES AND EXPENSES WAIVERS FEES AND EXPENSES -------------------------- --------- ---------------------- Bogle Investment Management Small Cap Growth Fund $429,514 $(37,977) $391,537
PFPC Distributors, Inc., ("PFPC Distributors") a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., provides certain administrative services to the Fund. As compensation for such administrative services, PFPC Distributors receives a monthly fee equal to an annual rate of 0.15% of the Fund's average daily net assets. PFPC Distributors voluntarily agreed to waive a portion of its administrative services fees for the Fund. For the year ended August 31, 2004, administrative services fees and waivers were as follows:
GROSS ADMINISTRATIVE NET ADMINISTRATIVE SERVICES FEES WAIVERS SERVICES FEES -------------------- ---------- ------------------ Bogle Investment Management Small Cap Growth Fund $455,719 $(394,956) $60,763
The Fund will not pay PFPC or PFPC's affiliates at a later time for any amounts they waived or any amounts assumed. PFPC Trust Company provides certain custodial services to the Fund. PFPC Trust Company is a wholly-owned subsidiary of PFPC Worldwide, Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. As compensation for such custodial services, PFPC Trust Company is entitled to receive a monthly fee equal to an annual rate of 0.03% of the Fund's average daily net assets. PFPC and its affiliates were due fees from the Fund of $56,504 at August 31, 2004. 3. INVESTMENT IN SECURITIES For the year ended August 31, 2004, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: INVESTMENT SECURITIES ------------------------------- PURCHASES SALES ------------ ------------ Bogle Investment Management Small Cap Growth Fund $403,654,720 $374,665,212 23 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2004, the Fund has 100,000,000 shares of $0.001 par value common stock authorized for the Institutional Class and 100,000,000 shares of $0.001 par value common stock authorized for the Investor Class. Transactions in capital shares were as follows:
INSTITUTIONAL CLASS ---------------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ----------------------------- --------------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ------------ Sales ........................................ 2,135,001 $ 56,532,403 2,263,361 $ 41,292,855 Redemptions .................................. (958,444) (24,625,912) (936,265) (16,623,617) --------- ------------ --------- ------------ Net Increase ................................. 1,176,557 $ 31,906,491 1,327,096 $ 24,669,238 ========= ============ ========= ============ INVESTOR CLASS ---------------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 ----------------------------- --------------------------- SHARES VALUE SHARES VALUE --------- ------------ --------- ------------ Sales ........................................ 812,505 $ 21,459,043 685,239 $ 12,710,849 Redemptions .................................. (800,883) (21,073,421) (713,904) (12,329,772) --------- ------------ --------- ------------ Net Increase/(Decrease) ...................... 11,622 $ 385,622 (28,665) $ 381,077 ========= ============ ========= ============
5. FEDERAL INCOME TAX INFORMATION At August 31, 2004, Federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Fund were as follows:
FEDERAL TAX UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION APPRECIATION ------------ ----------- ------------ ----------- Bogle Investment Management Small Cap Growth Fund $265,312,771 $41,051,593 $(12,234,550) $28,817,043
24 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of August 31, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM INCOME GAINS ------------- ------------- Bogle Investment Management Small Cap Growth Fund $2,306,138 $27,125,000 At August 31, 2004, the Fund had no capital loss carryforwards available to offset future capital gains. Under Federal tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as having arisen on the first day of the following fiscal year. For the year ended August 31, 2004, the Fund incurred no post-October capital losses. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term and foreign currency gains are reported as ordinary income for federal tax purposes. The tax character of dividends and distributions paid during the last two fiscal years were as follows: ORDINARY LONG-TERM INCOME GAINS TOTAL -------- --------- ----- Bogle Investment Management Small Cap Growth Fund 2004 -- -- -- 2003 -- -- -- 25 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of The RBB Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Bogle Investment Management Small Cap Growth Fund, a separately managed portfolio of The RBB Fund, Inc. (the "Fund") at August 31, 2004, the results of its operations for the year then ended, the changes in its net assets for the two years then ended, and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the Standards of the Public Company Accounting Oversight Board (United States). Those standards 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 at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 29, 2004 26 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND SHAREHOLDER TAX INFORMATION (UNAUDITED) The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of the Fund's fiscal year end (August 31) as to the U.S. federal tax status of distributions received by each Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2004, the following dividends and distributions per share were paid by the Fund:
ORDINARY INCOME CAPITAL GAINS ------------------------------- ------------------------------- INSTITUTIONAL INVESTOR INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS ------------- -------- ------------- -------- -- -- -- --
Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2005. There will be no 1099-DIV issued if there is no distribution required. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Fund, if any. In general, dividends received by tax exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. 27 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND OTHER INFORMATION (UNAUDITED) 1. PROXY VOTING Policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling (877) 264-5346 and on the Securities and Exchange Commission's website at http://www.sec.gov. 2. QUARTERLY PORTFOLIO SCHEDULES The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Fund's Form N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 28 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The Statement of Additional Information ("SAI") includes additional information about the Company's directors and may be obtained free of charge by calling (877) 264-5346.
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) COMPLEX OTHER NAME, ADDRESS, HELD AND LENGTH OF DURING PAST OVERSEEN DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS BY HELD BY DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to Since 1969, Director and Vice Chairman, 14 Director, Comcast Corporation present Comcast Corporation (cable television and Comcast 1500 Market Street, communications); Director, NDS Group PLC Corporation 35th Floor (provider of systems and applications for Philadelphia, PA 19102 digital pay TV). DOB: 7/16/33 ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to Since 2000, Vice President, Fox Chase Cancer 14 None Fox Chase Cancer Center present Center (biomedical research and medical 333 Cottman Avenue care); prior to 2000, Executive Vice Philadelphia, PA 19111 President, Fox Chase Cancer Center. DOB: 12/06/35 ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director 1991 to Since December 2000, Director, Gabelli 14 None 106 Pierrepont Street present Partners, L.P. (an investment partnership); Brooklyn, NY 11201 Chief Operating Officer and member of the DOB: 5/21/48 Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to Since 1974, Chairman, Director and President, 14 Director, Moyco Technologies, Inc. present Moyco Technologies, Inc. (manufacturer of Moyco 200 Commerce Drive precision coated and industrial abrasives). Technologies, Montgomeryville, PA 18936 Since 1999, Director, Pennsylvania Business Inc. DOB: 3/24/34 Bank. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
29 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) COMPLEX OTHER NAME, ADDRESS, HELD AND LENGTH OF DURING PAST OVERSEEN DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS BY HELD BY DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS 2 ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to Since July 2002, Senior Vice President and 14 None Oppenheimer & Company, Inc. present prior thereto, Executive Vice President of 200 Park Avenue Oppenheimer & Co., Inc., formerly Fahnestock New York, NY 10166 & Co., Inc. (a registered broker-dealer). DOB: 4/16/38 ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to Director of PFPC Inc. from January 1987 to 14 None 400 Bellevue Parkway present April 2002, Chairman and Chief Executive Wilmington, DE 19809 Officer of PFPC Inc. until April 2002, DOB: 9/25/38 Executive Vice President of PNC Bank, National Association from October 1981 to April 2002, Director of PFPC International Ltd. (financial services) from August 1993 to April 2002, Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
30 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND POSITION(S) TERM OF OFFICE PRINCIPAL OCCUPATION(S) COMPLEX OTHER NAME, ADDRESS, HELD AND LENGTH OF DURING PAST OVERSEEN DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED 1 5 YEARS BY HELD BY DIRECTOR* DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to Certified Public Accountant; Vice Chairman of N/A N/A 400 Bellevue Parkway and present the Board, Fox Chase Cancer Center; Trustee 4th Floor Treasurer and Emeritus, Pennsylvania School for the Deaf; Wilmington, DE 19809 1988 to Trustee Emeritus, Immaculata University; DOB: 6/29/24 present President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary Since 2003 Since 2000, Vice President and Counsel, PFPC N/A N/A 301 Bellevue Parkway Inc. (financial services company); Associate, 2nd Floor Stradley, Ronon, Stevens & Young, LLC (law Wilmington, DE 19809 firm) from 1996 to 2000. DOB: 1/27/68 ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 Senior Legal Counsel, PFPC Inc. from 2002 to N/A N/A Vigilant Compliance Compliance 2004; Chief Legal Counsel, Corviant 186 Dundee Drive, Suite 700 Officer Corporation (Investment Adviser, Williamstown, NJ 08094 Broker/Dealer and Service Provider to DOB: 12/25/62 Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation and the Company's principal underwriter, PFPC Distributors, Inc. are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
31 INVESTMENT ADVISER Bogle Investment Management, L.P. 57 River Street Suite 206 Wellesley, MA 02481 ADMINISTRATOR PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Two Commerce Square 2001 Market Street Philadelphia, PA 19103-7042 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 This report is submitted for the general information of the shareholders of the Fund. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. Current performance may be lower or higher than the performance data provided in the report. ================================================================================ BAKER 500 CORPORATION ================================================================================ BAKER 500 GROWTH FUND OF THE RBB FUND, INC. [LOGO OMITTED] B ------- 500 INSTITUTIONAL CLASS CLASS S ================================================================================ ANNUAL REPORT AUGUST 31, 2004 ================================================================================ BAKER 500 GROWTH FUND PRIVACY NOTICE (UNAUDITED) The Baker 500 Growth Fund of The RBB Fund, Inc. (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund. We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (877) 264-5346. October 2004 -------------------------------------------------------------------------------- BAKER 500 GROWTH FUND ANNUAL REPORT -------------------------------------------------------------------------------- October 25, 2004 Fellow Shareholders: The Baker 500 Growth Fund Institutional Class returned (7.47)% and the S Class (7.56)% for the six month period ending August 31, 2004, versus the Fund's benchmark, the S&P 500 Index, which returned (2.75)% for the same period. As stated in our semi-annual report as of February 29, 2004, we took a full investment position in the middle of January 2004, based on our belief the economy was improving and corporate earnings would continue to grow. The portfolio performed positively from March through June, but the correction of July and August did have a negative impact on many of the stocks in the Fund, causing performance to go negative for the year during this period. [CHART OMITTED - EDGAR REPRESENTATION OF DATA IS AS FOLLOWS] COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BAKER 500 GROWTH FUND INSTITUTIONAL CLASS(1)(2) VS. S&P 500 INDEX
TOTAL RETURNS Growth of $10,000 One Year Ended Since on August 31, 2004 August 31, 2004 Inception(3) ------------------ --------------- ------------ Baker 500 Growth Fund -- Institutional Class $10,117 0.83% 0.73% S&P 500 Index $13,404 11.45% 20.25%
Baker Institutional Shares S&P 500 Index 1/28/03 $10,000 $10,000 1/31/03 $10,000 $10,101 2/28/03 $10,042 $9,949 3/31/03 $10,067 $10,046 4/30/03 $10,033 $10,874 5/31/03 $9,983 $11,447 6/30/03 $9,950 $11,593 7/31/03 $9,983 $11,797 8/31/03 $10,033 $12,027 9/30/03 $9,783 $11,900 10/31/03 $10,375 $12,573 11/30/03 $10,500 $12,684 12/31/03 $10,508 $13,349 1/31/04 $10,950 $13,594 2/29/04 $10,933 $13,783 3/31/04 $10,908 $13,575 4/30/04 $10,667 $13,361 5/31/04 $10,958 $13,544 6/30/04 $11,125 $13,808 7/31/04 $10,375 $13,351 8/31/04 $10,117 $13,404 PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE --------------------- (1) The chart assumes a hypothetical $10,000 initial investment in the fund made on January 28, 2003 (commencement of operations) and reflects fund expenses. Investors should note that the fund is an actively managed mutual fund while the index is unmanaged, does not incur expenses and is not available for investment. (2) Baker 500 Corporation waived a portion of its advisory fee. Total returns shown include fee waivers. Total returns would have been lower had there been no fee waivers. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) Annualized return for the period January 28, 2003 (commencement of operations) through August 31, 2004. 2 -------------------------------------------------------------------------------- BAKER 500 GROWTH FUND ANNUAL REPORT -------------------------------------------------------------------------------- MACRO-ECONOMIC PERSPECTIVE From a macro-economic perspective, the tax cuts implemented in 2003 appear to have helped stimulate the economy, along with the continuing low interest rate environment, low inflation impact on pricing, and unemployment close to what the government economists and the Federal Reserve consider a normal level. The past year results in corporate earnings have been continued accelerated growth. Corporations are building large cash positions in their balance sheets. VALUATION LEVELS Equity valuations were at 14.8 P/E (price/earnings) ratio for forward earnings on the S&P 500 Index as of August 31, 2004 versus the long-term average P/E over the last 25 years for the S&P 500 Index is at 15.2 P/E. If earnings should continue to compound at 20-25%, the earnings component of the P/E ratio will rise, meaning the price must eventually rise as well to sustain the current P/E ratio or the P/E ratio will drop. STRATEGY We have continued to implement a growth strategy to meet our fund objectives. As of August 31, 2004, the Fund portfolio was invested in 20 positions, spread across 13 industries. We appreciate your continued support and look forward to the investment opportunities that lie ahead for the Baker 500 Growth Fund. Sincerely, L. Edward Baker Chief Portfolio Manager -------------------------------------------------------------------------------- PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. THE S&P 500 IS A CAPITALIZATION-WITHED INDEX OF 500 STOCKS. THE INDEX IS DESIGNED TO MEASURE PERFORMANCE OF THE BROAD U.S. ECONOMY THROUGH CHANGES IN THE AGGREGATE MARKET VALUE OF 500 STOCKS REPRESENTING ALL MAJOR INDUSTRIES. A DIRECT INVESTMENT IN THE INDEX IS NOT POSSIBLE. -------------------------------------------------------------------------------- 3 -------------------------------------------------------------------------------- BAKER 500 GROWTH FUND FUND EXPENSE EXAMPLES -------------------------------------------------------------------------------- As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, redemption fees; and (2) ongoing costs, including management fees; distribution fees; and other expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other mutual funds. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the period from March 1, 2004 through August 31, 2004. ACTUAL EXPENSES The first line of the accompanying tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the accompanying tables provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not your Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the accompanying tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the accompanying tables is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
BAKER 500 GROWTH FUND - INSTITUTIONAL CLASS -------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $ 925.30 $5.76 Hypothetical (5% return before expenses) 1,000.00 1,019.04 6.06 BAKER 500 GROWTH FUND - S CLASS -------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2004 AUGUST 31, 2004 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $ 924.40 $6.92 Hypothetical (5% return before expenses) 1,000.00 1,017.82 7.28 -------------------- * Expenses are equal to an annualized expense ratio of 1.19% for the Institutional Class shares and 1.43% for the Class S shares, which includes waived fees or reimbursed expenses, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, then divided by 366 to reflect the one-half year period.
4 BAKER 500 GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE % OF NET ASSETS VALUE -------- ----------- COMMON STOCK: Communications Equipment ................... 3.8% $ 712,959 Electronic Equipment & Instruments ................. 4.8% 892,186 Energy Equipment & Services .................... 4.4% 821,322 Food & Staples Retailing 5.0% 936,600 Health Care Equipment & Supplies .................... 17.9% 3,330,537 Health Care Providers & Services .................... 7.9% 1,466,880 Hotels, Restaurants & Leisure ..................... 3.7% 698,170 Household Durables ............ 2.9% 549,402 Machinery ..................... 4.4% 827,862 Other Securities .............. 9.1% 1,695,863 Paper & Forest Products ....... 4.4% 829,112 Personal Products ............. 4.6% 852,674 Specialty Retail .............. 4.5% 843,909 Telecommunications Equipment ................... 10.4% 1,930,618 SHORT-TERM INVESTMENTS ........... 5.4% 1,010,916 OTHER ASSETS IN EXCESS OF LIABILITIES ................... 6.8% 1,261,006 ------ ----------- NET ASSETS--100.0% ............... 100.0% $18,660,016 ====== =========== The accompanying notes are an integral part of the financial statements. 5 BAKER 500 GROWTH FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2004 NUMBER OF SHARES VALUE --------- ------------ COMMON STOCKS--87.8% COMMUNICATIONS EQUIPMENT--3.8% Avaya, Inc.* .................................. 58,825 $ 712,959 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--4.8% Waters Corp.* ................................. 20,600 892,186 ------------ ENERGY EQUIPMENT & SERVICES--4.4% Schlumberger Ltd. ............................. 13,290 821,322 ------------ FOOD & STAPLES RETAILING--5.0% CVS Corp. ..................................... 23,415 936,600 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--17.9% Medtronic, Inc. ............................... 17,200 855,700 St. Jude Medical, Inc.* ....................... 12,000 807,000 Stryker Corp. ................................. 19,150 867,495 Zimmer Holdings, Inc.* ........................ 11,225 800,342 ------------ 3,330,537 ------------ HEALTH CARE PROVIDERS & SERVICES--7.9% Humana, Inc. * ................................ 30,800 585,200 Quest Diagnostics, Inc. ....................... 10,300 881,680 ------------ 1,466,880 ------------ HOTELS, RESTAURANTS & LEISURE--3.7% International Game Technology ................. 24,200 698,170 ------------ HOUSEHOLD DURABLES--2.9% Stanley Works, (The) .......................... 12,700 549,402 ------------ MACHINERY--4.4% Danaher Corp. ................................. 16,100 827,862 ------------ OTHER SECURITIES--9.1% Nasdaq-100 Index Tracking Stock ....................................... 24,600 837,384 SPDR Trust Series 1 ........................... 7,725 858,479 ------------ 1,695,863 ------------ NUMBER OF SHARES VALUE --------- ------------ PAPER & FOREST PRODUCTS--4.4% Georgia-Pacific Corp. ......................... 24,400 $ 829,112 ------------ PERSONAL PRODUCTS--4.6% Avon Products, Inc. ........................... 19,300 852,674 ------------ SPECIALTY RETAIL--4.5% Staples, Inc. ................................. 29,425 843,909 ------------ TELECOMMUNICATIONS EQUIPMENT--10.4% Motorola, Inc. ................................ 51,100 825,265 QUALCOMM, Inc. ................................ 29,050 1,105,353 ------------ 1,930,618 ------------ TOTAL COMMON STOCKS (Cost $15,080,749) ................................... 16,388,094 ------------ SHORT TERM INVESTMENTS--5.4% MONEY MARKET FUNDS--5.4% Galaxy Money Market Fund 1.37% 09/01/04 .............................. 936,671 936,671 Wilmington Money Market Fund 0.77% 09/01/04 .............................. 74,245 74,245 ------------ 1,010,916 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $1,010,916) .................................... 1,010,916 ------------ TOTAL INVESTMENTS--93.2% (Cost $16,091,665) ................................... 17,399,010 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--6.8% .................................... 1,261,006 ------------ NET ASSETS--100.0% ..................................... $18,660,016 ============ --------------- * Non-income producing. The accompanying notes are an integral part of the financial statements. 6 BAKER 500 GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2004 ASSETS Investments, at value (cost - $16,091,665) .................................. $17,399,010 Receivable for investments sold ............................................. 1,316,575 Receivable for Fund shares sold ............................................. 800 Dividends and interest receivable ........................................... 8,183 Prepaid expenses and other assets ........................................... 9,669 ----------- Total assets .............................................................. 18,734,237 ----------- LIABILITIES Payable for Fund shares redeemed ............................................ 35,256 Accrued expenses and other liabilities ...................................... 38,965 ----------- Total liabilities ......................................................... 74,221 ----------- NET ASSETS Capital stock, $0.001 par value ............................................. 1,538 Additional paid-in capital .................................................. 18,389,555 Accumulated net realized loss from investments .............................. (1,038,422) Net unrealized appreciation on investments .................................. 1,307,345 ----------- Net assets ................................................................ $18,660,016 =========== INSTITUTIONAL CLASS Net assets .................................................................. $14,129,805 ----------- Shares outstanding .......................................................... 1,163,812 ----------- Net asset value, offering and redemption price per share .................... $ 12.14 =========== CLASS S Net assets .................................................................. $ 4,530,211 ----------- Shares outstanding .......................................................... 374,474 ----------- Net asset value, offering and redemption price per share .................... $ 12.10 ===========
The accompanying notes are an integral part of the financial statements 7 BAKER 500 GROWTH FUND STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2004 ------------------- INVESTMENT INCOME Dividends ................................................................... $ 71,287 Interest .................................................................... 16,278 ---------- Total investment income ................................................... 87,565 ---------- EXPENSES Advisory fees ............................................................... 174,800 Service fees and expenses ................................................... 173,340 Offering costs .............................................................. 26,206 Federal and state registration fees ......................................... 24,088 Printing fees ............................................................... 18,168 Audit and legal fees ........................................................ 16,751 Shareholder servicing fees .................................................. 12,251 Directors' and Officer's fees and expenses .................................. 3,093 Insurance and other expenses ................................................ 1,505 ---------- Total expenses before waivers and reimbursements .......................... 450,202 Less: waivers and reimbursements .......................................... (185,216) ---------- Total expenses after waivers and reimbursements ........................... 264,986 ---------- Net investment loss ......................................................... (177,421) ---------- NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS Net realized loss from investments .......................................... (999,471) Net change in unrealized appreciation on investments ........................ 1,125,228 ---------- Net realized and unrealized gain from investments ........................... 125,757 ---------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $ (51,664) ==========
The accompanying notes are an integral part of the financial statements. 8 BAKER 500 GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD FOR THE YEAR JANUARY 28, 2003* ENDED THROUGH AUGUST 31, 2004 AUGUST 31, 2003 ----------------- ----------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment loss ............................................... $ (177,421) $ (128,092) Net realized loss from investments ................................ (999,471) (38,951) Net change in unrealized appreciation on investments .............. 1,125,228 182,117 ----------- ----------- Net decrease in net assets resulting from operations .............. (51,664) 15,074 ----------- ----------- LESS DIVIDENDS TO SHAREHOLDERS FROM: Net investment income Institutional Class shares .................. -- -- Net investment income Class S shares .............................. -- -- ----------- ----------- Total dividends to shareholders ................................. -- -- ----------- ----------- INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ............................... 3,090,192 15,606,414 ----------- ----------- Total increase in net assets ...................................... 3,038,528 15,621,488 ----------- ----------- NET ASSETS Beginning of period ............................................... 15,621,488 -- ----------- ----------- End of period ..................................................... $18,660,016 $15,621,488 =========== =========== ---------------- * Commencement of operations.
The accompanying notes are an integral part of the financial statements. 9 BAKER 500 GROWTH FUND FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements. --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------- FOR THE PERIOD FOR THE YEAR JANUARY 28, 2003* ENDED THROUGH AUGUST 31, 2004 AUGUST 31, 2003 ----------------- ----------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................................... $12.04 $12.00 Net investment loss .................................................... (0.12)** (0.12)** Net realized and unrealized gain on investments ........................ 0.22** 0.16** ------ ------ Net increase in net assets resulting from operations ................... 0.10 0.04 ------ ------ Distributions to shareholders from: Net investment income .................................................. -- -- Net realized capital gains ............................................. -- -- ------ ------ Net asset value, end of period ......................................... $12.14 $12.04 ====== ====== Total investment return(1) ............................................. 0.83% 0.33% ====== ====== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) .............................. $14,130 $10,067 Ratio of expenses to average net assets including waivers and reimbursements ...................................................... 1.41% 2.44%(2) Ratio of expenses to average net assets excluding waivers and reimbursements ...................................................... 2.44% 3.34%(2) Ratio of net investment loss to average net assets ..................... (0.91)% (1.64)%(2) Portfolio turnover rate ................................................ 99.71% 49.61% ------------------ * Commencement of operations. ** Calculated based on average shares outstanding for the period. (1) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. (2) Annualized.
The accompanying notes are an integral part of the financial statements. 10 BAKER 500 GROWTH FUND FINANCIAL HIGHLIGHTS
CLASS S ------------------------------------- FOR THE PERIOD FOR THE YEAR JANUARY 28, 2003* ENDED THROUGH AUGUST 31, 2004 AUGUST 31, 2003 ----------------- ----------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................................... $12.03 $12.00 Net investment loss .................................................... (0.15)** (0.13)** Net realized and unrealized gain on investments ........................ 0.22** 0.16** ------ ------ Net increase in net assets resulting from operations ................... 0.07 0.03 ------ ------ Distributions to shareholders from: Net investment income .................................................. -- -- Net realized capital gains ............................................. -- -- ------ ------ Net asset value, end of period ......................................... $12.10 $12.03 ====== ====== Total investment return(1) ............................................. 0.58% 0.25% ====== ====== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) .............................. $4,530 $5,554 Ratio of expenses to average net assets including waivers and reimbursements ...................................................... 1.69% 2.69%(2) Ratio of expenses to average net assets excluding waivers and reimbursements ...................................................... 2.73% 3.66%(2) Ratio of net investment loss to average net assets ..................... (1.20)% (1.81)%(2) Portfolio turnover rate ................................................ 99.71% 49.61% ------------------ * Commencement of operations. ** Calculated based on average shares outstanding for the period. (1) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. (2) Annualized.
The accompanying notes are an integral part of the financial statements. 11 BAKER 500 GROWTH FUND NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988 and is registered under the Investment Company Act of 1940, as amended, (the "Investment Company Act") as an open-end management investment company. RBB is a "series fund," which is a mutual fund divided into separate portfolios. The portfolio is treated as a separate entity for certain matters under the Investment Company Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently RBB has fourteen active investment portfolios, including the Baker 500 Growth Fund (the "Fund"), which commenced investment operations on January 28, 2003. As of the date hereof, the Fund offers two classes of shares, Institutional Class and Class S. RBB has authorized capital of thirty billion shares of Common Stock of which 26.073 billion are currently classified into ninety-seven classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families," seven of which have begun investment operations. PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the NYSE (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Securities held by the Fund are valued using the closing price or the last sale price on a national securities exchange or on the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. If there were no sales on that day or the securities are traded on other over-the-counter markets, the mean of the last bid and ask price prior to the market close are used. Short-term debt securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Debt securities having a remaining maturity of greater than 60 days are valued at the mean between the bid and ask prices. With the approval of the Company's Board of Directors, the Fund may use a pricing service, bank or broker/dealer experienced in providing valuations to value the Fund's securities. If market quotations are unavailable or deemed unreliable, securities will be valued by the Fund's Valuation Committee as determined by procedures adopted by the Board of Directors. USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. REPURCHASE AGREEMENTS -- The Fund may purchase securities from financial institutions subject to the seller's agreement to repurchase them at an agreed-upon time and price ("repurchase agreements"). The financial institutions with whom the Fund enters into repurchase agreements are banks and broker-dealers that Baker 500 Corporation (the "Adviser") considers creditworthy. The seller under a repurchase agreement will be required to maintain the value of the securities as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. The Adviser marks to market daily the value of the collateral, and, if necessary, requires the seller to deposit additional collateral by the next day of business, to ensure that the value is not less than the repurchase price. Default by or bankruptcy of the seller would, however, expose the Fund to possible loss because of adverse market action or delays in connection with the disposition of the underlying securities. For the year ended August 31, 2004, the Fund did not enter into any repurchase agreements. 12 BAKER 500 GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES -- The Fund records security transactions 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 in determining realized gains and losses on investments. Interest income is accrued when earned. Dividend income is recorded on the ex-dividend date. The Fund's net investment income (other than class specific shareholder servicing fees) and unrealized and realized gains and losses are allocated daily to each class of shares based upon the relative proportion of net assets of each class at the beginning of the day. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all of the RBB families (such as director or professional fees) are charged to all funds in proportion to their net assets of the RBB Funds, or in such other manner as the Board of Directors deems fair or equitable. Expenses and fees, including investment advisory and administration fees, are accrued daily and taken into account for the purpose of determining the net asset value of the Fund. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income and distributions from net realized capital gains, if any, will be declared and paid at least annually to shareholders and recorded on ex-date. Income and capital gain distributions are determined in accordance with U.S. federal income tax regulations which may differ from accounting principles generally accepted in the United States. These differences include the treatment of non-taxable dividends, expiring capital loss carryforwards, foreign currency gain/loss, and losses deferred due to wash sales and excise tax regulations. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. The following permanent differences as of August 31, 2004, primarily attributable to net investment loss and nondeductible expenses were reclassified to the following accounts: DECREASE INCREASE ADDITIONAL ACCUMULATED PAID-IN NET INVESTMENT LOSS CAPITAL --------------------- ---------- Baker 500 Growth Fund $177,421 $(177,421) U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is the Fund's intention to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from U.S. income and excise taxes. OTHER -- In the normal course of business, the Fund may enter into contracts that provide general indemnifications. The Fund's maximum exposure under these arrangements is dependent on claims that may be made against the Fund in the future, and, therefore, cannot be estimated; however, based on experience, the risk of material loss for such claims is considered remote. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Baker 500 Corporation serves as the Fund's investment adviser. For its advisory services, the Adviser is entitled to receive 0.98% of the Fund's average daily net assets, computed daily and payable monthly. 13 BAKER 500 GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Adviser voluntarily agreed to waive the investment advisory fee through August 31, 2004. For the year ended August 31, 2004, the fee waivers were as follows: INVESTMENT NET INVESTMENT ADVISORY FEES WAIVERS ADVISORY FEES ------------- ---------- -------------- Baker 500 Growth Fund $174,800 $(174,800) $ -- The Fund will not pay the Adviser at a later time for any amounts they waived or any they have assumed. PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc., and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., serves as administrator and transfer agent for the Fund. PFPC Distributors, Inc., a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect wholly-owned subsidiary of the PNC Financial Services Group, Inc., provides certain administrative services to the Fund. PFPC Trust Company provides certain custodial services to the Fund. PFPC Trust Company is a wholly-owned subsidiary of PFPC Worldwide, Inc., and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. For providing accounting and administration, transfer agency, administrative and custodial services, PFPC and its affiliates are entitled to receive a monthly fee equal to an annual rate of 0.15% of the Fund's first $250 million of average net assets; and, 0.12% of average net assets in excess of $250 million or a minimum of $125,000 annually. For providing regulatory administrative services to RBB, PFPC is entitled to receive compensation as agreed to by the Fund and PFPC. This agreement commenced on June 1, 2003. This fee is charged to all funds in proportion to their net assets of RBB. The Fund's portion of this fee for the year ended August 31, 2004 was $2,935. PFPC and its affiliates voluntarily agreed to waive a portion of accounting and administration, transfer agency, administrative services and custodial services fees for the Fund. For the year ended August 31, 2004, fees earned by PFPC and its affiliates and related fee waivers were as follows: GROSS PFPC NET PFPC SERVICES FEES SERVICES FEES AND EXPENSES WAIVERS AND EXPENSES ------------- --------- ------------- Baker 500 Growth Fund $173,340 $(10,416) $162,924 The Fund will not pay PFPC or PFPC's affiliates at a later time for any amounts they waived or any they have assumed. As of August 31, 2004, the Fund owed PFPC and its affiliates $14,569 for their services. 3. NON 12B-1 SHAREHOLDER SERVICES PLAN The Fund has a Non 12b-1 Shareholder Services Plan (the "Plan") which permits Class S shares of the Fund to pay fees to various service organizations of up to 0.25% of the average daily net assets of such class. Under the Plan, the Fund has entered into agreements with service organizations that provide support services to their customers who are the beneficial owners of shares in Class S. The Fund had a payable of $909 as of August 31, 2004 and paid $12,251 under the Plan for the one-year ended August 31, 2004. 14 BAKER 500 GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. INVESTMENT IN SECURITIES For the year ended August 31, 2004, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: INVESTMENT SECURITIES -------------------------------- PURCHASES SALES ------------- ------------- Baker 500 Growth Fund $24,526,285 $14,487,956 5. CAPITAL SHARE TRANSACTIONS As of August 31, 2004, the Fund has 100,000,000 shares of $0.001 par value common stock authorized for the Institutional Class and 100,000,000 shares of $0.001 par value common stock authorized for Class S. Transactions in capital shares were as follows:
INSTITUTIONAL CLASS -------------------------------------------------------------------- FOR THE YEAR FOR THE ENDED PERIOD JANUARY 28, 2003* TO AUGUST 31, 2004 AUGUST 31, 2003 --------------------------------- ---------------------------- SHARES VALUE SHARES VALUE -------------- ----------- --------- ----------- Sales .......................... 593,782 $ 7,545,232 916,574 $11,013,785 Redemptions .................... (265,907) (3,338,988) (80,638) (969,206) Reinvestments .................. -- -- -- -- ------------ ----------- ------- ----------- Net Increase ................... 327,875 $ 4,206,244 835,936 $10,044,579 ============ =========== ======= =========== CLASS S -------------------------------------------------------------------- FOR THE YEAR FOR THE ENDED PERIOD JANUARY 28, 2003* TO AUGUST 31, 2004 AUGUST 31, 2003 --------------------------------- ---------------------------- SHARES VALUE SHARES VALUE -------------- ----------- --------- ----------- Sales 162,321 $2,056,652 860,194 $10,338,903 Redemptions (249,590) (3,172,704) (398,451) (4,777,068) Reinvestments -- -- -- -- ------------ ----------- -------- ----------- Net Increase/(Decrease) (87,269) $(1,116,052) 461,743 $ 5,561,835 ============ =========== ======== =========== -------------- * Commencement of operations.
15 BAKER 500 GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) 6. FEDERAL INCOME TAX INFORMATION At August 31, 2004, Federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Fund were as follows:
NET UNREALIZED FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION/ COST APPRECIATION DEPRECIATION DEPRECIATION ------------- -------------- -------------- ---------------- Baker 500 Growth Fund $16,091,665 $1,613,531 $(306,186) $1,307,345
As of August 31, 2004, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM INCOME GAINS ------------- ------------- Baker 500 Growth Fund -- -- Under Federal tax law, foreign currency losses and capital losses realized after October 31 may be deferred and treated as having arisen on the first day of the following fiscal year. For the year ended August 31, 2004, the Fund incurred post-October capital losses of $680,916. The differences between the book and tax basis components of distributable earnings relate principally to the timing of recognition of income and gains for federal income tax purposes. Short-term and foreign currency gains are reported as ordinary income for federal tax purposes. At August 31, 2004, the Fund had capital loss carryforwards available to offset future capital gains of $357,506 which expire August 31, 2012. 16 BAKER 500 GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of The RBB Fund, Inc. In our opinion, the accompanying statement of assets and liabilities, including the portfolio of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Baker 500 Growth Fund, a separately managed portfolio of The RBB Fund, Inc. (the "Fund"), at August 31, 2004, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 29, 2004 17 BAKER 500 GROWTH FUND SHAREHOLDER TAX INFORMATION (UNAUDITED) The Fund is required by Subchapter M of the Internal Revenue Code of 1986, as amended, to advise its shareholders within 60 days of the Fund's fiscal year end (August 31) as to the U.S. federal tax status of distributions received by each Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2004, the following dividends and distributions per share were paid by the Fund: ORDINARY INCOME CAPITAL GAINS ------------------------------- ------------------------------- INSTITUTIONAL INVESTOR INSTITUTIONAL INVESTOR CLASS CLASS CLASS CLASS ------------- ------------- ------------- ------------- -- -- -- -- Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2005. There will be no 1099-DIV issued if there is no distribution required. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their dividend. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Fund, if any. In general, dividends received by tax exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund. 18 BAKER 500 GROWTH FUND OTHER INFORMATION (UNAUDITED) 1. PROXY VOTING Policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 are available without charge, upon request, by calling (866) 253-8244 and on the Securities and Exchange Commission's website at http://www.sec.gov. 2. QUARTERLY PORTFOLIO SCHEDULES The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Fund's Forms N-Q will be available on the Securities and Exchange Commission's website at http://www.sec.gov and may be reviewed and copied at the Securities and Exchange Commission's Public Reference Room in Washington, D.C. Information on the operation of the Securities and Exchange Commission's Public Reference Room may be obtained by calling 1-800-SEC-0330. 19 BAKER 500 GROWTH FUND FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The Statement of Additional Information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (877) 264-5346.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF OTHER TERM OF OFFICE PORTFOLIOS IN DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR* ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 14 Director, Comcast Comcast Corporation Chairman, Comcast Corporation Corporation 1500 Market Street, (cable television and 35th Floor communications); Director, NDS Philadelphia, PA 19102 Group PLC (provider of systems DOB: 7/16/33 and applications for digital pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, Fox 14 None Fox Chase Cancer Center Chase Cancer Center (biomedical 333 Cottman Avenue research and medical care); Philadelphia, PA 19111 prior to 2000, Executive Vice DOB: 12/06/35 President, Fox Chase Cancer Center. ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Director 1991 to present Since December 2000, Director, 14 None 106 Pierrepont Street Gabelli Partners, L.P. (an Brooklyn, NY 11201 investment partnership); Chief DOB: 5/21/48 Operating Officer and member of the Board of Directors of Outercurve Technologies (wireless enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Prior to 1997, Managing Director of Warburg Pincus Asset Management, Inc. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 14 Director, Moyco Technologies, Inc. and President, Moyco Moyco 200 Commerce Drive Technologies, Inc. (manufacturer Technologies, Montgomeryville, PA 18936 of precision coated and Inc. DOB: 3/24/34 industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees fourteen portfolios of the Company that are currently offered for sale. The Company is authorized to offer two additional portfolios that had not commenced operations as of the date of this report.
20 BAKER 500 GROWTH FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF OTHER TERM OF OFFICE PORTFOLIOS IN DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR* ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 14 None Oppenheimer & Company, Inc. President and prior thereto, 200 Park Avenue Executive Vice President of New York, NY 10166 Oppenheimer & Co., Inc., DOB: 4/16/38 formerly Fahnestock & Co., Inc. (a registered broker-dealer). ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 14 None 400 Bellevue Parkway January 1987 to April 2002, Wilmington, DE 19809 Chairman and Chief Executive DOB: 9/25/38 Officer of PFPC Inc. until April 2002, Executive Vice President of PNC Bank, National Association from October 1981 to April 2002, Director of PFPC International Ltd. (financial services) from August 1993 to April 2002, Director of PFPC International (Cayman) Ltd. (financial services) from September 1996 to April 2002; Governor of the Investment Company Institute (investment company industry trade organization) from July 1996 to January 2002; Director of PNC Asset Management, Inc. (investment advisory) from September 1994 to March 1998; Director of PNC National Bank from October 1995 to November 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. ------------------------------------------------------------------------------------------------------------------------------------
21 BAKER 500 GROWTH FUND FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF OTHER TERM OF OFFICE PORTFOLIOS IN DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED 1 DURING PAST 5 YEARS OVERSEEN BY DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present Certified Public Accountant; N/A N/A 400 Bellevue Parkway and and Vice Chairman of the Board, Fox 4th Floor Treasurer 1988 to present Chase Cancer Center; Trustee Wilmington, DE 19809 Emeritus, Pennsylvania School DOB: 6/29/24 for the Deaf; Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund; and Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Lisa M. King Secretary Since 2003 Since 2000, Vice President and N/A N/A 301 Bellevue Parkway Counsel, PFPC Inc. (financial 2nd Floor services company); Associate, Wilmington, DE 19809 Stradley, Ronon, Stevens & DOB: 1/27/68 Young, LLC (law firm) from 1996-2000. ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 Senior Legal Counsel, PFPC from N/A N/A Vigilant Compliance Compliance 2002 to 2004; Chief Legal 186 Dundee Drive, Suite 700 Officer Counsel, Corviant Corporation Williamstown, NJ 08094 (Investment Adviser, DOB: 12/25/62 Broker/Dealer and Service Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002; Partner, Pepper Hamilton LLP (law firm) from 1997 to 2001. ------------------------------------------------------------------------------------------------------------------------------------ 1 Each Director serves for an indefinite period of time until his successor is elected and qualified or until his death, resignation or removal. Each officer holds office at the pleasure of the Board of Directors until the next annual meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns, is removed or becomes disqualified. 2 Messrs. Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act. Mr. Carnall is an "interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation and the Company's principal underwriter, PFPC Distributors, Inc. are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
22 [THIS PAGE INTENTIONALLY LEFT BLANK] INVESTMENT ADVISER Baker 500 Corporation 601 Carlson Parkway Suite 1050 Minnetonka, MN 55305 ADMINISTRATOR PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPCTrust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP Two Commerce Square 2001 Market Street Philadelphia, PA 19103-7042 COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 This report is submitted for the general information of the shareholders of the Fund. Total investment return is based on historical results and is not intended to indicate future performance. The investment return and principal value of an investment in the Fund will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than original cost. Current performance may be lower or higher than the performance data provided in the report. ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the registrant's board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. Julian A. Brodsky, Francis J. McKay, and Marvin E. Sternberg are the registrant's audit committee financial experts and each of them is "independent." ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES ---------- (a) The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $251,000 for 2003 and $260,500 for 2004. AUDIT-RELATED FEES ------------------ (b) The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item are $17,500 for 2003 and $850 for 2004 - for out-of-pocket expenses related to the audit. TAX FEES -------- (c) The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $8,500 for 2003 and $5,100 for 2004 - for excise tax review. ALL OTHER FEES -------------- (d) The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2003 and $0 for 2004. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES ------------------------------------------------------ 1. PRE-APPROVAL REQUIREMENTS OF THE COMPANY. The Committee shall pre-approve all auditing services and permissible non-audit services (e.g., tax services) to be provided to the Company by the Auditor, including the fees associated with those services. 2. PRE-APPROVAL REQUIREMENTS OF AFFILIATES. Additionally, the Committee shall pre-approve any engagement of the Auditor to provide non-audit services to an investment adviser of a Portfolio or to any affiliate of such investment adviser that provides ongoing services to the Company, if the engagement relates directly to the operations and financial reporting of the Company. 3. DELEGATION. The Committee may delegate to the Chairman of the Committee, or if the Chairman is not available, one or more of its members, the authority to grant pre-approvals. The decisions of any member to whom authority is delegated shall be presented to the full Committee at its next scheduled meeting. 4. PROHIBITED SERVICES. The Committee shall confirm with the Auditor that the Auditor is not performing contemporaneously with the Company's audit any prohibited non-audit services for the Company, any investment adviser of a Portfolio, or any affiliates of the Company or such investment advisers. The Auditor is responsible for informing the Committee of whether it believes that a particular service is permissible or prohibited pursuant to applicable regulations and standards. (e)(2) The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X are as follows: (b) 100% (c) 100% (d) N/A (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $0 for 2003 and $0 for 2004. (h) The registrant's audit committee of the board of directors HAS considered whether the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Not yet applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not yet applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) The RBB Fund, Inc. ------------------------------------------------------------------- By (Signature and Title)* /s/ Edward J. Roach ------------------------------------------------------ Edward J. Roach, President & Treasurer (principal executive officer) Date December 30, 2004 --------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Edward J. Roach ------------------------------------------------------ Edward J. Roach, President & Treasurer (principal executive & principal financial officer) Date December 30, 2004 --------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature.