-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, COXAk3Ssad8RkX11cGckcWveONPPiRZDKiHSD6O+B6dgcC38P85tnIPMmIgGrUIS bTz4RFCQHANdcQcahkjvRQ== 0000935069-07-002654.txt : 20071109 0000935069-07-002654.hdr.sgml : 20071109 20071109153141 ACCESSION NUMBER: 0000935069-07-002654 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070831 FILED AS OF DATE: 20071109 DATE AS OF CHANGE: 20071109 EFFECTIVENESS DATE: 20071109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RBB FUND INC CENTRAL INDEX KEY: 0000831114 IRS NUMBER: 510312196 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-05518 FILM NUMBER: 071231204 BUSINESS ADDRESS: STREET 1: 400 BELLEVUE PKWY STE 100 CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027911700 MAIL ADDRESS: STREET 1: 400 BELLEVUE PKWY STREET 2: SUITE 152 CITY: WILMINGTON STATE: DE ZIP: 19809 FORMER COMPANY: FORMER CONFORMED NAME: FUND INC /DE/ DATE OF NAME CHANGE: 19600201 0000831114 S000001093 RBB MONEY MARKET PORTFOLIO C000002980 BEDFORD BDMXX C000002981 SANSOM SANXX 0000831114 S000001094 ROBECO BP SMALL CAP VALUE II C000002982 INSTITUTIONAL BPSIX C000002983 INVESTOR BPSCX 0000831114 S000001095 ROBECO WPG 130/30 LARGE CAP CORE FUND (Formerly Robeco WPG Large Cap Growth Fund) C000002984 INSTITUTIONAL WPGLX 0000831114 S000001096 ROBECO WPG CORE BOND FUND C000002985 INSTITUTIONAL WPGCX C000002986 RETIREMENT WPGIX C000010816 INVESTOR WPGBX 0000831114 S000001097 ROBECO WPG SMALL CAP VALUE FUND C000002987 INSTITUTIONAL WPGTX 0000831114 S000001098 SENBANC FUND C000002988 SENBANC FUND SENBX 0000831114 S000001099 SCHNEIDER SMALL CAP VALUE FUND C000002989 SCHNEIDER SMALL CAP VALUE FUND SCMVX 0000831114 S000001100 SCHNEIDER VALUE FUND C000002990 SCHNEIDER VALUE FUND SCMLX 0000831114 S000001101 BOGLE SMALL CAP GROWTH C000002991 INSTITUTIONAL BOGIX C000002992 INVESTOR BOGLX 0000831114 S000001106 ROBECO BP ALL-CAP C000002997 INSTITUTIONAL BPAIX C000002998 INVESTOR BPAVX 0000831114 S000001107 ROBECO BP LARGE CAP VALUE C000002999 INSTITUTIONAL BPLAX C000003000 INVESTOR BPLIX 0000831114 S000001108 ROBECO BP LONG/SHORT EQUITY C000003001 INSTITUTIONAL BPLSX C000003002 INVESTOR BPLEX 0000831114 S000001109 ROBECO BP MID CAP VALUE FUND C000003003 INSTITUTIONAL BPMIX C000003004 INVESTOR BPMCX 0000831114 S000013665 Bear Stearns CUFS MLP Mortgage Portfolio C000037423 Bear Stearns CUFS MLP Mortgage Portfolio 0000831114 S000015912 Bear Stearns Enhanced Income Fund C000043699 Bear Stearns Enhanced Income Fund 0000831114 S000015913 Marvin & Palmer Large Cap Growth Fund C000043700 Marvin & Palmer Large Cap Growth Fund MPAUX N-CSR 1 g42233combined_ncsr.txt RBB COMBINED N-CSR 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) 103 Bellevue Parkway, 4th Floor Wilmington, DE 19809 --------------------------------------------------------------- (Address of principal executive offices) (Zip code) Edward J. Roach, President & Treasurer 103 Bellevue Parkway, 4th Floor Wilmington, DE 19809 --------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 302-791-1112 -------------- Date of fiscal year end: August 31 ----------- Date of reporting period: August 31, 2007 ----------------- 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, 100 F Street, NE, Washington, DC 20549. 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, 2007 This report is submitted for the general information of the shareholders of the Portfolio. It is not authorized for distribution unless preceded or accompanied by a prospectus for the Fund. ============================================================= THE RBB FUND, INC. MONEY MARKET PORTFOLIO PRIVACY NOTICE (UNAUDITED) The RBB Fund, Inc. MONEY MARKET PORTFOLIO (the "Portfolio") 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 Portfolio. 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 Portfolio 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 Portfolio 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. THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, distribution fees, and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 six-month period from March 1, 2007 through August 31, 2007, 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 Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 Portfolio 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 that may be incurred by shareholders of other funds. 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.
MONEY MARKET PORTFOLIO - BEDFORD CLASS --------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* --------------- ---------------- ------------- Actual $1,000.00 $1,022.80 $4.59 Hypothetical (5% return before expenses) 1,000.00 1,020.61 4.59
MONEY MARKET PORTFOLIO - SANSOM STREET CLASS --------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* --------------- ---------------- ------------- Actual $1,000.00 $1,025.60 $1.79 Hypothetical (5% return before expenses) 1,000.00 1,023.42 1.79
* Expenses are equal to the Portfolio's annualized expense ratio of 0.90% for the Bedford Class shares and 0.35% 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 (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Portfolio's ending account value on the first line in each table is based on the actual six-month total return of 2.28% for the Bedford Class shares and 2.56% for the Sansom Street Class shares. 2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 (UNAUDITED) SECURITY % OF NET FAIR TYPE ASSETS VALUE -------- -------- ------------ Short Term Investments: Commercial Paper .......................... 63.2% $147,952,219 Certificates of Deposit ................... 14.4 33,830,000 Variable Rate Obligations ................. 12.5 29,315,798 Repurchase Agreements ..................... 7.1 16,642,000 Master Notes .............................. 4.7 11,020,000 Municipal Bonds ........................... 0.7 1,540,000 Liabilities In Excess of Other Assets ..... (2.6) (6,034,280) ----- ------------ NET ASSETS -- 100.0% ......................... 100.0% $234,265,737 ===== ============ Portfolio holdings are subject to change at any time. 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS AUGUST 31, 2007
PAR FAIR (000) VALUE -------- ------------ CERTIFICATES OF DEPOSIT--14.4% DOMESTIC CERTIFICATES OF DEPOSIT--3.0% American Express Bank FSB5.500%, 11/21/07 ............ $5,000 $ 5,000,000 Wachovia Bank NA5.320%, 02/06/08 ..................... 2,100 2,100,000 ------------ 7,100,000 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--11.4% Banque Nationale de Paris, New York(a) 5.270%, 10/03/07 .................................. 1,880 1,880,000 5.310%, 11/20/07 .................................. 3,215 3,215,000 5.325%, 11/30/07 .................................. 2,950 2,950,000 Deutsche Bank AG, New York(a) 5.385%, 03/11/08 .................................. 2,600 2,600,000 Fortis Bank SA/NV, New York(a) 5.300%, 02/11/08 .................................. 2,990 2,990,000 HBOS Treasury Services PLC(a) 5.270%, 10/03/07 .................................. 2,095 2,095,000 Mizuho Corporate Bank, New York(a) 5.530%, 09/21/07 .................................. 5,000 5,000,000 5.730%, 10/02/07 .................................. 6,000 6,000,000 ------------ 26,730,000 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $33,830,000) ........................... 33,830,000 ------------ COMMERCIAL PAPER--63.2% ASSET BACKED SECURITIES--24.6% Amstel Funding Corp. 5.250%, 10/22/07 .................................. 1,480 1,468,993 5.900%, 11/20/07 .................................. 10,000 9,868,889 Beta Finance, Inc. 5.250%, 10/22/07 .................................. 1,500 1,488,844 Chariot Funding LLC 5.800%, 11/26/07 .................................. 1,000 986,144 Corporate Asset Funding Co. LLC 5.250%, 10/04/07 .................................. 5,000 4,975,937 Govco LLC 5.730%, 11/15/07 .................................. 2,000 1,976,125 Grampian Funding LLC 5.185%, 11/19/07 .................................. 4,000 3,954,487 Greyhawk Funding LLC 5.280%, 10/02/07 .................................. 1,100 1,094,999 K2 (USA) LLC 5.260%, 10/05/07 .................................. 10,000 9,950,322 Mont Blanc Capital Corp. 5.260%, 10/09/07 .................................. 5,000 4,972,239 PAR FAIR (000) VALUE -------- ------------ COMMERCIAL PAPER--(CONTINUED) ASSET BACKED SECURITIES--(CONTINUED) Newport Funding Corp. 5.250%, 10/09/07 .................................. $2,000 $ 1,988,917 Nieuw Amsterdam Receivables Corp. 5.150%, 09/27/07 .................................. 5,000 4,981,403 Picaros Funding LLC 5.260%, 10/16/07 .................................. 5,000 4,967,125 Ranger Funding Company LLC 6.050%, 09/24/07 .................................. 5,000 4,980,674 ------------ 57,655,098 ------------ BANKS--29.0% Allied Irish Banks North America, Inc. 5.250%, 09/19/07 .................................. 10,000 9,973,750 Banco Santander Puerto Rico(b) 5.600%, 09/20/07 .................................. 5,000 4,985,222 Bank of America Corp. 5.170%, 09/05/07 .................................. 3,000 2,998,277 Danske Corp. 5.240%, 09/05/07 .................................. 2,000 1,998,836 Dexia Delaware LLC 5.250%, 09/18/07 .................................. 9,924 9,899,397 Dresdner U.S. Finance, Inc. 5.230%, 09/04/07 .................................. 7,000 6,996,949 HBOS Treasury Services PLC(b) 5.250%, 10/17/07 .................................. 1,500 1,489,938 Northern Rock PLC 5.260%, 09/26/07 .................................. 2,500 2,490,868 Societe Generale North America 5.130%, 02/05/08 .................................. 6,000 5,865,765 5.165%, 02/08/08 .................................. 3,000 2,931,133 St. George Bank Ltd.(b) 5.245%, 09/04/07 .................................. 7,000 6,996,940 Swedbank Mortgage AB(b) 5.250%, 10/12/07 .................................. 10,000 9,940,208 UBS Finance Delaware LLC 5.255%, 09/06/07 .................................. 1,300 1,299,051 ------------ 67,866,334 ------------ FINANCE SERVICES--5.4% General Electric Capital Corp. 5.240%, 10/19/07 .................................. 5,000 4,965,067 Greenwich Capital Holdings, Inc. 5.450%, 11/15/07 .................................. 3,000 2,965,937 Irish Life and Permanent PLC 5.250%, 10/03/07 .................................. 4,600 4,578,533 ------------ 12,509,537 ------------
See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007
PAR FAIR (000) VALUE -------- ------------ COMMERCIAL PAPER--(CONTINUED) INSURANCE--4.2% Aegon Funding Corp. 5.250%, 10/25/07 .................................. $10,000 $ 9,921,250 ------------ TOTAL COMMERCIAL PAPER (Cost $147,952,219) ........................... 147,952,219 ------------ MUNICIPAL BONDS--0.7% PENNSYLVANIA--0.7% Franklin County IDR (Manufacturers & Traders LOC)(c) 5.610%, 09/07/07 .................................. 1,540 1,540,000 ------------ TOTAL MUNICIPAL BONDS (Cost $1,540,000) ............................. 1,540,000 ------------ VARIABLE RATE OBLIGATIONS--12.5% ASSET BACKED SECURITIES--0.9% Cullinan Finance Corp.(c)(d) 5.485%, 09/25/07 .................................. 1,115 1,114,909 Racers Trust 2004-6 MM(c)(d) 5.551%, 09/24/07 .................................. 1,000 1,000,000 ------------ 2,114,909 ------------ BANKS--9.5% Bank of Nova Scotia(c) 5.273%, 09/04/07 .................................. 2,200 2,199,265 Commonwealth Bank of Australia(b)(c) 5.358%, 10/31/07 .................................. 10,000 10,001,624 HBOS Treasury Services PLC(b)(c)(d) 5.430%, 09/24/07 .................................. 8,000 8,000,000 Westpac Banking Corp. New York(b)(c) 5.420%, 09/11/07 .................................. 2,000 2,000,000 ------------ 22,200,889 ------------ LIFE INSURANCE--2.1% MetLife Global Funding I(c)(d) 5.615%, 09/28/07 .................................. 5,000 5,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $29,315,798) ............................ 29,315,798 ------------ MASTER NOTES--4.7% Bank of America Securities LLC(c) 5.435%, 09/04/07 .................................. 4,000 4,000,000 Morgan Stanley Mortgage Capital, Inc.(c) 5.545%, 09/04/07 .................................. 7,020 7,020,000 ------------ TOTAL MASTER NOTES (Cost $11,020,000) ............................ 11,020,000 ------------ PAR FAIR (000) VALUE -------- ------------ REPURCHASE AGREEMENTS--7.1% Deutsche Bank Securities, Inc. (Tri-Party Agreement dated 08/31/07 to be repurchased at $16,651,800 collateralized by $17,020,000 Federal Home Loan Bank, 5.33%, due 07/16/08, Market Value of the collateral is $17,144,118)5.300%, 09/04/07 .................... $16,642 $ 16,642,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $16,642,000) ............................. 16,642,000 ------------ TOTAL INVESTMENTS AT FAIR VALUE--102.6% (Cost $240,300,017*) ............................... 240,300,017 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(2.6)% ........ (6,034,280) ------------ NET ASSETS (APPLICABLE TO 218,918,308 BEDFORD SHARES AND 15,354,093 SANSOM STREET SHARES)--100.0% ............................. $234,265,737 ============
* Aggregate cost is the same for financial reporting and federal tax purposes. (a) Security is a foreign domiciled issuer which is registered with the Securities and Exchange Commission. (b) U.S. dollar denominated security issued by foreign domiciled entity. (c) Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2007 and the maturity date shown is the next interest rate readjustment date or the maturity date. (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors. INVESTMENT ABBREVIATIONS IDR Industrial Development Revenue LOC Letter of Credit See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS Investments, at fair value (cost $223,658,017) .......... $223,658,017 Repurchase agreements at cost ........................... 16,642,000 Cash .................................................... 541 Interest receivable ..................................... 472,795 Prepaid expenses and other assets ....................... 24,886 ------------ Total assets .................................... 240,798,239 ------------ LIABILITIES Payables for: Investments purchased ................................ 6,000,000 Dividends ............................................ 329,031 Distribution fees .................................... 112,872 Advisory fees ........................................ 30,450 Directors' and officers' fees ........................ 7,653 Transfer agent fees .................................. 4,033 Custodian fees ....................................... 3,003 Administration and accounting fees ................... 2,266 Service organization fees ............................ 88 Accrued expenses and other liabilities .................. 43,106 ------------ Total liabilities ............................... 6,532,502 ------------ NET ASSETS .............................................. $234,265,737 ============ NET ASSETS CONSISTED OF: Paid-in capital ......................................... $234,272,400 Undistributed net investment income ..................... 831 Accumulated net realized loss from investments .......... (7,494) ------------ NET ASSETS .............................................. $234,265,737 ============ NET ASSET VALUE, Offering and Redemption Price Per Bedford Share ($218,913,906/218,918,308) ................ $1.00 ============ NET ASSET VALUE, Offering and Redemption Price Per Sansom Street Share ($15,351,831/15,354,093) ............ $1.00 ============ See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2007 Investment Income Interest ............................................. $11,358,909 ----------- Expenses Distribution fees(1) ................................. 1,246,103 Investment advisory and administration fees .......... 951,482 Registration and filing fees ......................... 78,852 Printing and shareholder reporting fees .............. 60,417 Custodian fees ....................................... 55,483 Directors' and Officers' fees ........................ 48,739 Transfer agent fees .................................. 33,800 Regulatory administration fees ....................... 28,317 Professional fees .................................... 57,556 Insurance fees ....................................... 23,175 Service organization fees (Sansom Class) ............. 963 Other expenses ....................................... 13,200 ----------- Total expenses .................................. 2,598,087 Less fees waived ..................................... (805,508) ----------- Net total expenses .............................. 1,792,579 ----------- Net investment income ................................... 9,566,330 Realized loss on investments ............................ (1,885) ----------- Net increase in net assets resulting from operations .... $ 9,564,445 =========== (1) See Note 2 in Notes to Financial Statements. See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- ---------------- Increase (decrease) in net assets: Operations: Net investment income ....................................... $ 9,566,330 $ 9,453,852 Net realized loss on investments ............................ (1,885) (1,104) ------------- -------------- Net increase in net assets resulting from operations ........ 9,564,445 9,452,748 ------------- -------------- Dividends to shareholders fromNet investment income: Bedford shares ............................................ (8,491,001) (5,087,205) Sansom Street shares ...................................... (1,075,329) (4,366,647) ------------- -------------- Total dividends to shareholders ........................... (9,566,330) (9,453,852) ------------- -------------- Net capital share transactions (See Note 3) ................... 68,085,811 (30,616,253) ------------- -------------- Total increase/(decrease) in net assets ....................... 68,083,926 (30,617,357) Net Assets: Beginning of year ........................................... 166,181,811 196,799,168 ------------- -------------- End of year ................................................. $ 234,265,737 $ 166,181,811 ============= ============== Undistributed net investment income, end of year .............. $ 831 $ -- ============= ==============
See Accompanying Notes to Financial Statements. 8 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, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 2007 2006 2005 2004 2003 ------------- ------------ ------------ ------------- ------------ Net asset value, beginning of year ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- -------- -------- -------- Income from investment operations: Net investment income ......................... 0.0447 0.0388 0.0162 0.0025 0.0046 Net gains (losses) on securities .............. --(b) --(b) --(b) --(b) 0.0005 ------- ------- -------- -------- -------- Total net income from investment operations ................................ 0.0447 0.0388 0.0162 0.0025 0.0051 ------- ------- -------- -------- -------- Less dividends and distributions: Dividends (from net investment income) ........ (0.0447) (0.0388) (0.0162) (0.0025) (0.0046) Distributions (from capital gains) ............ -- -- -- -- (0.0005) ------- ------- -------- -------- -------- Total dividends and distributions ........... (0.0447) (0.0388) (0.0162) (0.0025) (0.0051) ------- ------- -------- -------- -------- Net asset value, end of year ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======== ======== ======== Total Return .................................. 4.56% 3.95% 1.63% 0.25% 0.53% Ratios/Supplemental Data Net assets, end of year (000's omitted) ....... $218,914 $150,657 $109,495 $ 72,001 $ 80,406 Ratios of expenses to average net assets(a) ............................... 0.90% 0.85% 0.97% 0.94% 0.98% Ratios of net investment income to average net assets .......................... 4.47% 3.81% 1.68% 0.24% 0.46%
(a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Bedford Class of the Money Market Portfolio would have been 1.29%, 1.34%, 1.23%, 1.34% and 1.30% for the years ended August 31, 2007, 2006, 2005, 2004 and 2003, respectively. (b) Amount is less than ($0.0005) per share. See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (CONCLUDED) (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, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 2007 2006 2005 2004 2003 ------------- ------------ ------------ ------------- ------------ Net asset value, beginning of year ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- -------- -------- Income from investment operations: Net investment income ......................... 0.0502 0.0434 0.0239 0.0100 0.0114 Net gains (losses) on securities .............. --(b) --(b) --(b) --(b) 0.0005 ------- ------- ------- -------- -------- Total net income from investment operations ................................ 0.0502 0.0434 0.0239 0.0100 0.0119 ------- ------- ------- -------- -------- Less dividends and distributions: Dividends (from net investment income) ........ (0.0502) (0.0434) (0.0239) (0.0100) (0.0114) Distributions (from capital gains) ............ -- -- -- -- (0.0005) ------- ------- ------- -------- -------- Total dividends and distributions ........... (0.0502) (0.0434) (0.0239) (0.0100) (0.0119) ------- ------- ------- -------- -------- Net asset value, end of year ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======== ======== Total Return ................................ 5.14% 4.42% 2.41% 1.00% 1.21% Ratios/Supplemental Data Net assets, end of year (000's omitted) ....... $15,352 $15,525 $87,304 $141,372 $198,373 Ratios of expenses to average net assets(a) ............................... 0.35% 0.26% 0.20% 0.20% 0.30% Ratios of net investment income to average net assets .......................... 5.02% 4.25% 2.39% 0.98% 1.14%
(a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Sansom Street Class of the Money Market Portfolio would have been 0.69%, 0.67%, 0.67%, 0.59% and 0.57% for the years ended August 31, 2007, 2006, 2005, 2004 and 2003, respectively. (b) Amount is less than ($0.0005) per share. See Accompanying Notes to Financial Statements. 10 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Money Market Portfolio ("Portfolio"), which comprise the RBB family of funds. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen classes of common stock. The Portfolio has issued shares with a par value of $0.001. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families." 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 accretion of discount or amortization of 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. 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. 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 Company (such as director or professional fees) are charged to all portfolios in proportion to their average net assets. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. All dividends from net investment income are taxed as ordinary income. Any net realized capital gains are distributed at least annually. Income subject to dividends 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. FEDERAL INCOME TAXES -- No provision is made for federal income taxes. It is the Company's intention to have each portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of 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. 11 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the collateral falls below 102% of the value of the repurchase price plus accrued interest, the 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 Portfoliocustodian or a third party sub-custodian. 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. OTHER -- In the normal course of business, the Portfolio may enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is dependent on claims that may be made against the Portfolio 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 Pursuant to an Investment Advisory and Administration Agreement, BlackRock Institutional Management Corp. (the "Adviser" or "BIMC"), an indirect subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser and administrator for the Portfolio. BIMC and PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., 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 0.10% 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: ANNUAL RATE ------------------------------------------------ 0.45% of first $250 million of net assets; 0.40% of next $250 million of net assets; and 0.35% of net assets in excess of $500 million. 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for the 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, 2007, advisory fees and waivers for the investment portfolio were as follows: GROSS NET ADVISORY ADVISORY FEE WAIVER FEE -------------- -------------- -------------- $951,482 $(710,449) $241,033 As of August 31, 2007, the Portfolio owed BIMC $30,450 in advisory fees. BIMC may voluntarily waive and/or reimburse a portion of its fees. PFPC may also voluntarily waive a portion of its fees and/or reimburse expenses. The Portfolio will not pay BIMC or PFPC at a later time for any amounts waived or assumed. For providing regulatory administration services to RBB, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to their net assets. The Portfolio's portion of this fee for the year ended August 31, 2007 was $28,317. PFPC serves as the transfer and dividend disbursing agent for each class. Both PFPC Trust Company and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. For providing transfer agent services, PFPC is entitled to receive fees from the Portfolio. 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, 2007, transfer agency fees for the Portfolio were $33,800. PFPC Trust Company provides certain custodial services to the Portfolio. As compensation for such custodial services, PFPC Trust Company is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average gross assets: ANNUAL RATE ------------------------------------------------ 0.025% of first $50 million of gross assets; 0.020% of next $50 million of gross assets; 0.015% of gross assets in excess of $100 million. The Portfolio, on behalf of each class of shares of the Portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The Portfolio has entered into a Distribution Agreement 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. 13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) The Plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to 0.65% on an annualized basis for the Bedford Class and up to 0.05% on an annualized basis for the Sansom Street Class. For the year ended August 31, 2007, distribution fees paid to PFPC Distributors for each class were as follows: GROSS NET DISTRIBUTION DISTRIBUTION FEE WAIVER FEE -------------- ---------- ------------ Bedford Class $1,235,394 $(95,059) $1,140,335 Sansom Street Class 10,709 -- 10,709 ---------- --------- ---------- Total Money Market Portfolio $1,246,103 $(95,059) $1,151,044 ========== ========= ========== The Portfolio 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 0.10% of the daily net asset value of such shares. For the year ended August 31, 2007, service organization fees were $963 for the Portfolio. As of August 31, 2007, the Portfolio owed PFPC and its affiliates $122,262 for their services. 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
BEDFORD CLASS ------------------------------------ FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- ---------------- VALUE VALUE ---------------- ---------------- Shares sold $ 540,563,896 $ 506,580,146 Shares issued on reinvestment of dividends 8,204,137 5,326,071 Shares repurchased (480,513,295) (470,739,390) -------------- -------------- Net Increase $ 68,254,738 $ 41,166,827 -------------- -------------- Bedford Shares authorized 1,500,000,000 1,500,000,000 ============== ============== SANSOM STREET CLASS ------------------------------------ FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- ---------------- VALUE VALUE ---------------- ---------------- Shares sold $ 207,692,244 $1,554,920,729 Shares issued on reinvestment of dividends 136,709 146,903 Shares repurchased (207,997,880) (1,626,850,712) -------------- -------------- Net Decrease $ (168,927) $ (71,783,080) -------------- -------------- Sansom Street Shares authorized 1,500,000,000 1,500,000,000 ============== ==============
14 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2007 4. FEDERAL INCOME TAX INFORMATION In order to present undistributed net investment income, the Portfolio reclassed $831 from accumulated net realized loss on investments to undistributed net investment income. For federal income tax purposes, realized capital losses may be carried forward and applied against future realized gains. At August 31, 2007, the Portfolio had capital loss carryforwards of $5,533 of which $3,587 will expire on August 31, 2013, $917 will expire on August 31, 2014 and $1,029 will expire on August 31, 2015. 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, 2007 the Portfolio incurred post-October capital losses of $1,961. 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 gains are reported as ordinary income for federal tax purposes. Dividends paid from net investment income and short-term capital gains are treated as ordinary income distributions 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 -------------- ----------- 2007 $9,566,330 $ -- 2006 9,453,852 -- As of August 31, 2007, the Portfolio had $329,862 of undistributed ordinary income for federal tax purposes. 5. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management has evaluated the impact of FIN 48 and has determined it will have no impact on the financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Although we are still in the process of evaluating the impact, if any, upon the adoption of the standard, we believe there will be no material impact other than enhanced disclosures. 15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Money Market Portfolio and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments of Money Market Portfolio, one of the portfolios constituting The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented. 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 audits. The financial highlights of the Money Market Portfolio for the year ended August 31, 2003 were audited by other auditors whose report, dated October 27, 2003, expressed an unqualified opinion on those financial highlights. We conducted our audits 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. The Portfolio is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Money Market Portfolio of The RBB Fund, Inc. as of August 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 21, 2007 16 ADDITIONAL INFORMATION (UNAUDITED) PROXY VOTING Policies and procedures that the Portfolio uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Portfolio 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 number shown below and on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. Bedford (800) 888-9723 Sansom Street (888) 261-4073 QUARTERLY PORTFOLIO SCHEDULES The Company files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarter of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q is available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS As required by the 1940 Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the 1940 Act (the "Independent Directors"), considered at a meeting of the Board held on May 24, 2007 (the "Meeting"). At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Portfolio; (ii) descriptions of the experience and qualifications of the personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Portfolio; (ix) the extent to which economies of scale are relevant to the Portfolio; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's management fees and 17 ADDITIONAL INFORMATION (CONCLUDED) (UNAUDITED) total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to that of its Lipper peer group; and (xi) a report comparing the performance of the Portfolio to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors reviewed and considered comparative fee and expense information prepared by Lipper in evaluating the fees payable by the Portfolio. The Directors considered that the Portfolio's gross fees were lower than those of the Lipper peer group median for both the Bedford Class and the Sansom Street Class. The Directors noted that the Portfolio's net advisory fees (after waivers) were less than those of the respective Lipper peer group medians for the Bedford Class and Sansom Street Class and compared favorably to the fees paid to BIMC for managing assets for other registered investment company clients (after waivers) with investment objectives similar to the Portfolio's investment objective. The Directors also considered the total expense ratios (after waivers) for the Portfolio's Bedford Class and Sansom Street Class, which were lower than the total expense ratio (after waivers) for the Lipper peer group medians. The Directors noted that the performance of each Class for the one, two, three, four and five-year periods ended March 31, 2007 exceeded the median performance of the Lipper peer group. The Directors then determined that the nature, extent and quality of services provided by BIMC in advising the Portfolio were satisfactory, the losses incurred by BIMC in providing the services were acceptable and the method BIMC uses to select brokers seemed reasonable. The Directors considered the effect of any economies of scale and noted that the presence of advisory fee waivers by BIMC benefited the Portfolio's shareholders. Further, the Board considered that breakpoints in the BIMC's contractual advisory fee would benefit investors if Portfolio assets were to increase. The Board of Directors considered the level of BIMC's and its affiliates' profits in respect of their relationship with the Portfolio, including the cost of services provided by BIMC. The consideration including a review of BIMC's and its affiliates' revenue and expense analysis in connection with the management of the Portfolio. The Board of Directors considered that, except for custody services provided by PFPC Trust Company, BIMC and its affiliates incurred an overall net operating loss in connection with the services provided to the Portfolio. The Board of Directors also took into account not only the fees payable by the Portfolio under the Advisory Agreement, but also potential benefits to BIMC, such as the engagement of affiliates of BIMC as service providers to the Portfolio, including for sub-administration, regulatory administration, transfer agency, distribution and custodial services. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately, the Independent Directors, concluded that the advisory fee structure was reasonable and determined that the Advisory Agreement be continued for another one year period, ending August 16, 2008. 18 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 (888) 520-3277.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Corporation; Comcast Corporation Vice Chairman, Comcast AMDOCS Limited (service 1500 Market Street, Corporation (cable provider to 35th Floor television and telecommunications Philadelphia, PA 19102 communications); companies) DOB: 7/16/33 Director, NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial 16 Kalmar Pooled Investment 103 Bellevue Parkway services organizations Trust (registered Wilmington, DE 19809 from 1997 to present. investment company); WT DOB: 3/7/43 Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice 16 None Fox Chase Cancer Center President, Fox Chase 333 Cottman Avenue Cancer Center (biomedical Philadelphia, PA 19111 research and medical DOB: 12/6/35 care). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 19 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli 16 None 106 Pierrepont Street Group Capital Brooklyn, NY 11201 Director 1991 to present Partners, L.P. (an DOB: 5/21/48 investment partnership) from 2000 to 2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor 16 WT Mutual Fund Villanova University of Law, Villanova (registered School of Law University School of investment 299 North Spring Mill Road Law since July 1997. company); NYSE Villanova, PA 19085 Regulation, Inc.; DOB: 4/28/51 Financial Industry Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, 16 Moyco Moyco Technologies, Inc. Chairman, Director Technologies, 200 Commerce Drive and President, Moyco Inc. Montgomeryville, PA 18936 Technologies, Inc. DOB: 3/24/34 (manufacturer of precision coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York 16 Reich and Tang Group 300 East 57th Street State Assembly (asset management); New York, NY 10022 (1981-2004); The Sparx Japan DOB: 3/28/41 Founding Partner, Funds Group Straniere Law Firm (registered (1980 to date); investment company) Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 20 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior 16 Kensington Funds Oppenheimer & Company, Inc. Vice President and prior (registered 200 Park Avenue thereto, Executive Vice investment company) New York, NY 10166 President of Oppenheimer DOB: 4/16/38 & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. 16 Cornerstone Bank 103 Bellevue Parkway from January 1987 to Wilmington, DE 19809 April 2002, Chairman and DOB: 9/25/38 Chief 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc., 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 21 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public Accountant; N/A N/A 103 Bellevue Parkway and 1988 to present Vice Chairman of the Board, Wilmington, DE 19809 Treasurer Fox Chase Cancer Center; DOB: 6/29/24 Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, Chief Since 2004 President, Vigilant N/A N/A CPA Vigilant Compliance Compliance Compliance Services since Services 186 Dundee Officer 2004; Senior Legal Drive, Suite 700 Counsel, PFPC Inc. from Williamstown, NJ 08094 2002 to 2004; Chief Legal DOB: 12/25/62 Counsel, Corviant Corporation (Investment Adviser, Broker-Dealer and Service Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
22 [THIS PAGE INTENTIONALLY LEFT BLANK.] INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 101 Sabin Street Pawtucket, RI 02866 PRINCIPAL UNDERWRITER 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 SHAREBUILDER BEDFORD SHARES OF THE RBB MONEY MARKET PORTFOLIO - -------------------------------------------------------------------------------- Managed by BlackRock Institutional Management Corporation SHAREBUILDER(R) ANNUAL REPORT August 31, 2007 www.sharebuilder.com THE RBB FUND, INC. MONEY MARKET PORTFOLIO PRIVACY NOTICE (UNAUDITED) The RBB Fund, Inc. MONEY MARKET PORTFOLIO (the "Portfolio") 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 Portfolio. 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 Portfolio 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 Portfolio 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. 1 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, distribution fees, and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 six-month period from March 1, 2007 through August 31, 2007, 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 Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 Portfolio 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 that may be incurred by shareholders of other funds. 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.
MONEY MARKET PORTFOLIO - BEDFORD CLASS ------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ----------------- ------------------ ----------------- Actual $1,000.00 $1,022.80 $4.59 Hypothetical (5% return before expenses) 1,000.00 1,020.61 4.59
MONEY MARKET PORTFOLIO - SANSOM STREET CLASS ------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ----------------- ------------------ ----------------- Actual $1,000.00 $1,025.60 $1.79 Hypothetical (5% return before expenses) 1,000.00 1,023.42 1.79
* Expenses are equal to the Portfolio's annualized expense ratio of 0.90% for the Bedford Class shares and 0.35% 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 (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Portfolio's ending account value on the first line in each table is based on the actual six-month total return of 2.28% for the Bedford Class shares and 2.56% for the Sansom Street Class shares. 2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 (UNAUDITED) SECURITY % OF NET FAIR TYPE ASSETS VALUE -------- --------- ------------ Short Term Investments: Commercial Paper .............................. 63.2% $147,952,219 Certificates of Deposit ....................... 14.4 33,830,000 Variable Rate Obligations ..................... 12.5 29,315,798 Repurchase Agreements ......................... 7.1 16,642,000 Master Notes .................................. 4.7 11,020,000 Municipal Bonds ............................... 0.7 1,540,000 Liabilities In Excess of Other Assets ......... (2.6) (6,034,280) ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $234,265,737 ===== ============ Portfolio holdings are subject to change at any time. 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS AUGUST 31, 2007 PAR FAIR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--14.4% DOMESTIC CERTIFICATES OF DEPOSIT--3.0% American Express Bank FSB5. 500%, 11/21/07 .................... $ 5,000 $ 5,000,000 Wachovia Bank NA 5.320%, 02/06/08 .................. 2,100 2,100,000 ------------ 7,100,000 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--11.4% Banque Nationale de Paris, New York(a) 5.270%, 10/03/07 .................. 1,880 1,880,000 5.310%, 11/20/07 .................. 3,215 3,215,000 5.325%, 11/30/07 .................. 2,950 2,950,000 Deutsche Bank AG, New York(a) 5.385%, 03/11/08 .................. 2,600 2,600,000 Fortis Bank SA/NV, New York(a) 5.300%, 02/11/08 .................. 2,990 2,990,000 HBOS Treasury Services PLC(a) 5.270%, 10/03/07 .................. 2,095 2,095,000 Mizuho Corporate Bank, New York(a) 5.530%, 09/21/07 .................. 5,000 5,000,000 5.730%, 10/02/07 .................. 6,000 6,000,000 ------------ 26,730,000 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $33,830,000) ............. 33,830,000 ------------ COMMERCIAL PAPER--63.2% ASSET BACKED SECURITIES--24.6% Amstel Funding Corp. 5.250%, 10/22/07 .................. 1,480 1,468,993 5.900%, 11/20/07 .................. 10,000 9,868,889 Beta Finance, Inc. 5.250%, 10/22/07 .................. 1,500 1,488,844 Chariot Funding LLC 5.800%, 11/26/07 .................. 1,000 986,144 Corporate Asset Funding Co. LLC 5.250%, 10/04/07 .................. 5,000 4,975,937 Govco LLC 5.730%, 11/15/07 .................. 2,000 1,976,125 Grampian Funding LLC 5.185%, 11/19/07 .................. 4,000 3,954,487 Greyhawk Funding LLC 5.280%, 10/02/07 .................. 1,100 1,094,999 K2 (USA) LLC 5.260%, 10/05/07 .................. 10,000 9,950,322 Mont Blanc Capital Corp. 5.260%, 10/09/07 .................. 5,000 4,972,239 PAR FAIR (000) VALUE ------- ------------ COMMERCIAL PAPER--(CONTINUED) ASSET BACKED SECURITIES--(CONTINUED) Newport Funding Corp. 5.250%, 10/09/07 .................. $ 2,000 $ 1,988,917 Nieuw Amsterdam Receivables Corp. 5.150%, 09/27/07 .................. 5,000 4,981,403 Picaros Funding LLC 5.260%, 10/16/07 .................. 5,000 4,967,125 Ranger Funding Company LLC 6.050%, 09/24/07 .................. 5,000 4,980,674 ------------ 57,655,098 ------------ BANKS--29.0% Allied Irish Banks North America, Inc. 5.250%, 09/19/07 .................. 10,000 9,973,750 Banco Santander Puerto Rico(b) 5.600%, 09/20/07 .................. 5,000 4,985,222 Bank of America Corp. 5.170%, 09/05/07 .................. 3,000 2,998,277 Danske Corp. 5.240%, 09/05/07 .................. 2,000 1,998,836 Dexia Delaware LLC 5.250%, 09/18/07 .................. 9,924 9,899,397 Dresdner U.S. Finance, Inc. 5.230%, 09/04/07 .................. 7,000 6,996,949 HBOS Treasury Services PLC(b) 5.250%, 10/17/07 .................. 1,500 1,489,938 Northern Rock PLC 5.260%, 09/26/07 .................. 2,500 2,490,868 Societe Generale North America 5.130%, 02/05/08 .................. 6,000 5,865,765 5.165%, 02/08/08 .................. 3,000 2,931,133 St. George Bank Ltd.(b) 5.245%, 09/04/07 .................. 7,000 6,996,940 Swedbank Mortgage AB(b) 5.250%, 10/12/07 .................. 10,000 9,940,208 UBS Finance Delaware LLC 5.255%, 09/06/07 .................. 1,300 1,299,051 ------------ 67,866,334 ------------ FINANCE SERVICES--5.4% General Electric Capital Corp. 5.240%, 10/19/07 .................. 5,000 4,965,067 Greenwich Capital Holdings, Inc. 5.450%, 11/15/07 .................. 3,000 2,965,937 Irish Life and Permanent PLC 5.250%, 10/03/07 .................. 4,600 4,578,533 ------------ 12,509,537 ------------ See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 PAR FAIR (000) VALUE ------- ------------ COMMERCIAL PAPER--(CONTINUED) INSURANCE--4.2% Aegon Funding Corp. 5.250%, 10/25/07 .................. $10,000 $ 9,921,250 ------------ TOTAL COMMERCIAL PAPER (Cost $147,952,219) ........... 147,952,219 ------------ MUNICIPAL BONDS--0.7% PENNSYLVANIA--0.7% Franklin County IDR (Manufacturers & Traders LOC)(c) 5.610%, 09/07/07 .................. 1,540 1,540,000 ------------ TOTAL MUNICIPAL BONDS (Cost $1,540,000) ............. 1,540,000 ------------ VARIABLE RATE OBLIGATIONS--12.5% ASSET BACKED SECURITIES--0.9% Cullinan Finance Corp.(c)(d) 5.485%, 09/25/07 .................. 1,115 1,114,909 Racers Trust 2004-6 MM(c)(d) 5.551%, 09/24/07 .................. 1,000 1,000,000 ------------ 2,114,909 ------------ BANKS--9.5% Bank of Nova Scotia(c) 5.273%, 09/04/07 .................. 2,200 2,199,265 Commonwealth Bank of Australia(b)(c) 5.358%, 10/31/07 .................. 10,000 10,001,624 HBOS Treasury Services PLC(b)(c)(d) 5.430%, 09/24/07 .................. 8,000 8,000,000 Westpac Banking Corp. New York(b)(c) 5.420%, 09/11/07 .................. 2,000 2,000,000 ------------ 22,200,889 ------------ LIFE INSURANCE--2.1% MetLife Global Funding I(c)(d) 5.615%, 09/28/07 .................. 5,000 5,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $29,315,798) ........... 29,315,798 ------------ MASTER NOTES--4.7% Bank of America Securities LLC(c) 5.435%, 09/04/07 .................. 4,000 4,000,000 Morgan Stanley Mortgage Capital, Inc.(c) 5.545%, 09/04/07 .................. 7,020 7,020,000 ------------ TOTAL MASTER NOTES (Cost $11,020,000) ............ 11,020,000 ------------ PAR FAIR (000) VALUE ------- ------------ REPURCHASE AGREEMENTS--7.1% Deutsche Bank Securities, Inc. (Tri-Party Agreement dated 08/31/07 to be repurchased at $16,651,800 collateralized by $17,020,000 Federal Home Loan Bank, 5.33%, due 07/16/08, Market Value of the collateral is $17,144,118) 5.300%, 09/04/07 .................. $16,642 $ 16,642,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $16,642,000) 16,642,000 ------------ TOTAL INVESTMENTS AT FAIR VALUE--102.6% (Cost $240,300,017*) .............. 240,300,017 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(2.6)% .............. (6,034,280) ------------ NET ASSETS (APPLICABLE TO 218,918,308 BEDFORD SHARES AND 15,354,093 SANSOM STREET SHARES)--100.0% ..... $234,265,737 ============ * Aggregate cost is the same for financial reporting and federal tax purposes. (a) Security is a foreign domiciled issuer which is registered with the Securities and Exchange Commission. (b) U.S. dollar denominated security issued by foreign domiciled entity. (c) Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2007 and the maturity date shown is the next interest rate readjustment date or the maturity date. (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors. INVESTMENT ABBREVIATIONS IDR Industrial Development Revenue LOC Letter of Credit See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS Investments, at fair value (cost $223,658,017) ....... $223,658,017 Repurchase agreements at cost ........................ 16,642,000 Cash ................................................. 541 Interest receivable .................................. 472,795 Prepaid expenses and other assets .................... 24,886 ------------ Total assets ................................. 240,798,239 ------------ LIABILITIES Payables for: Investments purchased ............................. 6,000,000 Dividends ......................................... 329,031 Distribution fees ................................. 112,872 Advisory fees ..................................... 30,450 Directors' and officers' fees ..................... 7,653 Transfer agent fees ............................... 4,033 Custodian fees .................................... 3,003 Administration and accounting fees ................ 2,266 Service organization fees ......................... 88 Accrued expenses and other liabilities ............... 43,106 ------------ Total liabilities ............................ 6,532,502 ------------ NET ASSETS ........................................... $234,265,737 ============ NET ASSETS CONSISTED OF: Paid-in capital ...................................... $234,272,400 Undistributed net investment income .................. 831 Accumulated net realized loss from investments ....... (7,494) ------------ NET ASSETS ........................................... $234,265,737 ============ NET ASSET VALUE, Offering and Redemption Price Per Bedford Share ($218,913,906/218,918,308) ......... $1.00 ============ NET ASSET VALUE, Offering and Redemption Price Per Sansom Street Share ($15,351,831/15,354,093) ..... $1.00 ============ See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2007 Investment Income Interest ............................................... $11,358,909 ----------- Expenses Distribution fees(1) ................................... 1,246,103 Investment advisory and administration fees ............ 951,482 Registration and filing fees ........................... 78,852 Printing and shareholder reporting fees ................ 60,417 Custodian fees ......................................... 55,483 Directors' and Officers' fees .......................... 48,739 Transfer agent fees .................................... 33,800 Regulatory administration fees ......................... 28,317 Professional fees ...................................... 57,556 Insurance fees ......................................... 23,175 Service organization fees (Sansom Class) ............... 963 Other expenses 13,200 ----------- Total expenses .................................... 2,598,087 Less fees waived ....................................... (805,508) ----------- Net total expenses ................................ 1,792,579 ----------- Net investment income ..................................... 9,566,330 Realized loss on investments .............................. (1,885) ----------- Net increase in net assets resulting from operations ...... $ 9,564,445 =========== (1) See Note 2 in Notes to Financial Statements. See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ----------------- ----------------- Increase (decrease) in net assets: Operations: Net investment income .......................................... $ 9,566,330 $ 9,453,852 Net realized loss on investments ............................... (1,885) (1,104) ------------ ------------ Net increase in net assets resulting from operations ........... 9,564,445 9,452,748 ------------ ------------ Dividends to shareholders fromNet investment income: Bedford shares ............................................... (8,491,001) (5,087,205) Sansom Street shares ......................................... (1,075,329) (4,366,647) ------------ ------------ Total dividends to shareholders .............................. (9,566,330) (9,453,852) ------------ ------------ Net capital share transactions (See Note 3) ...................... 68,085,811 (30,616,253) ------------ ------------ Total increase/(decrease) in net assets .......................... 68,083,926 (30,617,357) Net Assets: Beginning of year .............................................. 166,181,811 196,799,168 ------------ ------------ End of year .................................................... $234,265,737 $166,181,811 ============ ============ Undistributed net investment income, end of year ................. $ 831 $ -- ============ ============
See Accompanying Notes to Financial Statements. 8 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, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 2007 2006 2005 2004 2003 --------------------------------------------------------------------------------------- Net asset value, beginning of year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- ------- Income from investment operations: Net investment income .................... 0.0447 0.0388 0.0162 0.0025 0.0046 Net gains (losses) on securities ......... --(b) --(b) --(b) --(b) 0.0005 -------- -------- -------- -------- ------- Total net income from investment operations ........................... 0.0447 0.0388 0.0162 0.0025 0.0051 -------- -------- -------- -------- ------- Less dividends and distributions: Dividends (from net investment income) ... (0.0447) (0.0388) (0.0162) (0.0025) (0.0046) Distributions (from capital gains) ....... -- -- -- -- (0.0005) -------- -------- -------- -------- ------- Total dividends and distributions ...... (0.0447) (0.0388) (0.0162) (0.0025) (0.0051) -------- -------- -------- -------- ------- Net asset value, end of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======= Total Return ............................. 4.56% 3.95% 1.63% 0.25% 0.53% Ratios/Supplemental Data Net assets, end of year (000's omitted) ........................ $218,914 $150,657 $109,495 $ 72,001 $80,406 Ratios of expenses to average net assets(a) ......................... 0.90% 0.85% 0.97% 0.94% 0.98% Ratios of net investment income to average net assets .................... 4.47% 3.81% 1.68% 0.24% 0.46%
(a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Bedford Class of the Money Market Portfolio would have been 1.29%, 1.34%, 1.23%, 1.34% and 1.30% for the years ended August 31, 2007, 2006, 2005, 2004 and 2003, respectively. (b) Amount is less than ($0.0005) per share. See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (CONCLUDED) (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, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 2007 2006 2005 2004 2003 --------------------------------------------------------------------------------------- Net asset value, beginning of year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income .................... 0.0502 0.0434 0.0239 0.0100 0.0114 Net gains (losses) on securities ......... --(b) --(b) --(b) --(b) 0.0005 -------- -------- -------- -------- -------- Total net income from investment operations ........................... 0.0502 0.0434 0.0239 0.0100 0.0119 -------- -------- -------- -------- -------- Less dividends and distributions: Dividends (from net investment income) ... (0.0502) (0.0434) (0.0239) (0.0100) (0.0114) Distributions (from capital gains) ....... -- -- -- -- (0.0005) -------- -------- -------- -------- -------- Total dividends and distributions ...... (0.0502) (0.0434) (0.0239) (0.0100) (0.0119) -------- -------- -------- -------- -------- Net asset value, end of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ........................... 5.14% 4.42% 2.41% 1.00% 1.21% Ratios/Supplemental Data Net assets, end of year (000's omitted) .. $ 15,352 $ 15,525 $ 87,304 $141,372 $198,373 Ratios of expenses to average net assets(a) ......................... 0.35% 0.26% 0.20% 0.20% 0.30% Ratios of net investment income to average net assets .................... 5.02% 4.25% 2.39% 0.98% 1.14%
(a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Sansom Street Class of the Money Market Portfolio would have been 0.69%, 0.67%, 0.67%, 0.59% and 0.57% for the years ended August 31, 2007, 2006, 2005, 2004 and 2003, respectively. (b) Amount is less than ($0.0005) per share. See Accompanying Notes to Financial Statements. 10 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Money Market Portfolio ("Portfolio"), which comprise the RBB family of funds. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen classes of common stock. The Portfolio has issued shares with a par value of $0.001. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families." 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 accretion of discount or amortization of 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. 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. 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 Company (such as director or professional fees) are charged to all portfolios in proportion to their average net assets. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. All dividends from net investment income are taxed as ordinary income. Any net realized capital gains are distributed at least annually. Income subject to dividends 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. FEDERAL INCOME TAXES -- No provision is made for federal income taxes. It is the Company's intention to have each portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of 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. 11 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the collateral falls below 102% of the value of the repurchase price plus accrued interest, the 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 Portfoliocustodian or a third party sub-custodian. 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. OTHER -- In the normal course of business, the Portfolio may enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is dependent on claims that may be made against the Portfolio 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 Pursuant to an Investment Advisory and Administration Agreement, BlackRock Institutional Management Corp. (the "Adviser" or "BIMC"), an indirect subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser and administrator for the Portfolio. BIMC and PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., 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 0.10% 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: ANNUAL RATE ------------------------------------------------ 0.45% of first $250 million of net assets; 0.40% of next $250 million of net assets; and 0.35% of net assets in excess of $500 million. 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for the 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, 2007, advisory fees and waivers for the investment portfolio were as follows: GROSS NET ADVISORY ADVISORY FEE WAIVER FEE -------------- -------------- -------------- $951,482 $(710,449) $241,033 As of August 31, 2007, the Portfolio owed BIMC $30,450 in advisory fees. BIMC may voluntarily waive and/or reimburse a portion of its fees. PFPC may also voluntarily waive a portion of its fees and/or reimburse expenses. The Portfolio will not pay BIMC or PFPC at a later time for any amounts waived or assumed. For providing regulatory administration services to RBB, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to their net assets. The Portfolio's portion of this fee for the year ended August 31, 2007 was $28,317. PFPC serves as the transfer and dividend disbursing agent for each class. Both PFPC Trust Company and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. For providing transfer agent services, PFPC is entitled to receive fees from the Portfolio. 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, 2007, transfer agency fees for the Portfolio were $33,800. PFPC Trust Company provides certain custodial services to the Portfolio. As compensation for such custodial services, PFPC Trust Company is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average gross assets: ANNUAL RATE ------------------------------------------------ 0.025% of first $50 million of gross assets; 0.020% of next $50 million of gross assets; 0.015% of gross assets in excess of $100 million. The Portfolio, on behalf of each class of shares of the Portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The Portfolio has entered into a Distribution Agreement 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. 13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) The Plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to 0.65% on an annualized basis for the Bedford Class and up to 0.05% on an annualized basis for the Sansom Street Class. For the year ended August 31, 2007, distribution fees paid to PFPC Distributors for each class were as follows:
GROSS NET DISTRIBUTION DISTRIBUTION FEE WAIVER FEE -------------- -------------- ------------- Bedford Class $1,235,394 $ (95,059) $ 1,140,335 Sansom Street Class 10,709 -- 10,709 ---------- --------- ------------ Total Money Market Portfolio $1,246,103 $ (95,059) $ 1,151,044 ========== ========= ============
The Portfolio 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 0.10% of the daily net asset value of such shares. For the year ended August 31, 2007, service organization fees were $963 for the Portfolio. As of August 31, 2007, the Portfolio owed PFPC and its affiliates $122,262 for their services. 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
BEDFORD CLASS ------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- ----------------- VALUE VALUE ---------------- ----------------- Shares sold $ 540,563,896 $ 506,580,146 Shares issued on reinvestment of dividends 8,204,137 5,326,071 Shares repurchased (480,513,295) (470,739,390) -------------- -------------- Net Increase $ 68,254,738 $ 41,166,827 -------------- -------------- Bedford Shares authorized 1,500,000,000 1,500,000,000 ============== ============== SANSOM STREET CLASS ------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- ----------------- VALUE VALUE ---------------- ----------------- Shares sold $ 207,692,244 $1,554,920,729 Shares issued on reinvestment of dividends 136,709 146,903 Shares repurchased (207,997,880) (1,626,850,712) -------------- -------------- Net Decrease $ (168,927) $ (71,783,080) -------------- -------------- Sansom Street Shares authorized 1,500,000,000 1,500,000,000 ============== ==============
14 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2007 4. FEDERAL INCOME TAX INFORMATION In order to present undistributed net investment income, the Portfolio reclassed $831 from accumulated net realized loss on investments to undistributed net investment income. For federal income tax purposes, realized capital losses may be carried forward and applied against future realized gains. At August 31, 2007, the Portfolio had capital loss carryforwards of $5,533 of which $3,587 will expire on August 31, 2013, $917 will expire on August 31, 2014 and $1,029 will expire on August 31, 2015. 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, 2007 the Portfolio incurred post-October capital losses of $1,961. 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 gains are reported as ordinary income for federal tax purposes. Dividends paid from net investment income and short-term capital gains are treated as ordinary income distributions 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 -------------- ----------------- 2007 $9,566,330 $ -- 2006 9,453,852 -- As of August 31, 2007, the Portfolio had $329,862 of undistributed ordinary income for federal tax purposes. 5. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management has evaluated the impact of FIN 48 and has determined it will have no impact on the financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Although we are still in the process of evaluating the impact, if any, upon the adoption of the standard, we believe there will be no material impact other than enhanced disclosures. 15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Money Market Portfolio and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments of Money Market Portfolio, one of the portfolios constituting The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented. 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 audits. The financial highlights of the Money Market Portfolio for the year ended August 31, 2003 were audited by other auditors whose report, dated October 27, 2003, expressed an unqualified opinion on those financial highlights. We conducted our audits 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. The Portfolio is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Money Market Portfolio of The RBB Fund, Inc. as of August 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 21, 2007 16 ADDITIONAL INFORMATION (UNAUDITED) PROXY VOTING Policies and procedures that the Portfolio uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Portfolio 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 number shown below and on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. Bedford (800) 888-9723 QUARTERLY PORTFOLIO SCHEDULES The Company files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarter of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q is available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS As required by the 1940 Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the 1940 Act (the "Independent Directors"), considered at a meeting of the Board held on May 24, 2007 (the "Meeting"). At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Portfolio; (ii) descriptions of the experience and qualifications of the personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Portfolio; (ix) the extent to which economies of scale are relevant to the Portfolio; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to that of its 17 ADDITIONAL INFORMATION (CONCLUDED) (UNAUDITED) Lipper peer group; and (xi) a report comparing the performance of the Portfolio to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors reviewed and considered comparative fee and expense information prepared by Lipper in evaluating the fees payable by the Portfolio. The Directors considered that the Portfolio's gross fees were lower than those of the Lipper peer group median for both the Bedford Class and the Sansom Street Class. The Directors noted that the Portfolio's net advisory fees (after waivers) were less than those of the respective Lipper peer group medians for the Bedford Class and Sansom Street Class and compared favorably to the fees paid to BIMC for managing assets for other registered investment company clients (after waivers) with investment objectives similar to the Portfolio's investment objective. The Directors also considered the total expense ratios (after waivers) for the Portfolio's Bedford Class and Sansom Street Class, which were lower than the total expense ratio (after waivers) for the Lipper peer group medians. The Directors noted that the performance of each Class for the one, two, three, four and five-year periods ended March 31, 2007 exceeded the median performance of the Lipper peer group. The Directors then determined that the nature, extent and quality of services provided by BIMC in advising the Portfolio were satisfactory, the losses incurred by BIMC in providing the services were acceptable and the method BIMC uses to select brokers seemed reasonable. The Directors considered the effect of any economies of scale and noted that the presence of advisory fee waivers by BIMC benefited the Portfolio's shareholders. Further, the Board considered that breakpoints in the BIMC's contractual advisory fee would benefit investors if Portfolio assets were to increase. The Board of Directors considered the level of BIMC's and its affiliates' profits in respect of their relationship with the Portfolio, including the cost of services provided by BIMC. The consideration including a review of BIMC's and its affiliates' revenue and expense analysis in connection with the management of the Portfolio. The Board of Directors considered that, except for custody services provided by PFPC Trust Company, BIMC and its affiliates incurred an overall net operating loss in connection with the services provided to the Portfolio. The Board of Directors also took into account not only the fees payable by the Portfolio under the Advisory Agreement, but also potential benefits to BIMC, such as the engagement of affiliates of BIMC as service providers to the Portfolio, including for sub-administration, regulatory administration, transfer agency, distribution and custodial services. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately, the Independent Directors, concluded that the advisory fee structure was reasonable and determined that the Advisory Agreement be continued for another one year period, ending August 16, 2008. 18 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 (888) 520-3277.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director 16 Comcast Corporation; Comcast Corporation and Vice Chairman, AMDOCS Limited 1500 Market Street, Comcast Corporation (service provider to 35th Floor (cable television telecommunications Philadelphia, PA 19102 and communications); companies) DOB: 7/16/33 Director, NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, 16 Kalmar Pooled 103 Bellevue Parkway financial services Investment Trust Wilmington, DE 19809 organizations from (registered DOB: 3/7/43 1997 to present. investment company); WT Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice 16 None Fox Chase Cancer Center President, Fox Chase 333 Cottman Avenue Cancer Center Philadelphia, PA 19111 (biomedical research DOB: 12/6/35 and medical care). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 19 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli 16 None 106 Pierrepont Street Group Capital Brooklyn, NY 11201 Director 1991 to present Partners, L.P. (an DOB: 5/21/48 investment partnership) from 2000 to 2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor 16 WT Mutual Fund Villanova University of Law, Villanova (registered School of Law University School of investment company); 299 North Spring Mill Road Law since July 1997. NYSE Regulation, Villanova, PA 19085 Inc.; Financial DOB: 4/28/51 Industry Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, 16 Moyco Technologies, Moyco Technologies, Inc. Chairman, Director Inc. 200 Commerce Drive and President, Moyco Montgomeryville, PA 18936 Technologies, Inc. DOB: 3/24/34 (manufacturer of precision coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York 16 Reich and Tang Group 300 East 57th Street State Assembly (asset management); New York, NY 10022 (1981-2004); The Sparx Japan DOB: 3/28/41 Founding Partner, Funds Group Straniere Law Firm (registered (1980 to date); investment company) Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns `or is removed. 20 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, 16 Kensington Funds Oppenheimer & Senior Vice (registered Company, Inc. President and prior investment company) 200 Park Avenue thereto, Executive New York, NY 10166 Vice President of DOB: 4/16/38 Oppenheimer & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. 16 Cornerstone Bank 103 Bellevue Parkway from January 1987 to Wilmington, DE 19809 April 2002, Chairman and DOB: 9/25/38 Chief 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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; the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc.; 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 21 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public N/A N/A 103 Bellevue Parkway and 1988 to present Accountant; Vice Chairman Wilmington, DE 19809 Treasurer of the Board, Fox Chase DOB: 6/29/24 Cancer Center; Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, Vice President N/A N/A 301 Bellevue Parkway and Counsel, PFPC Inc. 2nd Floor (financial services Wilmington, DE 19809 company); Associate, DOB: 7/28/74 Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Chief Since 2004 President, Vigilant N/A N/A Esquire, CPA Compliance Compliance Services since Vigilant Compliance Officer 2004; Senior Legal Counsel, Services PFPC Inc. from 2002 to 186 Dundee Drive, 2004; Chief Legal Counsel, Suite 700 Corviant Corporation Williamstown, NJ 08094 (Investment Adviser, DOB: 12/25/62 Broker-Dealer and Service Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
22 [THIS PAGE INTENTIONALLY LEFT BLANK.] [THIS PAGE INTENTIONALLY LEFT BLANK.] CUSTOMER CARE For questions regarding your ShareBuilder account please call 1-800-SHRBLDR (1-800-747-2537) 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, 2007 This report is submitted for the general information of the shareholders of the Portfolio. It is not authorized for distribution unless preceded or accompanied by a prospectus for the Fund. ================================================================================ THE RBB FUND, INC. MONEY MARKET PORTFOLIO PRIVACY NOTICE (UNAUDITED) The RBB Fund, Inc. MONEY MARKET PORTFOLIO (the "Portfolio") 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 Portfolio. 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 Portfolio 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 Portfolio 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. THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND EXPENSE EXAMPLES(UNAUDITED) As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, distribution fees, and other Portfolio expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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 six-month period from March 1, 2007 through August 31, 2007, 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 Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 Portfolio 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 that may be incurred by shareholders of other funds. 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.
MONEY MARKET PORTFOLIO - BEDFORD CLASS -------------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,022.80 $4.59 Hypothetical (5% return before expenses) 1,000.00 1,020.61 4.59 MONEY MARKET PORTFOLIO - SANSOM STREET CLASS -------------------------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* -------------- --------------- ------------- Actual $1,000.00 $1,025.60 $1.79 Hypothetical (5% return before expenses) 1,000.00 1,023.42 1.79 * Expenses are equal to the Portfolio's annualized expense ratio of 0.90% for the Bedford Class shares and 0.35% 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 (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Portfolio's ending account value on the first line in each table is based on the actual six-month total return of 2.28% for the Bedford Class shares and 2.56% for the Sansom Street Class shares.
2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 (UNAUDITED) SECURITY % OF NET FAIR TYPE ASSETS VALUE -------- -------- ------------ Short Term Investments: Commercial Paper ............................ 63.2% $147,952,219 Certificates of Deposit ..................... 14.4 33,830,000 Variable Rate Obligations ................... 12.5 29,315,798 Repurchase Agreements ....................... 7.1 16,642,000 Master Notes ................................ 4.7 11,020,000 Municipal Bonds ............................. 0.7 1,540,000 Liabilities In Excess of Other Assets ....... (2.6) (6,034,280) ----- ------------ NET ASSETS -- 100.0% ........................... 100.0% $234,265,737 ===== ============ Portfolio holdings are subject to change at any time. 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS AUGUST 31, 2007 PAR FAIR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--14.4% DOMESTIC CERTIFICATES OF DEPOSIT--3.0% American Express Bank FSB 5.500%, 11/21/07 ................................ $ 5,000 $ 5,000,000 Wachovia Bank NA 5.320%, 02/06/08 ................................ 2,100 2,100,000 ------------ 7,100,000 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--11.4% Banque Nationale de Paris, New York(a) 5.270%, 10/03/07 ................................ 1,880 1,880,000 5.310%, 11/20/07 ................................ 3,215 3,215,000 5.325%, 11/30/07 ................................ 2,950 2,950,000 Deutsche Bank AG, New York(a) 5.385%, 03/11/08 ................................ 2,600 2,600,000 Fortis Bank SA/NV, New York(a) 5.300%, 02/11/08 ................................ 2,990 2,990,000 HBOS Treasury Services PLC(a) 5.270%, 10/03/07 ................................ 2,095 2,095,000 Mizuho Corporate Bank, New York(a) 5.530%, 09/21/07 ................................ 5,000 5,000,000 5.730%, 10/02/07 ................................ 6,000 6,000,000 ------------ 26,730,000 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $33,830,000) ......................... 33,830,000 ------------ COMMERCIAL PAPER--63.2% ASSET BACKED SECURITIES--24.6% Amstel Funding Corp. 5.250%, 10/22/07 ................................ 1,480 1,468,993 5.900%, 11/20/07 ................................ 10,000 9,868,889 Beta Finance, Inc. 5.250%, 10/22/07 ................................ 1,500 1,488,844 Chariot Funding LLC 5.800%, 11/26/07 ................................ 1,000 986,144 Corporate Asset Funding Co. LLC 5.250%, 10/04/07 ................................ 5,000 4,975,937 Govco LLC 5.730%, 11/15/07 ................................ 2,000 1,976,125 Grampian Funding LLC 5.185%, 11/19/07 ................................ 4,000 3,954,487 Greyhawk Funding LLC 5.280%, 10/02/07 ................................ 1,100 1,094,999 K2 (USA) LLC 5.260%, 10/05/07 ................................ 10,000 9,950,322 Mont Blanc Capital Corp. 5.260%, 10/09/07 ................................ 5,000 4,972,239 PAR FAIR (000) VALUE ------- ------------ COMMERCIAL PAPER--(CONTINUED) ASSET BACKED SECURITIES--(CONTINUED) Newport Funding Corp. 5.250%, 10/09/07 ................................ $ 2,000 $ 1,988,917 Nieuw Amsterdam Receivables Corp. 5.150%, 09/27/07 .. ............................. 5,000 4,981,403 Picaros Funding LLC 5.260%, 10/16/07 ................................ 5,000 4,967,125 Ranger Funding Company LLC 6.050%, 09/24/07 ................................ 5,000 4,980,674 ------------ 57,655,098 ------------ BANKS--29.0% Allied Irish Banks North America, Inc. 5.250%, 09/19/07 ................................ 10,000 9,973,750 Banco Santander Puerto Rico(b) 5.600%, 09/20/07 ................................ 5,000 4,985,222 Bank of America Corp. 5.170%, 09/05/07 ................................ 3,000 2,998,277 Danske Corp. 5.240%, 09/05/07 ................................ 2,000 1,998,836 Dexia Delaware LLC 5.250%, 09/18/07 ................................ 9,924 9,899,397 Dresdner U.S. Finance, Inc. 5.230%, 09/04/07 ................................ 7,000 6,996,949 HBOS Treasury Services PLC(b) 5.250%, 10/17/07 ................................ 1,500 1,489,938 Northern Rock PLC 5.260%, 09/26/07 ................................ 2,500 2,490,868 Societe Generale North America 5.130%, 02/05/08 ................................ 6,000 5,865,765 5.165%, 02/08/08 ................................ 3,000 2,931,133 St. George Bank Ltd.(b) 5.245%, 09/04/07 ................................ 7,000 6,996,940 Swedbank Mortgage AB(b) 5.250%, 10/12/07 ................................ 10,000 9,940,208 UBS Finance Delaware LLC 5.255%, 09/06/07 ................................ 1,300 1,299,051 ------------ 67,866,334 ------------ FINANCE SERVICES--5.4% General Electric Capital Corp. 5.240%, 10/19/07 ................................ 5,000 4,965,067 Greenwich Capital Holdings, Inc. 5.450%, 11/15/07 .. ............................. 3,000 2,965,937 Irish Life and Permanent PLC 5.250%, 10/03/07 ................................ 4,600 4,578,533 ------------ 12,509,537 ------------ See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 PAR FAIR (000) VALUE ------- ------------ COMMERCIAL PAPER--(CONTINUED) INSURANCE--4.2% Aegon Funding Corp. 5.250%, 10/25/07 ................................ $10,000 $ 9,921,250 ------------ TOTAL COMMERCIAL PAPER (Cost $147,952,219) ........................ 147,952,219 ------------ MUNICIPAL BONDS--0.7% PENNSYLVANIA--0.7% Franklin County IDR (Manufacturers & Traders LOC)(c) 5.610%, 09/07/07 ................................ 1,540 1,540,000 ------------ TOTAL MUNICIPAL BONDS (Cost $1,540,000) .......................... 1,540,000 ------------ VARIABLE RATE OBLIGATIONS--12.5% ASSET BACKED SECURITIES--0.9% Cullinan Finance Corp.(c)(d) 5.485%, 09/25/07 ................................ 1,115 1,114,909 Racers Trust 2004-6 MM(c)(d) 5.551%, 09/24/07 ................................ 1,000 1,000,000 ------------ 2,114,909 ------------ BANKS--9.5% Bank of Nova Scotia(c) 5.273%, 09/04/07 ................................ 2,200 2,199,265 Commonwealth Bank of Australia(b)(c) 5.358%, 10/31/07 ................................ 10,000 10,001,624 HBOS Treasury Services PLC(b)(c)(d) 5.430%, 09/24/07 ................................ 8,000 8,000,000 Westpac Banking Corp. New York(b)(c) 5.420%, 09/11/07 ................................ 2,000 2,000,000 ------------ 22,200,889 ------------ LIFE INSURANCE--2.1% MetLife Global Funding I(c)(d) 5.615%, 09/28/07 ................................ 5,000 5,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $29,315,798) ......................... 29,315,798 ------------ MASTER NOTES--4.7% Bank of America Securities LLC(c) 5.435%, 09/04/07 .. ............................. 4,000 4,000,000 Morgan Stanley Mortgage Capital, Inc.(c) 5.545%, 09/04/07 ........................................ 7,020 7,020,000 ------------ TOTAL MASTER NOTES (Cost $11,020,000) ......................... 11,020,000 ------------ PAR FAIR (000) VALUE ------- ------------ REPURCHASE AGREEMENTS--7.1% Deutsche Bank Securities, Inc. (Tri-Party Agreement dated 08/31/07 to be repurchased at $16,651,800 collateralized by $17,020,000 Federal Home Loan Bank, 5.33%, due 07/16/08, Market Value of the collateral is $17,144,118) 5.300%, 09/04/07 ................................ $16,642 $ 16,642,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $16,642,000) ......................... 16,642,000 ------------ TOTAL INVESTMENTS AT FAIR VALUE--102.6% (Cost $240,300,017*) ............................ 240,300,017 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(2.6)% ...... (6,034,280) ------------ NET ASSETS (APPLICABLE TO 218,918,308 BEDFORD SHARES AND 15,354,093 SANSOM STREET SHARES)--100.0% ................................. $234,265,737 ============ * Aggregate cost is the same for financial reporting and federal tax purposes. (a) Security is a foreign domiciled issuer which is registered with the Securities and Exchange Commission. (b) U.S. dollar denominated security issued by foreign domiciled entity. (c) Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2007 and the maturity date shown is the next interest rate readjustment date or the maturity date. (d) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors. INVESTMENT ABBREVIATIONS IDR Industrial Development Revenue LOC Letter of Credit See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS Investments, at fair value (cost $223,658,017) .............. $223,658,017 Repurchase agreements at cost ............................... 16,642,000 Cash ........................................................ 541 Interest receivable ......................................... 472,795 Prepaid expenses and other assets ........................... 24,886 ------------ Total assets ........................................ 240,798,239 ------------ LIABILITIES Payables for: Investments purchased .................................... 6,000,000 Dividends ................................................ 329,031 Distribution fees ........................................ 112,872 Advisory fees ............................................ 30,450 Directors' and officers' fees ............................ 7,653 Transfer agent fees ...................................... 4,033 Custodian fees ........................................... 3,003 Administration and accounting fees ....................... 2,266 Service organization fees ................................ 88 Accrued expenses and other liabilities ...................... 43,106 ------------ Total liabilities ................................... 6,532,502 ------------ NET ASSETS .................................................. $234,265,737 ============ NET ASSETS CONSISTED OF: Paid-in capital ............................................. $234,272,400 Undistributed net investment income ......................... 831 Accumulated net realized loss from investments .............. (7,494) ------------ NET ASSETS .................................................. $234,265,737 ============ NET ASSET VALUE, Offering and Redemption Price Per Bedford Share ($218,913,906/218,918,308) .................... $1.00 ===== NET ASSET VALUE, Offering and Redemption Price Per Sansom Street Share ($15,351,831/15,354,093) ................ $1.00 ===== See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2007 Investment Income Interest ................................................ $11,358,909 ----------- Expenses Distribution fees(1) .................................... 1,246,103 Investment advisory and administration fees ............. 951,482 Registration and filing fees ............................ 78,852 Printing and shareholder reporting fees ................. 60,417 Custodian fees .......................................... 55,483 Directors' and Officers' fees ........................... 48,739 Transfer agent fees ..................................... 33,800 Regulatory administration fees .......................... 28,317 Professional fees ....................................... 57,556 Insurance fees .......................................... 23,175 Service organization fees (Sansom Class) ................ 963 Other expenses .......................................... 13,200 ----------- Total expenses ..................................... 2,598,087 Less fees waived ........................................ (805,508) ----------- Net total expenses ................................. 1,792,579 ----------- Net investment income ...................................... 9,566,330 Realized loss on investments ............................... (1,885) ----------- Net increase in net assets resulting from operations ....... $ 9,564,445 =========== (1) See Note 2 in Notes to Financial Statements. See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- --------------- Increase (decrease) in net assets: Operations: Net investment income .................................... $ 9,566,330 $ 9,453,852 Net realized loss on investments ......................... (1,885) (1,104) ------------ ------------ Net increase in net assets resulting from operations ..... 9,564,445 9,452,748 ------------ ------------ Dividends to shareholders from Net investment income: Bedford shares ......................................... (8,491,001) (5,087,205) Sansom Street shares ................................... (1,075,329) (4,366,647) ------------ ------------ Total dividends to shareholders ........................ (9,566,330) (9,453,852) ------------ ------------ Net capital share transactions (See Note 3) ................ 68,085,811 (30,616,253) ------------ ------------ Total increase/(decrease) in net assets .................... 68,083,926 (30,617,357) Net Assets: Beginning of year ........................................ 166,181,811 196,799,168 ------------ ------------ End of year .............................................. $234,265,737 $166,181,811 ============ ============ Undistributed net investment income, end of year ........... $ 831 $ -- ============ ============
See Accompanying Notes to Financial Statements. 8 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, 2007 AUGUST 31, 2006 AUGUST 31, 2005 AUGUST 31, 2004 AUGUST 31, 2003 --------------------------------------------------------------------------------------- Net asset value, beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ................. 0.0447 0.0388 0.0162 0.0025 0.0046 Net gains (losses) on securities ...... --(b) --(b) --(b) --(b) 0.0005 -------- -------- -------- -------- -------- Total net income from investment operations ....................... 0.0447 0.0388 0.0162 0.0025 0.0051 -------- -------- -------- -------- -------- Less dividends and distributions: Dividends (from net investment income) ............................ (0.0447) (0.0388) (0.0162) (0.0025) (0.0046) Distributions (from capital gains) .... -- -- -- -- (0.0005) -------- -------- -------- -------- -------- Total dividends and distributions ... (0.0447) (0.0388) (0.0162) (0.0025) (0.0051) -------- -------- -------- -------- -------- Net asset value, end of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return .......................... 4.56% 3.95% 1.63% 0.25% 0.53% Ratios/Supplemental Data Net assets, end of year (000's omitted) .................... $218,914 $150,657 $109,495 $ 72,001 $ 80,406 Ratios of expenses to average net assets(a) ...................... 0.90% 0.85% 0.97% 0.94% 0.98% Ratios of net investment income to average net assets .............. 4.47% 3.81% 1.68% 0.24% 0.46% (a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Bedford Class of the Money Market Portfolio would have been 1.29%, 1.34%, 1.23%, 1.34% and 1.30% for the years ended August 31, 2007, 2006, 2005, 2004 and 2003, respectively. (b) Amount is less than ($0.0005) per share.
See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FINANCIAL HIGHLIGHTS (CONCLUDED) (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, 2007 AUGUST 31, 2006 AUGUST 31, 2005 AUGUST 31, 2004 AUGUST 31, 2003 --------------------------------------------------------------------------------------- Net asset value, beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ................. 0.0502 0.0434 0.0239 0.0100 0.0114 Net gains (losses) on securities ...... --(b) --(b) --(b) --(b) 0.0005 -------- -------- -------- -------- -------- Total net income from investment operations ....................... 0.0502 0.0434 0.0239 0.0100 0.0119 -------- -------- -------- -------- -------- Less dividends and distributions: Dividends (from net investment income) (0.0502) (0.0434) (0.0239) (0.0100) (0.0114) Distributions (from capital gains) .... -- -- -- -- (0.0005) -------- -------- -------- -------- -------- Total dividends and distributions ... (0.0502) (0.0434) (0.0239) (0.0100) (0.0119) -------- -------- -------- -------- -------- Net asset value, end of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return 5.14% 4.42% 2.41% 1.00% 1.21% Ratios/Supplemental Data Net assets, end of year (000's omitted) $ 15,352 $ 15,525 $ 87,304 $141,372 $198,373 Ratios of expenses to average net assets(a) .............. 0.35% 0.26% 0.20% 0.20% 0.30% Ratios of net investment income to average net assets ................. 5.02% 4.25% 2.39% 0.98% 1.14% (a) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Sansom Street Class of the Money Market Portfolio would have been 0.69%, 0.67%, 0.67%, 0.59% and 0.57% for the years ended August 31, 2007, 2006, 2005, 2004 and 2003, respectively. (b) Amount is less than ($0.0005) per share.
See Accompanying Notes to Financial Statements. 10 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Money Market Portfolio ("Portfolio"), which comprise the RBB family of funds. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen classes of common stock. The Portfolio has issued shares with a par value of $0.001. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into eight separate "families." 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 accretion of discount or amortization of 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. 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. 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 Company (such as director or professional fees) are charged to all portfolios in proportion to their average net assets. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. All dividends from net investment income are taxed as ordinary income. Any net realized capital gains are distributed at least annually. Income subject to dividends 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. FEDERAL INCOME TAXES -- No provision is made for federal income taxes. It is the Company's intention to have each portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of 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. 11 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the collateral falls below 102% of the value of the repurchase price plus accrued interest, the 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 Portfoliocustodian or a third party sub-custodian. 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. OTHER -- In the normal course of business, the Portfolio may enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is dependent on claims that may be made against the Portfolio 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 Pursuant to an Investment Advisory and Administration Agreement, BlackRock Institutional Management Corp. (the "Adviser" or "BIMC"), an indirect subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser and administrator for the Portfolio. BIMC and PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., 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 0.10% 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: ANNUAL RATE -------------------------------------------------- 0.45% of first $250 million of net assets; 0.40% of next $250 million of net assets; and 0.35% of net assets in excess of $500 million. 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for the 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, 2007, advisory fees and waivers for the investment portfolio were as follows: GROSS NET ADVISORY ADVISORY FEE WAIVER FEE -------- ---------- -------- $951,482 $(710,449) $241,033 As of August 31, 2007, the Portfolio owed BIMC $30,450 in advisory fees. BIMC may voluntarily waive and/or reimburse a portion of its fees. PFPC may also voluntarily waive a portion of its fees and/or reimburse expenses. The Portfolio will not pay BIMC or PFPC at a later time for any amounts waived or assumed. For providing regulatory administration services to RBB, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to their net assets. The Portfolio's portion of this fee for the year ended August 31, 2007 was $28,317. PFPC serves as the transfer and dividend disbursing agent for each class. Both PFPC Trust Company and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc. For providing transfer agent services, PFPC is entitled to receive fees from the Portfolio. 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, 2007, transfer agency fees for the Portfolio were $33,800. PFPC Trust Company provides certain custodial services to the Portfolio. As compensation for such custodial services, PFPC Trust Company is entitled to receive the following fees, computed daily and payable monthly, and based on the Portfolio's average gross assets: ANNUAL RATE ------------------------------------------------- 0.025% of first $50 million of gross assets; 0.020% of next $50 million of gross assets; 0.015% of gross assets in excess of $100 million. The Portfolio, on behalf of each class of shares of the Portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the 1940 Act (the "Plans"). The Portfolio has entered into a Distribution Agreement 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. 13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) The Plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to 0.65% on an annualized basis for the Bedford Class and up to 0.05% on an annualized basis for the Sansom Street Class. For the year ended August 31, 2007, distribution fees paid to PFPC Distributors for each class were as follows:
GROSS NET DISTRIBUTION DISTRIBUTION FEE WAIVER FEE ------------ --------- ------------ Bedford Class ....................... $1,235,394 $(95,059) $1,140,335 Sansom Street Class ................. 10,709 -- 10,709 ---------- -------- ---------- Total Money Market Portfolio ........ $1,246,103 $(95,059) $1,151,044 ========== ======== ==========
The Portfolio 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 0.10% of the daily net asset value of such shares. For the year ended August 31, 2007, service organization fees were $963 for the Portfolio. As of August 31, 2007, the Portfolio owed PFPC and its affiliates $122,262 for their services. 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
BEDFORD CLASS ----------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- VALUE VALUE -------------- --------------- Shares sold $ 540,563,896 $ 506,580,146 Shares issued on reinvestment of dividends 8,204,137 5,326,071 Shares repurchased (480,513,295) (470,739,390) -------------- --------------- Net Increase $ 68,254,738 $ 41,166,827 -------------- --------------- Bedford Shares authorized 1,500,000,000 1,500,000,000 ============== =============== SANSOM STREET CLASS ----------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- ---------------- VALUE VALUE -------------- --------------- Shares sold $ 207,692,244 $ 1,554,920,729 Shares issued on reinvestment of dividends 136,709 146,903 Shares repurchased (207,997,880) (1,626,850,712) -------------- --------------- Net Decrease $ (168,927) $ (71,783,080) -------------- --------------- Sansom Street Shares authorized 1,500,000,000 1,500,000,000 ============== ===============
14 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2007 4. FEDERAL INCOME TAX INFORMATION In order to present undistributed net investment income, the Portfolio reclassed $831 from accumulated net realized loss on investments to undistributed net investment income. For federal income tax purposes, realized capital losses may be carried forward and applied against future realized gains. At August 31, 2007, the Portfolio had capital loss carryforwards of $5,533 of which $3,587 will expire on August 31, 2013, $917 will expire on August 31, 2014 and $1,029 will expire on August 31, 2015. 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, 2007 the Portfolio incurred post-October capital losses of $1,961. 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 gains are reported as ordinary income for federal tax purposes. Dividends paid from net investment income and short-term capital gains are treated as ordinary income distributions 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 ---------- --------- 2007 $9,566,330 $ -- 2006 9,453,852 -- As of August 31, 2007, the Portfolio had $329,862 of undistributed ordinary income for federal tax purposes. 5. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management has evaluated the impact of FIN 48 and has determined it will have no impact on the financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Although we are still in the process of evaluating the impact, if any, upon the adoption of the standard, we believe there will be no material impact other than enhanced disclosures. 15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Money Market Portfolio and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments of Money Market Portfolio, one of the portfolios constituting The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented. 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 audits. The financial highlights of the Money Market Portfolio for the year ended August 31, 2003 were audited by other auditors whose report, dated October 27, 2003, expressed an unqualified opinion on those financial highlights. We conducted our audits 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. The Portfolio is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Money Market Portfolio of The RBB Fund, Inc. as of August 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 21, 2007 16 ADDITIONAL INFORMATION (UNAUDITED) PROXY VOTING Policies and procedures that the Portfolio uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Portfolio 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 number shown below and on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. Bedford (800) 888-9723 Sansom Street (888) 261-4073 QUARTERLY PORTFOLIO SCHEDULES The Company files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarter of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q is available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS As required by the 1940 Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the 1940 Act (the "Independent Directors"), considered at a meeting of the Board held on May 24, 2007 (the "Meeting"). At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Portfolio; (ii) descriptions of the experience and qualifications of the personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Portfolio; (ix) the extent to which economies of scale are relevant to the Portfolio; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to that of its Lipper peer group; and (xi) a report comparing the performance of the Portfolio to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. 17 ADDITIONAL INFORMATION (CONCLUDED) (UNAUDITED) The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors reviewed and considered comparative fee and expense information prepared by Lipper in evaluating the fees payable by the Portfolio. The Directors considered that the Portfolio's gross fees were lower than those of the Lipper peer group median for both the Bedford Class and the Sansom Street Class. The Directors noted that the Portfolio's net advisory fees (after waivers) were less than those of the respective Lipper peer group medians for the Bedford Class and Sansom Street Class and compared favorably to the fees paid to BIMC for managing assets for other registered investment company clients (after waivers) with investment objectives similar to the Portfolio's investment objective. The Directors also considered the total expense ratios (after waivers) for the Portfolio's Bedford Class and Sansom Street Class, which were lower than the total expense ratio (after waivers) for the Lipper peer group medians. The Directors noted that the performance of each Class for the one, two, three, four and five-year periods ended March 31, 2007 exceeded the median performance of the Lipper peer group. The Directors then determined that the nature, extent and quality of services provided by BIMC in advising the Portfolio were satisfactory, the losses incurred by BIMC in providing the services were acceptable and the method BIMC uses to select brokers seemed reasonable. The Directors considered the effect of any economies of scale and noted that the presence of advisory fee waivers by BIMC benefited the Portfolio's shareholders. Further, the Board considered that breakpoints in the BIMC's contractual advisory fee would benefit investors if Portfolio assets were to increase. The Board of Directors considered the level of BIMC's and its affiliates' profits in respect of their relationship with the Portfolio, including the cost of services provided by BIMC. The consideration including a review of BIMC's and its affiliates' revenue and expense analysis in connection with the management of the Portfolio. The Board of Directors considered that, except for custody services provided by PFPC Trust Company, BIMC and its affiliates incurred an overall net operating loss in connection with the services provided to the Portfolio. The Board of Directors also took into account not only the fees payable by the Portfolio under the Advisory Agreement, but also potential benefits to BIMC, such as the engagement of affiliates of BIMC as service providers to the Portfolio, including for sub-administration, regulatory administration, transfer agency, distribution and custodial services. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately, the Independent Directors, concluded that the advisory fee structure was reasonable and determined that the Advisory Agreement be continued for another one year period, ending August 16, 2008. 18 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 (888) 520-3277.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Corporation; Comcast Corporation Vice Chairman, Comcast AMDOCS Limited 1500 Market Street, Corporation (cable (service provider to 35th Floor television and telecommunications Philadelphia, PA 19102 communications); Director, companies) DOB: 7/16/33 NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial 16 Kalmar Pooled 103 Bellevue Parkway services organizations from Investment Trust Wilmington, DE 19809 1997 to present. (registered investment DOB: 3/7/43 company); WT Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, 16 None Fox Chase Cancer Center Fox Chase Cancer Center 333 Cottman Avenue (biomedical research and Philadelphia, PA 19111 medical care). DOB: 12/6/35 - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed.
19 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group 16 None 106 Pierrepont Street Capital Partners, L.P. (an Brooklyn, NY 11201 Director 1991 to present investment partnership) DOB: 5/21/48 from 2000 to 2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor of Law, 16 WT Mutual Fund Villanova University Villanova University School (registered investment School of Law of Law since July 1997. company); NYSE 299 North Spring Mill Road Regulation, Inc.; Villanova, PA 19085 Financial Industry DOB: 4/28/51 Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, 16 Moyco Technologies, Moyco Technologies, Inc. Director and President, Inc. 200 Commerce Drive Moyco Technologies, Inc. Montgomeryville, PA 18936 (manufacturer of precision DOB: 3/24/34 coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York State 16 Reich and Tang Group 300 East 57th Street Assembly (1981-2004); (asset management); New York, NY 10022 Founding Partner, Straniere The Sparx Japan Funds DOB: 3/28/41 Law Firm (1980 to date); Group (registered Partner, Kanter-Davidoff investment company) (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns `or is removed.
20 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior 16 Kensington Funds Oppenheimer & Company, Inc. Vice President and prior (registered investment 200 Park Avenue thereto, Executive Vice company) New York, NY 10166 President of Oppenheimer & DOB: 4/16/38 Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 16 Cornerstone Bank 103 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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; the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc.; 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer.
21 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public Accountant; N/A N/A 103 Bellevue Parkway and 1988 to present Vice Chairman of the Board, Wilmington, DE 19809 Treasurer Fox Chase Cancer Center; DOB: 6/29/24 Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Chief Since 2004 President, Vigilant Compliance N/A N/A Esquire, CPA Compliance Services since 2004; Senior Vigilant Compliance Officer Legal Counsel, PFPC Inc. from Services 2002 to 2004; Chief Legal 186 Dundee Drive, Counsel, Corviant Corporation Suite 700 (Investment Adviser, Williamstown, NJ 08094 Broker-Dealer and Service DOB: 12/25/62 Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
22 [THIS PAGE INTENTIONALLY LEFT BLANK.] INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 101 Sabin Street Pawtucket, RI 02866 PRINCIPAL UNDERWRITER 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 [GRAPHIC OMITTED] ROBECO ROBECO INVESTMENT FUNDS OF THE RBB FUND, INC. ANNUAL REPORT AUGUST 31, 2007 ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND ROBECO BOSTON PARTNERS MID CAP VALUE FUND ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND ROBECO WPG SMALL CAP VALUE FUND ROBECO WPG LARGE CAP GROWTH FUND ROBECO WPG CORE BOND FUND This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution unless preceded or accompanied by a current prospectus for the Funds. Shares of Robeco Investment Funds are distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA 19406. ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ PRIVACY NOTICE (unaudited) ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND ROBECO BOSTON PARTNERS MID CAP VALUE FUND ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND ROBECO WPG SMALL CAP VALUE FUND ROBECO WPG LARGE CAP GROWTH FUND ROBECO WPG CORE BOND FUND (THE "ROBECO INVESTMENT FUNDS") The Robeco Investment 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. ANNUAL REPORT 2007 | 1 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ GENERAL MARKET COMMENTARY ================================================================================ Dear Shareholder: Spring and early summer marked the culmination of an extended period of tranquility, liquidity and upward price trends in the U.S. financial markets, but July and August quickly extinguished investor optimism and served as a stark reminder of how violently market prices incorporate new information, particularly bad news. Positive sentiment, market liquidity and credit availability vanished amidst the first broad-based evidence that years of lax lending standards in sub-prime and home equity mortgage markets had finally reached a critical turning point. A global retrenchment in attitudes toward risky assets began in response to the widely publicized problems and, in some instances, failure of some large lenders and hedge funds. This was a world wide phenomenon, affecting investors not only in the United States, but also in Europe, Asia and the Far East. There is reasonable cause for concern. For years, excessive global liquidity has driven down risk premiums and rates of return as investors reached further out the risk spectrum amidst a paucity of yield. Strategies based on leveraging illiquid and complicated investment structures have been preferred investment vehicles, with low quality mortgage and corporate bonds as well as emerging markets taking center stage. Now investors are rethinking higher risk strategies, as they grapple with the probable widespread consequences of declining U.S. home prices, a weakened consumer and a more skeptical and less inviting global investment climate. For investors with a reasonably long investment horizon, all is not doom and gloom. The U.S. economy remains fundamentally sound, and although employment and spending will probably weaken in response to lower housing prices, the Federal Reserve has clearly indicated its intention to provide liquidity should economic fundamentals seriously weaken. Corporate balance sheets are also quite sound following years of healthy cash flows which allowed companies to pay down debt and accumulate cash. The jump in market volatility has uncovered investment opportunities -- particularly in higher quality companies with large market capitalizations and geographically diversified customer bases from which to tap strong foreign demand. The investment strategies outlined on the following pages each target a different segment of the U.S. equity and fixed income market, but they all share a common trait in that they are managed by highly experienced, long tenured professionals each of whom has weathered challenging markets during the course of their long careers. The following pages contain investment commentary on each of the Robeco Investment Funds. Please take a minute to review this commentary and feel free to contact us with questions. Warm regards, Robeco Investment Funds 2 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (unaudited) ================================================================================ Dear Shareholder: The Robeco Boston Partners Small Cap Value Fund II returned 10.53% (Institutional share class) and 10.26% (Investor share class) for the one-year period ended August 31, 2007, outperforming its primary benchmark, the Russell 2000 Value(R) Index, which returned 6.64%. The last year has been a diverse period in the markets. While the latter half of 2006 provided month after month of positive returns in the U.S. equity market, year-to-date 2007 has reminded investors that stocks can go down as well as up. As the year opened, weakness in the housing market spread to the mortgage market. As several prominent mortgage lenders ran into financial difficulty and news spread of certain large hedge fund failures, investors became cautious and liquidity began to leave the financial markets, negatively impacting the equity markets. However, the U.S. equity markets - including small cap value - were up again in August, though more volatility than we have seen in recent years. Amidst the recent market turmoil, the Robeco Boston Partners Small Cap Value Fund II remains ahead of its benchmark for both the year-to-date and one-year periods ended August 31, 2007. The portfolio's holdings in the Finance, Capital Goods, Consumer Durables and Health Care sectors were the main drivers of the portfolio's outperformance. Although the portfolio's avoidance of banks detracted during much of 2006, it was a primary contributor to relative performance for the fiscal year. Stock selection in the Capital Goods and Consumer Durables sectors also helped add value to the portfolio. Within the portfolio, other areas affected by investor nervousness were Consumer Services and REITs, and sub-par stock selection in the Consumer Services sector made it the largest detractor. Overall, the portfolio has produced attractive relative returns in the majority of economic sectors, largely due to our diversification and strong stock selection. Our bottom-up investment process has continued to emphasize attractive valuations and strong profitability, attributes which we believe will drive outperformance over time. While market declines are disappointing, the portfolio should not reach speculative levels due to its value strategy and thus is well-positioned over the long-term. As we continually look for under-priced stocks in our process and stress strong fundamentals, the portfolio should hold up well in volatile periods when risk is being priced into the market. As a value investor in this environment, we will selectively respond to stock-specific opportunities where we believe the market has overreacted but are always mindful of the risk/reward tradeoff and will continue to be so going forward. The Robeco Boston Partners Small Cap Value Fund II is open to new investors. We will continue to monitor cash flows closely to ensure that we maintain asset levels which enable us to manage the portfolio effectively for the benefit of its shareholders. Sincerely, David Dabora Robeco Boston Partners Small Cap Value Fund II Portfolio Manager - ----------------------- Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Investors should note that the Fund is an actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== Platinum Underwriters Holdings Ltd. 2.38% - ----------------------------------------------------------- Live Nation, Inc. 1.56% - ----------------------------------------------------------- Max Re Capital Ltd. 1.50% - ----------------------------------------------------------- FTI Consulting, Inc. 1.36% - ----------------------------------------------------------- BankUnited Financial Corp. 1.29% - ----------------------------------------------------------- Mentor Corp. 1.28% - ----------------------------------------------------------- Insight Enterprises, Inc. 1.27% - ----------------------------------------------------------- IndyMac Bancorp, Inc. 1.26% - ----------------------------------------------------------- Warnaco Group, Inc., (The) 1.21% - ----------------------------------------------------------- IPC Holdings Ltd. 1.18% - ----------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) =========================================================== P/E: Price/Earnings 14.1x - ----------------------------------------------------------- P/B: Price/Book 1.6x - ----------------------------------------------------------- Holdings 176 - ----------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $1,109 - ----------------------------------------------------------- ROE: Return on Equity 13.2 - ----------------------------------------------------------- OROA: Operating Return on Operating Assets 32.7 - ----------------------------------------------------------- Portfolio holdings are subject to change at any time. ANNUAL REPORT 2007 | 3 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Small Cap Value Fund II Institutional Class vs. Russell Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Small Cap Value Fund II-- Institutional Russell 2000 Russell 2000(R) Class Value(R) Index Index --------------- -------------- --------------- 7/1/98 $10,000 $10,000 $10,000 7/31/98 9,280 9,217 9,190 8/31/98 7,620 7,774 7,405 11/30/98 7,930 8,686 8,746 2/28/99 7,640 8,157 8,649 5/31/99 8,670 9,099 9,711 8/31/99 8,670 8,868 9,506 11/30/99 8,450 8,561 10,117 2/29/00 8,714 9,118 12,911 5/31/00 9,854 9,074 10,673 8/31/00 11,395 10,081 12,087 11/30/00 11,225 9,784 10,057 2/28/01 14,382 11,118 10,736 5/31/01 16,926 11,741 11,281 8/31/01 17,613 11,898 10,682 11/30/01 17,172 11,641 10,542 2/28/02 17,995 12,594 10,773 5/31/02 19,739 13,550 11,224 8/31/02 16,312 11,232 9,034 11/30/02 15,939 11,431 9,426 2/28/03 14,437 10,277 8,393 5/31/03 18,135 12,536 10,306 8/31/03 20,970 13,892 11,660 11/30/03 22,943 15,422 12,846 2/29/04 25,689 16,854 13,799 5/31/04 24,956 16,399 13,427 8/31/04 23,897 16,600 12,984 11/30/04 26,748 19,080 15,062 2/28/05 27,522 19,153 15,113 5/31/05 27,107 18,876 14,746 8/31/05 29,298 20,353 15,985 11/30/05 30,163 20,613 16,291 2/28/06 31,565 22,143 17,621 5/31/06 31,702 22,314 17,434 8/31/06 31,182 22,940 17,477 11/30/06 34,435 25,038 19,128 2/28/07 35,381 27,285 19,357 5/31/07 38,141 28,926 20,733 8/31/07 34,467 26,347 19,465 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 actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION(1) ---------- --------- ---------- ------------- Small Cap Value Fund II -- Institutional Class 10.53% 12.98% 16.14% 14.45% Russell 2000 Value(R) Index 6.64% 13.80% 16.85% 10.25% Russell 2000(R) Index(2) 11.36% 14.45% 16.60% 7.53%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.53%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period July 1, 1998 (commencement of operations) through August 31, 2007. (2) This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. 4 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Small Cap Value Fund II Investor Class vs. Russell Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Small Cap Value Fund II-- Investor Russell 2000 Russell 2000(R) Class Value(R) Index Index --------------- -------------- --------------- 7/1/98 $10,000 $10,000 $10,000 7/31/98 9,290 9,217 9,190 8/31/98 7,630 7,774 7,405 11/30/98 7,940 8,686 8,746 2/28/99 7,640 8,157 8,649 5/31/99 8,660 9,099 9,711 8/31/99 8,650 8,868 9,506 11/30/99 8,440 8,561 10,117 2/29/00 8,700 9,118 12,911 5/31/00 9,830 9,074 10,673 8/31/00 11,360 10,081 12,087 11/30/00 11,180 9,784 10,057 2/28/01 14,325 11,118 10,736 5/31/01 16,858 11,741 11,281 8/31/01 17,525 11,898 10,682 11/30/01 17,084 11,641 10,542 2/28/02 17,896 12,594 10,773 5/31/02 19,619 13,550 11,224 8/31/02 16,204 11,232 9,034 11/30/02 15,809 11,431 9,426 2/28/03 14,318 10,277 8,393 5/31/03 17,973 12,536 10,306 8/31/03 20,766 13,892 11,660 11/30/03 22,708 15,422 12,846 2/29/04 25,401 16,854 13,799 5/31/04 24,668 16,399 13,427 8/31/04 23,609 16,600 12,984 11/30/04 26,407 19,080 15,062 2/28/05 27,159 19,153 15,113 5/31/05 26,720 18,876 14,746 8/31/05 28,878 20,353 15,985 11/30/05 29,696 20,613 16,291 2/28/06 31,056 22,143 17,621 5/31/06 31,179 22,314 17,434 8/31/06 30,645 22,940 17,477 11/30/06 33,819 25,038 19,128 2/28/07 34,738 27,285 19,357 5/31/07 37,421 28,926 20,733 8/31/07 33,790 26,347 19,465 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 actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION(1) ---------- --------- ---------- ------------- Small Cap Value Fund II -- Investor Class 10.26% 12.69% 15.83% 14.20% Russell 2000 Value(R) Index 6.64% 13.80% 16.85% 10.25% Russell 2000(R) Index(2) 11.36% 14.45% 16.60% 7.53%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.78%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period July 1, 1998 (commencement of operations) through August 31, 2007. (2) This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2007 | 5 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco Boston Partners Long/Short Equity Fund returned 2.61% (Institutional share class) and 2.35% (Investor share class) for the fiscal year ended August 31, 2007. Investor sentiment turned decidedly negative toward the end of 2006, as evidence of a slowing U.S. housing market caused concerns of a consumer-led slowdown in the economy. Starting in September 2006, we began to see a structural shift in market sentiment fueled by negative economic news, weaker consumer confidence, and a cooling in the housing sector. Despite this challenging economic environment, the Fund continued to post solid returns, outperforming the S&P 500(R) index in the second half of 2006 and through the first quarter of 2007. Leading into the New Year, short opportunities fitting our security selection were abundant and we increased our short exposure by almost 20%. This shift moved the portfolio from a net long exposure of roughly 70%, at the end of 2006, which is at the upper end of our two year range, to approximately 55% net long by the end of the first quarter. The summer months proved to be challenging for the Fund as the market dealt the portfolio a bit of a head-wind with growth issues outperforming value-oriented stocks across all capitalizations. By the end of August, for the 2007 year-to-date period, the Fund moved into negative territory, although still positive for the Fund's fiscal year ended August 31, 2007. The most meaningful impact on the Fund resulted from indiscriminant buying at the highest end of the valuation spectrum. In other words, stocks with excessive valuations that are perceived to be growing at high multiples are being bought by momentum players, which is further compounded by generally high short interest ratios among most of the names. In the short run, this type of activity was particularly harmful to our short portfolio as a select number of positions that we believed were on the verge of "cracking" now appear to be a bit further off. Market volatility continued into August as investors came to terms with an increase in mortgage defaults, tightening credit markets and their potential impact on the economy. We remain steadfast in our conviction and value approach to investing and have used this period to build on short positions that we believe to be grossly overvalued with near-term events that will cause a change in value. In some instances, we have elected to reduce exposure where our catalyst for payoff has been pushed into the future. Our bottom-up value discipline has yielded a portfolio that we feel is attractively positioned relative to the short portfolio from both a valuation and profitability standpoint. The long portfolio trades at 14.2x price-to-earnings and 1.9x price-to-book value, and the short portfolio trades at 22.9x price-to-earnings and 3.9x price-to-book value. The Fund is well diversified with approximately 120 positions on the long side and 155 positions on the short side. We believe that consistently positioning the portfolio with these general characteristics increases the probability of success over the long term and it continues to be the focus of our efforts. The Fund remains closed to new investors. We appreciate the confidence you have placed in our team and your support of the Fund. Sincerely, Robert Jones Robeco Boston Partners Long/Short Equity Fund Portfolio Manager - ----------------------- Long/Short Equity is an absolute return product that balances long and short portfolio strategies and seeks to achieve stable absolute returns with approximately half the risk of the S&P 500(R) Index. However, this product is not risk neutral. It is exposed to style, capitalization, sector and short-implementation risk. Use of the S&P 500(R) Index is for comparative purposes only since Long/Short returns are not correlated to equity market returns. An absolute return benchmark of 15% is the more appropriate measure for this product. Investors should note that the Fund is an actively managed mutual fund while the S&P 500(R) Index is unmanaged, does not incur expenses and is not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== Pfizer, Inc. 3.02% - ----------------------------------------------------------- KHD Humboldt Wedag International Ltd. 2.90% - ----------------------------------------------------------- Loews Corp. 2.53% - ----------------------------------------------------------- Johnson & Johnson 2.45% - ----------------------------------------------------------- Citigroup, Inc. 1.96% - ----------------------------------------------------------- WD-40 Co. 1.88% - ----------------------------------------------------------- Graphic Packaging Corp. 1.78% - ----------------------------------------------------------- E-Z-Em, Inc. 1.78% - ----------------------------------------------------------- Orthofix International 1.76% - ----------------------------------------------------------- Cornell Companies, Inc. 1.57% - ----------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) LONG SHORT =========================================================== P/E: Price/Earnings 15.8x 18.2x - ----------------------------------------------------------- P/B: Price/Book 1.9x 3.8x - ----------------------------------------------------------- Holdings 111 155 - ----------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $26,869 $1,411 - ----------------------------------------------------------- ROE: Return on Equity 10.5 5.9 - ----------------------------------------------------------- OROA: Operating Return on Operating Assets 39.2 34.1 - ----------------------------------------------------------- Portfolio holdings are subject to change at any time. 6 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Long/Short Equity Fund Institutional Class vs. S&P 500(R) Index [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Long/Short Equity Fund-- Institutional S&P 500(R) Class Index ------------- ---------- 11/17/98 $10,000 $10,000 11/30/98 9,580 10,000 2/28/99 9,080 10,675 5/31/99 9,500 11,260 8/31/99 9,460 11,457 11/30/99 8,100 12,088 2/29/00 8,154 11,928 5/31/00 10,312 12,440 8/31/00 10,760 13,328 11/30/00 11,798 11,581 2/28/01 14,559 10,951 5/31/01 15,094 11,128 8/31/01 16,339 10,078 11/30/01 16,081 10,165 2/28/02 16,371 9,909 5/31/02 17,457 9,587 8/31/02 16,147 8,265 11/30/02 16,477 8,487 2/28/03 16,109 7,662 5/31/03 16,221 8,815 8/31/03 15,964 9,262 11/30/03 15,909 9,768 2/29/04 16,054 10,614 5/31/04 15,328 10,430 8/31/04 16,399 10,322 11/30/04 16,957 11,023 2/28/05 18,329 11,353 5/31/05 18,742 11,288 8/31/05 19,958 11,617 11/30/05 20,438 11,915 2/28/06 19,808 12,305 5/31/06 20,269 12,262 8/31/06 22,539 12,648 11/30/06 23,207 13,652 2/28/07 24,280 13,778 5/31/07 25,005 15,057 8/31/07 23,126 14,563 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 actively managed mutual fund while the S&P 500(R) Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION(1) ---------- --------- ---------- ------------- Long/Short Equity Fund -- Institutional Class 2.61% 12.14% 7.45% 10.01% S&P 500(R) Index 15.13% 12.16% 11.99% 4.37%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO (INCLUDING INTEREST AND DIVIDEND EXPENSE ON SHORT SALES), AS STATED IN THE CURRENT PROSPECTUS IS 3.40%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period November 17, 1998 (commencement of operations) through August 31, 2007. ANNUAL REPORT 2007 | 7 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Long/Short Equity Fund Investor Class vs. S&P 500(R) Index [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Long/Short Equity Fund-- Investor S&P 500(R) Class Index ------------- ---------- 11/17/98 $10,000 $10,000 11/30/98 9,580 10,000 2/28/99 9,080 10,675 5/31/99 9,500 11,260 8/31/99 9,460 11,457 11/30/99 8,100 12,088 2/29/00 8,154 11,928 5/31/00 10,312 12,440 8/31/00 10,760 13,328 11/30/00 11,798 11,581 2/28/01 14,559 10,951 5/31/01 15,094 11,128 8/31/01 16,339 10,078 11/30/01 16,081 10,165 2/28/02 16,371 9,909 5/31/02 17,457 9,587 8/31/02 16,147 8,265 11/30/02 16,477 8,487 2/28/03 16,109 7,662 5/31/03 16,221 8,815 8/31/03 15,964 9,262 11/30/03 15,909 9,768 2/29/04 16,054 10,614 5/31/04 15,328 10,430 8/31/04 16,399 10,322 11/30/04 16,957 11,023 2/28/05 18,329 11,353 5/31/05 18,742 11,288 8/31/05 19,958 11,617 11/30/05 20,135 11,915 2/28/06 19,496 12,305 5/31/06 19,943 12,262 8/31/06 22,164 12,648 11/30/06 22,804 13,652 2/28/07 23,848 13,778 5/31/07 24,543 15,057 8/31/07 22,685 14,563 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 actively managed mutual fund while the S&P 500(R) Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION(1) ---------- --------- ---------- ------------- Long/Short Equity Fund -- Investor Class 2.35% 11.85% 7.19% 9.77% S&P 500(R) Index 15.13% 12.16% 11.99% 4.37%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO (INCLUDING INTEREST AND DIVIDEND EXPENSE ON SHORT SALES), AS STATED IN THE CURRENT PROSPECTUS IS 3.65%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period November 17, 1998 (commencement of operations) through August 31, 2007. 8 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco Boston Partners Large Cap Value Fund outperformed the Russell 1000(R) Value and the S&P 500(R) Indices for the fiscal year (September 1, 2006 to August 31, 2007). During the reporting period, the Fund was up 15.70% (Institutional share class) and 15.45% (Investor share class) versus 12.9% for the Russell 1000 Value(R) Index and 15.1% for the S&P 500(R) Index. In 2007, we have seen the return of stock market volatility. As the year opened, weakness in the housing market spread into the mortgage market. This caused the failure of several prominent mortgage lenders. This in turn impacted Wall Street as several brand-named hedge funds failed. Liquidity began to leave the financial markets, causing the equity markets to fall. The vicious cycle continued as over-leveraged equity funds got the double whammy of seeing their assets fall while their margin requirements went up. Their only choice was to sell into the falling market which continued pushing stock prices down. Toward the end of the fiscal year, multi-hundred point moves in the Dow Jones Industrial Average became commonplace as investors vacillated between fear and greed. The financial press ran headlines proclaiming unprecedented volatility and several asset managers (who lost money) claimed this was a "1 in 200 year event." This was not a 1 in 200 year event. What happened in fiscal 2007 is typical of what happens at turning points in the market. It exposed investment strategies that relied on excessive leverage to produce their returns. The Robeco Boston Partners Large Cap Value Fund benefited during this turmoil because the portfolio has a quality bias. Over the last several years, we have been able to take advantage of an anomaly in the stock market by buying highly profitable companies at what, we believe, are very attractive prices. This has led our profitability characteristics to be greater than both the Russell 1000 Value(R) and the S&P 500(R) Indices. While it seems obvious that a portfolio of highly profitable companies, purchased at reasonable prices, should outperform (it does in the long term), this combination has not outperformed in the last several years. Fiscal 2007 saw the importance of quality return as investors gravitated toward high quality stocks while low quality stocks underperformed. We are maintaining our quality bias in the portfolio, as we believe the recent outperformance of this segment of the market still has a long way to go. We continue to overweight the Technology and Health Care sectors while underweighting the Utility and Communications sectors. However, we do not actively choose sectors to overweight or underweight. Instead, we choose stocks that have attractive valuation and favorable business fundamentals. The sector weights are a byproduct of our stock selection process. Technology and Health Care today contain what we believe are a large number of attractively valued and fundamentally sound companies. Conversely, in the Utility and Communications sectors, we see a dearth of opportunities. Our exposure to the Energy sector came down throughout the fiscal year as our energy holdings hit their target prices and we sold many of the stocks. We continue to have no exposure to the Transportation and Other (primarily REITs) sectors. We will continue to look for companies that have strong business fundamentals and are selling at attractive valuations. On a bottom-up basis, we will invest in companies generating substantial free cash flow and using it with prudence. We believe these types of companies have a higher probability of success, regardless of market conditions, and will position the Fund to do well over the long term. Sincerely, Mark Donovan and David Pyle Robeco Boston Partners Large Cap Value Fund Portfolio Managers - ----------------------- Investors should note that the Fund is an actively managed mutual fund while the indices are unmanaged, do not incur expenses and are not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== Citigroup, Inc. 3.66% - ----------------------------------------------------------- ConocoPhillips 3.56% - ----------------------------------------------------------- Lockheed Martin Corp. 3.37% - ----------------------------------------------------------- Berkshire Hathaway, Inc., Class B 3.37% - ----------------------------------------------------------- JP Morgan Chase & Co. 3.03% - ----------------------------------------------------------- Exxon Mobil Corp. 2.99% - ----------------------------------------------------------- American International Group, Inc. 2.86% - ----------------------------------------------------------- Procter & Gamble Co., (The) 2.76% - ----------------------------------------------------------- Freddie Mac 2.73% - ----------------------------------------------------------- Pfizer, Inc. 2.60% - ----------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) =========================================================== P/E: Price/Earnings 14.2x - ----------------------------------------------------------- P/B: Price/Book 2.3x - ----------------------------------------------------------- Holdings 81 - ----------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $91,228 - ----------------------------------------------------------- ROE: Return on Equity 19.7 - ----------------------------------------------------------- OROA: Operating Return on Operating Assets 54.3 - ----------------------------------------------------------- Portfolio holdings are subject to change at any time. ANNUAL REPORT 2007 | 9 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Large Cap Value Fund Institutional Class vs. Various Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Large Cap Value Fund -- Institutional S&P 500(R) Russell 1000 Value(R) Class Index Index --------------------- ---------- --------------------- 8/31/97 $10,000 $10,000 $10,000 11/30/97 10,281 10,668 10,764 2/28/98 11,064 11,763 11,656 5/31/98 11,098 12,275 12,268 8/31/98 8,977 10,810 10,389 11/30/98 10,216 13,191 12,388 2/28/99 9,938 14,082 12,730 5/31/99 10,978 14,853 14,050 8/31/99 10,514 15,113 13,514 11/30/99 10,660 15,946 13,684 2/29/00 9,552 15,735 12,313 5/31/00 11,141 16,410 13,799 8/31/00 11,775 17,581 14,074 11/30/00 12,289 15,276 14,013 2/28/01 13,026 14,446 14,360 5/31/01 13,503 14,679 14,860 8/31/01 12,911 13,294 13,919 11/30/01 13,083 13,408 13,573 2/28/02 13,164 13,071 13,808 5/31/02 13,349 12,646 14,035 8/31/02 11,275 10,902 12,090 11/30/03 11,254 11,195 12,269 2/28/03 10,262 10,107 11,147 5/31/03 11,902 11,628 12,933 8/31/03 12,013 12,218 13,497 11/30/03 12,789 12,885 14,376 2/29/04 14,350 14,001 15,862 5/31/04 13,993 13,759 15,496 8/31/04 14,160 13,616 15,860 11/30/04 15,323 14,540 17,201 2/28/05 16,026 14,976 18,039 5/31/05 15,745 14,890 17,895 8/31/05 16,893 15,325 18,533 11/30/05 17,299 15,765 18,914 2/28/06 18,196 16,231 19,097 5/31/06 18,261 16,175 19,344 8/31/06 18,993 16,684 20,274 11/30/06 20,509 18,008 21,841 2/28/07 20,857 18,174 22,265 5/31/07 22,920 19,861 24,293 8/31/07 21,974 19,210 22,882 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- ---------- ------------- Large Cap Value Fund -- Institutional Class 15.70% 15.77% 14.28% 8.19% S&P 500(R) Index 15.13% 12.16% 11.99% 6.74% Russell 1000 Value(R) Index(1) 12.85% 14.54% 14.54% 9.07%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.22%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) This is not a primary benchmark of the Fund. Results of index performance are presented for general comparative purposes. 10 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Large Cap Value Fund Investor Class vs. Various Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Large Cap Value Fund -- Investor S&P 500(R) Russell 1000 Value(R) Class Index Index ---------------- ---------- --------------------- 8/31/97 $10,000 $10,000 $10,000 11/30/97 10,281 10,668 10,764 2/28/98 11,060 11,763 11,656 5/31/98 11,102 12,275 12,268 8/31/98 8,972 10,810 10,389 11/30/98 10,205 13,191 12,388 2/28/99 9,925 14,082 12,730 5/31/99 10,951 14,853 14,050 8/31/99 10,484 15,113 13,514 11/30/99 10,620 15,946 13,684 2/29/00 9,505 15,735 12,313 5/31/00 11,088 16,410 13,799 8/31/00 11,708 17,581 14,074 11/30/00 12,212 15,276 14,013 2/28/01 12,936 14,446 14,360 5/31/01 13,403 14,679 14,860 8/31/01 12,815 13,294 13,919 11/30/01 12,973 13,408 13,573 2/28/02 13,047 13,071 13,808 5/31/02 13,218 12,646 14,035 8/31/02 11,165 10,902 12,090 11/30/03 11,133 11,195 12,269 2/28/03 10,136 10,107 11,147 5/31/03 11,752 11,628 12,933 8/31/03 11,860 12,218 13,497 11/30/03 12,624 12,885 14,376 2/29/04 14,144 14,001 15,862 5/31/04 13,797 13,759 15,496 8/31/04 13,938 13,616 15,860 11/30/04 15,076 14,540 17,201 2/28/05 15,763 14,976 18,039 5/31/05 15,480 14,890 17,895 8/31/05 16,592 15,325 18,533 11/30/05 16,973 15,765 18,914 2/28/06 17,850 16,231 19,097 5/31/06 17,901 16,175 19,344 8/31/06 18,606 16,684 20,274 11/30/06 20,080 18,008 21,841 2/28/07 20,408 18,174 22,265 5/31/07 22,401 19,861 24,293 8/31/07 21,480 19,210 22,882 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- ---------- ------------- Large Cap Value Fund -- Investor Class 15.45% 15.51% 13.98% 7.95% S&P 500(R) Index 15.13% 12.16% 11.99% 6.74% Russell 1000 Value(R) Index(1) 12.85% 14.54% 14.54% 9.07%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.47%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) This is not a primary benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2007 | 11 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS MID CAP VALUE FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco Boston Partners Mid Cap Value Fund outperformed the Russell Mid Cap Value(R) Index for the one-year period ended August 31, 2007. During the reporting period, the Institutional share class returned 21.32% and the Investor share class returned 21.02% versus the Russell Mid Cap Value(R) Index which returned 12.43%. Nine of thirteen economic sectors contributed to the outperformance. Areas of relative strength included Consumer Services, Technology, and Consumer Non-Durables. In addition, the large underweight in the REIT sector (which significantly lagged the Index) contributed materially to the outperformance of the Fund. Areas of relative weakness included Basic Industries and Utilities. We have continued to be overweight in both Health Care and Technology, where we have found companies with strong balance sheets, and generating strong returns on capital, also selling at attractive valuations. We also continue to underweight both Utilities and REITs, due to high valuations. In aggregate, the positions that constitute the Fund have above average profitability and growth characteristics, while selling at a discount to the benchmark, on a price to earnings multiple basis. High quality and attractive valuations remain the predominant themes in the portfolio. Warm Regards, Steven Pollack and Joseph Feeney Robeco Boston Partners Mid Cap Value Fund Portfolio Managers - ----------------------- Mid size company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Investors should note that the Fund is an actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== Annaly Capital Management Inc. (REIT) 2.16% - ----------------------------------------------------------- Harris Corp. 1.83% - ----------------------------------------------------------- Meredith Corp. 1.71% - ----------------------------------------------------------- Commerce Bancorp, Inc. 1.69% - ----------------------------------------------------------- Lubrizol Corp. (The) 1.63% - ----------------------------------------------------------- General Mills, Inc. 1.62% - ----------------------------------------------------------- Symantec Corp. 1.61% - ----------------------------------------------------------- Mentor Corp. 1.52% - ----------------------------------------------------------- Stanley Works, (The) 1.48% - ----------------------------------------------------------- Davita, Inc. 1.46% - ----------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) =========================================================== P/E: Price/Earnings 16.2x - ----------------------------------------------------------- P/B: Price/Book 2.5x - ----------------------------------------------------------- Holdings 103 - ----------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $8,328 - ----------------------------------------------------------- ROE: Return on Equity 16.9 - ----------------------------------------------------------- OROA: Operating Return on Operating Assets 39.4 - ----------------------------------------------------------- Portfolio holdings are subject to change at any time. 12 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS MID CAP VALUE FUND (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Mid Cap Value Fund Institutional Class vs. Russell Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Mid Cap Value Fund-- Institutional Russell Midcap Russell 2500(R) Russell 2500(R) Class Value(R) Index Value Index Index ------------- -------------- --------------- --------------- 8/31/97 $10,000 $10,000 $10,000 $10,000 11/30/97 10,218 10,644 10,514 10,221 2/28/98 11,479 11,561 11,387 11,000 5/31/98 11,691 11,807 11,566 10,992 8/31/98 8,727 9,663 9,092 8,315 11/30/98 9,730 11,273 10,378 9,857 2/28/99 9,599 11,095 9,859 9,751 5/31/99 10,622 12,371 11,035 11,019 8/31/99 10,567 11,777 10,771 11,008 11/30/99 9,811 11,301 10,500 11,708 2/29/00 8,867 10,454 10,586 14,511 5/30/00 10,335 11,970 11,340 12,871 8/31/00 10,906 12,516 12,147 14,518 11/30/00 10,457 12,709 11,914 12,459 2/28/01 11,088 13,722 13,186 13,077 5/31/01 11,982 14,476 14,004 13,855 8/31/01 11,803 13,966 13,924 13,104 11/30/01 11,775 13,589 13,617 12,969 2/28/02 12,485 14,529 14,704 13,290 5/31/02 13,017 15,238 15,623 13,757 8/31/02 10,744 13,285 13,399 11,467 11/30/02 10,910 13,100 13,389 11,793 2/28/03 10,079 12,227 12,270 10,697 5/31/03 11,975 14,363 14,717 12,918 8/31/03 12,829 15,443 16,259 14,516 11/30/03 13,904 16,924 18,086 16,032 2/29/04 15,110 18,569 19,800 17,247 5/31/04 15,065 18,268 19,293 16,855 8/31/04 14,675 18,704 19,493 16,354 11/30/04 16,682 21,024 22,148 18,654 2/28/05 17,181 22,075 22,669 19,157 5/31/05 17,366 22,313 22,724 19,016 8/31/05 18,486 23,951 24,369 20,474 11/30/05 18,908 24,365 24,646 20,908 2/28/06 19,505 25,913 26,276 22,420 5/31/06 19,626 26,997 26,362 22,270 8/31/06 19,747 27,761 26,839 22,126 11/30/06 21,941 30,197 29,270 24,236 2/28/07 23,183 31,633 30,183 24,964 5/31/07 25,652 34,126 32,252 26,938 8/31/07 23,957 31,207 29,191 25,199 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- ---------- ------------- Mid Cap Value Fund -- Institutional Class 21.32% 17.75% 17.40% 9.13% Russell Midcap Value(R) Index 12.43% 17.39% 17.90% 11.70% Russell 2500(R) Value Index(1) 8.76% 14.40% 16.85% 11.31% Russell 2500(R) Index(1) 13.89% 15.50% 17.05% 9.68%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.38%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) This is not a primary benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2007 | 13 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS MID CAP VALUE FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners Mid Cap Value Fund Investor Class vs. Russell Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] Mid Cap Value Fund-- Investor Russell Midcap Russell 2500(R) Russell 2500(R) Class Value(R) Index Value Index Index ------------- -------------- --------------- --------------- 8/31/97 $10,000 $10,000 $10,000 $10,000 11/30/97 10,209 10,644 10,514 10,221 2/28/98 11,474 11,561 11,387 11,000 5/31/98 11,677 11,807 11,565 10,992 8/31/98 8,723 9,663 9,092 8,315 11/30/98 9,714 11,273 10,378 9,857 2/28/99 9,585 11,095 9,859 9,751 5/31/99 10,594 12,371 11,035 11,019 8/31/99 10,538 11,777 10,771 11,008 11/30/99 9,770 11,301 10,500 11,708 2/29/00 8,835 10,454 10,586 14,511 5/30/00 10,291 11,970 11,339 12,871 8/31/00 10,845 12,515 12,147 14,518 11/30/00 10,394 12,709 11,914 12,459 2/28/01 11,020 13,722 13,186 13,077 5/31/01 11,896 14,476 14,004 13,855 8/31/01 11,707 13,966 13,924 13,104 11/30/01 11,679 13,589 13,617 12,969 2/28/02 12,375 14,529 14,704 13,290 5/31/02 12,896 15,237 15,623 13,757 8/31/02 10,623 13,285 13,399 11,467 11/30/02 10,790 13,100 13,389 11,793 2/28/03 9,969 12,227 12,270 10,697 5/31/03 11,832 14,363 14,717 12,918 8/31/03 12,675 15,443 16,259 14,516 11/30/03 13,728 16,924 18,086 16,032 2/29/04 14,904 18,569 19,800 17,247 5/31/04 14,859 18,268 19,293 16,855 8/31/04 14,459 18,704 19,492 16,354 11/30/04 16,428 21,024 22,148 18,654 2/28/05 16,905 22,075 22,668 19,157 5/31/05 17,076 22,313 22,724 19,016 8/31/05 18,169 23,950 24,369 20,474 11/30/05 18,577 24,365 24,646 20,908 2/28/06 19,140 25,913 26,276 22,420 5/31/06 19,261 26,997 26,362 22,270 8/31/06 19,367 27,761 26,839 22,126 11/30/06 21,513 30,197 29,270 24,236 2/28/07 22,702 31,633 30,183 24,964 5/31/07 25,096 34,126 32,252 26,938 8/31/07 23,437 31,207 29,191 25,199 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- ---------- ------------- Mid Cap Value Fund -- Investor Class 21.02% 17.47% 17.15% 8.89% Russell Midcap Value(R) Index 12.43% 17.39% 17.90% 11.70% Russell 2500(R) Value Index(1) 8.76% 14.40% 16.85% 11.31% Russell 2500(R) Index(1) 13.89% 15.50% 17.05% 9.68%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.63%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) This is not a primary benchmark of the Fund. Results of index performance are presented for general comparative purposes. 14 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco Boston Partners All-Cap Value Fund produced double-digit returns in nine of thirteen major economic sectors and outperformed the Russell 3000 Value(R) Index for the one-year period ended August 31, 2007. During the reporting period, the Institutional share class returned 14.38% and the Investor share class returned 14.16% versus the Russell 3000(R) Value Index which returned 12.31%. The Fund outperformed the Index by 2.07% for the Institutional share class and by 1.85% for the Investor share class. The Fund's relative performance was led by positions in the Consumer Non-Durables, Finance and Technology sectors. Our positions in these areas represented over half of the Fund's market weight and were indicative of the Fund's active positioning. Within the Consumer area, we have continued to take advantage of higher quality businesses at attractive valuations. The Fund is more defensively positioned in terms of credit, and within Finance we have avoided banks in favor of well-managed insurance businesses at attractive discounts to fair value. Within Technology, we have been able to invest in established, market-leading businesses at attractive valuations. These attributes have not been as readily recognized by the market in the Health Care area, where we have been patiently investing in world-class pharmaceutical companies at historically low valuations. Stock selection drove the Fund's performance last year, and we look to continue to execute on stock-specific opportunities within the entire market that meet our criteria. We believe the Fund's construction, in terms of our three-circle discipline (attractive valuations, sound fundamentals and catalysts for change), has positioned the Fund well for favorable returns over the longer term. Regards, Duilio Ramallo Robeco Boston Partners All-Cap Value Fund Portfolio Manager - ------------------------------------------------------------- Small and mid-size company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Investors should note that the Fund is an actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== Loews Corp. 5.21% - ----------------------------------------------------------- ACE Ltd. 3.82% - ----------------------------------------------------------- International Business Machines Corp. 3.59% - ----------------------------------------------------------- Alleghany Corp. 3.53% - ----------------------------------------------------------- Pfizer, Inc. 3.01% - ----------------------------------------------------------- Hewlett-Packard Co. 2.55% - ----------------------------------------------------------- MBIA, Inc. 2.40% - ----------------------------------------------------------- Johnson & Johnson 2.37% - ----------------------------------------------------------- Vodafone Group PLC-ADR 2.28% - ----------------------------------------------------------- Freddie Mac 2.24% - ----------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) =========================================================== P/E: Price/Earnings 13.4x - ----------------------------------------------------------- P/B: Price/Book 1.8x - ----------------------------------------------------------- Holdings 114 - ----------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $60,366 - ----------------------------------------------------------- ROE: Return on Equity 16.8 - ----------------------------------------------------------- OROA: Operating Return on Operating Assets 50.3 - ----------------------------------------------------------- Portfolio holdings are subject to change at any time. ANNUAL REPORT 2007 | 15 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners All-Cap Value Fund Institutional Class vs. Russell Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] All-Cap Value Fund--Institutional Russell 3000 Russell 3000(R) Class Value(R) Index Index ------------------- -------------- -------------- 7/1/02 $10,000 $10,000 $10,000 7/31/02 9,240 9,029 9,205 8/31/02 9,450 9,089 9,248 11/30/02 9,410 9,226 9,476 2/28/03 8,666 8,376 8,577 5/31/03 10,350 9,752 9,942 8/31/03 10,852 10,222 10,536 11/30/03 11,925 10,922 11,204 2/29/04 13,382 12,042 12,122 5/31/04 13,240 11,760 11,900 8/31/04 13,402 12,024 11,726 11/30/04 14,703 13,106 12,664 2/28/05 15,391 13,692 13,047 5/31/05 15,465 13,575 13,024 8/31/05 16,394 14,110 13,523 11/30/05 16,531 14,390 13,908 2/28/06 17,212 15,269 14,692 5/31/06 17,268 15,462 14,624 8/31/06 17,697 16,175 14,996 11/30/06 19,287 17,447 16,230 2/28/07 19,602 17,772 16,462 5/31/07 21,372 19,338 17,927 8/31/07 20,241 18,166 17,236 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 actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION(1) ---------- --------- ---------- ------------- All-Cap Value Fund -- Institutional Class 14.38% 14.73% 16.46% 14.61% Russell 3000 Value(R) Index 12.31% 14.47% 14.69% 12.09% Russell 3000(R) Index(2) 14.94% 12.96% 12.82% 10.69%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 2.93%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period July 1, 2002 (commencement of operations) through August 31, 2007. (2) This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. 16 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco Boston Partners All-Cap Value Fund Investor Class vs. Russell Indices [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] All-Cap Value Fund--Investor Russell 3000 Russell 3000 (R) Class Value(R) Index Index -------------- -------------- -------------- 7/1/02 $10,000 $10,000 $10,000 7/31/02 9,230 9,029 9,205 8/31/02 9,440 9,089 9,248 11/30/02 9,390 9,226 9,476 2/28/03 8,637 8,376 8,577 5/31/03 10,330 9,752 9,942 8/31/03 10,821 10,222 10,536 11/30/03 11,873 10,922 11,204 2/29/04 13,324 12,042 12,122 5/31/04 13,173 11,760 11,900 8/31/04 13,324 12,024 11,726 11/30/04 14,610 13,106 12,664 2/28/05 15,297 13,692 13,047 5/31/05 15,360 13,575 13,024 8/31/05 16,263 14,110 13,523 11/30/05 16,389 14,390 13,908 2/28/06 17,059 15,269 14,692 5/31/06 17,104 15,462 14,624 8/31/06 17,518 16,175 14,996 11/30/06 19,088 17,447 16,230 2/28/07 19,389 17,772 16,462 5/31/07 21,120 19,338 17,927 8/31/07 19,999 18,166 17,236 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 actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
SINCE 1 YEAR 3 YEAR 5 YEAR INCEPTION(1) ---------- --------- ---------- ------------- All-Cap Value Fund -- Investor Class 14.16% 14.50% 16.20% 14.35% Russell 3000 Value(R) Index 12.31% 14.47% 14.69% 12.09% Russell 3000(R) Index(2) 14.94% 12.96% 12.82% 10.69%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 3.18%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period July 1, 2002 (commencement of operations) through August 31, 2007. (2) This is not a benchmark of the Fund. Results of index performance are presented for general comparative purposes. ANNUAL REPORT 2007 | 17 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG SMALL CAP VALUE FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco WPG Small Cap Value Fund outperformed the Russell 2000 Value Index by 7.64% during the one-year period ended August 31, 2007. Areas of strength for the Fund included Transportation, Commercial Services, and Consumer Non-Cyclicals. Areas that detracted from performance were Energy and Financials. For most of the year, we had been worried about the impact that tightening credit, a housing slowdown, high commodity prices and a weak dollar would have on the economy and the American consumer. As a result, the portfolio has been operating in a defensive posture for the majority of the year. We see the recent market turbulence as justification for our positioning and we note that riskier asset classes, like small cap stocks, have underperformed the broader markets. In expectation of future rate cuts by the Federal Reserve, we are anticipating that the sectors where we have been historically underweight, such as Consumer Discretionary and Financials, will start to outperform. Furthermore, Technology stocks, which typically have healthy balance sheets and rely little on the public markets for financing, should also benefit. However, given our bottom-up stock selection methodology, we do continue to try to find stocks outside of these sectors with attractive risk/reward profiles. We will continue to invest in companies using the same evaluation criteria that have served us well not only for the past year, but since the inception of the Fund. Regards, Richard Shuster and Gregory Weiss WPG Small Cap Value Fund Portfolio Managers - ----------------------- Small and mid size company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Investors should note that the Fund is an actively managed mutual fund while the Russell indices are unmanaged, do not incur expenses and are not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== MDC Partners, Inc. (The) 5.25% - ---------------------------------------------------------- Chiquita Brands International, Inc. 3.10% - ---------------------------------------------------------- Princeton Review, Inc. 2.84% - ---------------------------------------------------------- Lifepoint Hospitals, Inc. 2.62% - ---------------------------------------------------------- Legg Corp. 2.56% - ---------------------------------------------------------- Sun Communities, Inc. 2.53% - ---------------------------------------------------------- Lifetime Brands, Inc. 2.44% - ---------------------------------------------------------- Jarden Corp. 2.42% - ---------------------------------------------------------- PeopleSupport, Inc. 2.26% - ---------------------------------------------------------- Libbey, Inc. 2.13% - ---------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) =========================================================== P/E: Price/Earnings 16.1x - ---------------------------------------------------------- P/B: Price/Book 1.6x - ---------------------------------------------------------- Holdings 91 - ---------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $711 - ---------------------------------------------------------- ROE: Return on Equity 2.2 - ---------------------------------------------------------- OROA: Operating Return on Operating Assets 18.0 - ---------------------------------------------------------- Portfolio holdings are subject to change at any time. 18 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG SMALL CAP VALUE FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco WPG Small Cap Value Fund Institutional Class vs. Russell Index [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] WPG Small Cap Value Fund-- Institutional Russell 2000(R) Class Value Index ------------- --------------- 8/31/97 $10,000 $10,000 11/30/97 10,307 10,489 2/28/98 10,704 11,293 5/31/98 10,458 11,391 8/31/98 6,959 8,805 11/30/98 7,690 9,838 2/28/99 7,162 9,240 5/31/99 8,343 10,307 8/31/99 8,857 10,045 11/30/99 11,002 9,697 2/29/00 15,958 10,328 5/31/00 11,956 10,278 8/31/00 14,916 11,419 11/30/00 11,327 11,082 2/28/01 10,725 12,593 5/31/01 11,206 13,299 8/31/01 9,857 13,476 11/30/01 9,904 13,186 2/28/02 8,997 14,265 5/31/02 9,107 15,348 8/31/02 7,860 12,722 11/30/02 8,287 12,948 2/28/03 7,316 11,640 5/31/03 8,645 14,199 8/31/03 9,858 15,735 11/30/03 10,726 17,468 2/29/04 11,980 19,090 5/31/04 11,559 18,575 8/31/04 11,579 18,803 11/30/04 12,786 21,611 2/28/05 13,550 21,695 5/31/05 12,561 21,381 8/31/05 13,335 23,053 11/30/05 13,144 23,347 2/28/06 13,840 25,080 5/31/06 14,436 25,274 8/31/06 14,289 25,983 11/30/06 16,183 28,360 2/28/07 16,407 28,679 5/31/07 17,882 30,404 8/31/07 16,330 27,712 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Russell index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- ---------- ------------- WPG Small Cap Value Fund -- Institutional Class 14.28% 12.14% 15.75% 5.03% Russell 2000(R) Value Index 6.64% 13.80% 16.85% 10.73%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. AGREED TO WAIVE A PORTION OF ITS ADVISORY FEE AND 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.43%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. ANNUAL REPORT 2007 | 19 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG LARGE CAP GROWTH FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco WPG Large Cap Growth Fund returned 15.74% for the one-year period ended August 31, 2007, underperforming the Russell 1000(R) Growth Index which returned 17.70% during the period. Stock selection made a positive contribution to performance, but was offset by negative contributions from investment style risk and sector risk. However, none of the contributions were statistically significant. At the sector level, stocks in the Basic Materials and Industrials sectors made the strongest positive contributions. Stocks in the Consumer Cyclical and Technology sectors made the strongest negative contributions. The individual stocks making the largest positive contributions to performance were Lyondell Chemical (LYO), Expedia Inc. (EXP), and Energizer Holdings (ENR); the largest negative contributions came from Micron Technology (MU), RadioShack (RSH), and not owning index member Apple Inc. (AAPL). The proprietary quantitative stock selection model made a very modest positive contribution to performance. The momentum and value factors made very modest positive contributions to return, while the share buyback factor made an extremely modest negative contribution to performance. The Robeco WPG Large Cap Growth Fund seeks to identify stocks that are quantitatively attractive because of rising price momentum and earnings expectations, low relative valuations and high share buybacks. All stocks in the selection universe are scored according to their exposure to each factor. Using a dynamic weighting process, factor scores are combined into a composite score or alpha used to select stocks. A sector-specific model is used for technology stocks. The team selects attractively ranked stocks within economic sectors and applies a rigorous portfolio risk management discipline. The above commentary pertains to the Fund's investment strategy during the fiscal year ended August 31, 2007. As of September 4, 2007, the Robeco WPG Large Cap Growth Fund is known as the Robeco WPG 130/30 Large Cap Core Fund as a result of a change in the Fund's investment strategy to a 130/30 strategy that will provide the Fund with shorting capabilities. This new strategy will also result in a change to the S&P 500(R) as its benchmark. We are excited about this opportunity and look forward to being able to add additional value. Further detail on the new strategy can be found in the Prospectus dated September 4, 2007 or by calling 1-888-261-4073. Regards, Easton Ragsdale and Peter Albanese Robeco WPG Large Cap Growth Fund Management Team - ----------------------- Investors should note that the Fund is an actively managed mutual fund while the indices are unmanaged, do not incur expenses and are not available for investment. =========================================================== TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS =========================================================== Hewlett-Packard Co. 3.96% - ----------------------------------------------------------- Intel Corp. 3.61% - ----------------------------------------------------------- International Business Machines Corp. 3.32% - ----------------------------------------------------------- Microsoft Corp. 3.02% - ----------------------------------------------------------- Pepsi Bottling Group, Inc. 2.86% - ----------------------------------------------------------- Energizer Holdings Corp. 2.84% - ----------------------------------------------------------- Exxon Mobil Corp. 2.83% - ----------------------------------------------------------- Gilead Sciences, Inc. 2.49% - ----------------------------------------------------------- Accenture Ltd., Class A 2.42% - ----------------------------------------------------------- Waters Corp. 2.41% - ----------------------------------------------------------- =========================================================== PORTFOLIO REVIEW (AS OF 8/31/07) =========================================================== P/E: Price/Earnings 16.7x - --------------------------------------------------------- P/B: Price/Book 3.5x - --------------------------------------------------------- Holdings 61 - --------------------------------------------------------- Wtd. Average Mkt. Cap. (mil) $64,727 - --------------------------------------------------------- ROE: Return on Equity 30.8 - --------------------------------------------------------- OROA: Operating Return on Operating Assets 44.1 - --------------------------------------------------------- Portfolio holdings are subject to change at any time. 20 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG LARGE CAP GROWTH FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco WPG Large Cap Growth Fund Institutional Class vs. Russell Index [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] WPG Large Cap Growth Fund-- Institutional Russell 1000(R) Class Growth Index ------------- --------------- 8/31/97 $10,000 $10,000 11/30/97 10,856 10,533 2/28/98 11,952 11,795 5/31/98 12,687 12,081 8/31/98 10,945 10,824 11/30/98 13,224 13,551 2/28/99 13,566 14,926 5/31/99 13,458 15,250 8/31/99 13,677 16,056 11/30/99 14,557 17,819 2/29/00 15,303 19,666 5/31/00 15,746 19,059 8/31/00 17,691 21,427 11/30/00 14,924 15,758 2/28/01 13,798 13,545 5/31/01 13,715 13,398 8/31/01 11,893 11,716 11/30/01 12,419 12,167 2/28/02 12,056 11,434 5/31/02 11,477 10,602 8/31/02 9,505 9,119 11/30/02 10,111 9,407 2/28/03 8,940 8,505 5/31/03 10,324 9,768 8/31/03 11,077 10,402 11/30/03 11,543 10,983 2/29/04 12,179 11,669 5/31/04 11,877 11,530 8/31/04 11,101 10,961 11/30/04 11,981 11,624 2/28/05 12,142 11,801 5/31/05 12,003 11,916 8/31/05 12,490 12,292 11/30/05 12,928 12,756 2/28/06 13,299 12,919 5/31/06 13,079 12,648 8/31/06 13,252 12,744 11/30/06 14,156 13,824 2/28/07 14,349 13,960 5/31/07 15,737 15,225 8/31/07 15,338 15,001 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Russell index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- --------- --------- WPG Large Cap Growth Fund -- Institutional Class 15.74% 11.38% 10.04% 4.37% Russell 1000(R) Growth Index 17.70% 11.02% 10.46% 4.14%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.79%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. ANNUAL REPORT 2007 | 21 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (unaudited) ================================================================================ Dear Shareholder: The Robeco WPG Core Bond Fund returned 4.84% (Institutional share class), 4.58% (Investor share class) and 4.73% (Retirement share class) for the twelve-month period ended August 31, 2007, as compared to a return for the benchmark Lehman Brothers Aggregate Index of 5.26%. In the U.S. fixed income market, Treasury yields declined over the twelve months ended August 31, 2007, with 2-year yields falling by 64 basis points to 4.14% and 10-year yields declining by 20 basis points to 4.73%. For the eight-month period ended April 30, 2007, the fixed income market was relatively stable, and the yield differential between Treasury securities and "spread" sectors such as corporate bonds, mortgage-backed securities (MBS) and asset-backed securities (ABS) remained low by historical standards; however, beginning in May, investor concerns emanating from the sub-prime segment of the mortgage market began to expand and negatively impacted all non-government bond sectors. The resulting liquidity crunch continues today. In regards to the Fund, the largest positive contributor to performance over the period was the Fund's positioning in corporate bonds. Specifically, a notable underweight in the corporate sector has benefited performance over the past few months during the "credit crunch." Also helping performance during the year was yield curve positioning as the Fund was structured to benefit from the "steepening" which has taken place in the government yield curve. On the negative side, a holding in Treasury Inflation Protected Securities (TIPS) detracted from performance during the last half of 2006. Also, duration positioning over the past twelve months has weighed on performance. Lastly, although we have emphasized only the top quality, AAA-rated segment of the MBS, ABS, and collateralized MBS market in constructing the structured product component of the Fund, even this market segment came under pressure in the wake of the sub-prime mortgage problems and contributed negative excess returns to performance. Going forward, we believe the fixed income market volatility that has persisted over the summer will continue in coming months, with the potential that some of the recent underperformance in non-government sectors could be reversed. At the same time, we intend to maintain an emphasis on quality and liquidity in the Fund's holdings. Regards, James Ramsay and Sid Bakst Robeco WPG Core Bond Fund Portfolio Managers ================================================================================ TOP TEN POSITIONS (AS OF 8/31/07) % OF NET ASSETS ================================================================================ Federal National Mortgage Association, 5.000%, 03/01/36 8.92% - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., 4.875%, 11/18/11 6.57% - -------------------------------------------------------------------------------- Federal National Mortgage Association, 5.000%, 04/01/22 3.98% - -------------------------------------------------------------------------------- U.S. Treasury Note, 4.750%, 05/31/12 3.83% - -------------------------------------------------------------------------------- Federal National Mortgage Association, 5.500%, 07/01/34 3.23% - -------------------------------------------------------------------------------- Federal National Mortgage Association, 5.000%, 02/13/17 3.12% - -------------------------------------------------------------------------------- Federal Home Loan Mortgage Corp., 6.000%, 08/01/22 3.00% - -------------------------------------------------------------------------------- Federal National Mortgage Association, 5.500%, 12/01/36 2.78% - -------------------------------------------------------------------------------- U.S. Treasury Note, 4.750%, 08/15/17 2.61% - -------------------------------------------------------------------------------- Government National Mortgage Association, 5.500%, 02/15/37 2.58% - -------------------------------------------------------------------------------- Portfolio holdings are subject to change at any time. 22 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco WPG Core Bond Fund Institutional Class vs. Lehman Brothers Aggregate Index [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] WPG Lehman Core Bond Fund-- Brothers Institutional Aggregate Class Index ---------------- --------- 8/31/97 $10,000 $10,000 11/30/97 10,231 10,342 2/28/98 10,473 10,572 5/31/98 10,693 10,764 8/31/98 10,961 11,056 11/30/98 11,210 11,318 2/28/99 11,145 11,234 5/31/99 11,194 11,233 8/31/99 11,069 11,144 11/30/99 11,276 11,314 2/29/00 11,320 11,357 5/31/00 11,304 11,469 8/31/00 11,858 11,986 11/30/00 12,184 12,339 2/28/01 12,797 12,885 5/31/01 12,959 12,974 8/31/01 13,423 13,466 11/30/01 13,725 13,717 2/28/02 13,882 13,873 5/31/02 14,018 14,025 8/31/02 14,605 14,558 11/30/02 14,801 14,723 2/28/03 15,416 15,247 5/31/03 15,859 15,648 8/31/03 15,417 15,193 11/30/03 15,711 15,486 2/29/04 16,206 15,940 5/31/04 15,809 15,579 8/31/04 16,373 16,124 11/30/04 16,442 16,174 2/28/05 16,633 16,328 5/31/05 16,884 16,642 8/31/05 17,031 16,793 11/30/05 16,786 16,562 2/28/05 16,998 16,776 5/31/06 16,743 16,628 8/31/06 17,221 17,404 11/30/06 17,654 17,878 2/28/07 17,821 18,041 5/31/07 17,738 18,000 8/31/07 18,053 18,318 The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1997 and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Lehman Brothers Aggregate Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return
1 YEAR 3 YEAR 5 YEAR 10 YEAR ---------- --------- --------- --------- WPG Core Bond Fund -- Institutional Class 4.84% 3.31% 4.33% 6.09% Lehman Brothers Aggregate Index 5.26% 3.96% 4.31% 6.04%
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 0.79%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. ANNUAL REPORT 2007 | 23 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (unaudited) (continued) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco WPG Core Bond Fund Investor Class vs. Lehman Brothers Aggregate Index [GRAPH OMITTED] [EDGAR REPRESENTAION OF DATA POINTS AS FOLLOWS] WPG Core Bond Fund-- Lehman Brothers Investor Class Aggregate Index ----------------- --------------- 1/17/06 $10,000 $10,000 1/31/06 9,937 9,940 2/28/06 9,966 9,973 3/31/06 9,860 9,875 4/30/06 9,829 9,864 5/31/06 9,810 9,885 6/30/06 9,818 10,019 7/31/06 9,950 10,172 8/31/06 10,084 10,346 9/30/06 10,161 10,502 10/31/06 10,220 10,571 11/30/06 10,333 10,694 12/31/06 10,260 10,632 1/31/07 10,279 10,627 2/28/07 10,425 10,791 3/31/07 10,406 10,791 4/30/07 10,457 10,849 5/31/07 10,369 10,767 6/30/07 10,329 10,735 7/31/07 10,408 10,824 8/31/07 10,547 10,957 The chart assumes a hypothetical $10,000 initial investment in the Fund made on January 17, 2006 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Lehman Brothers Aggregate Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return SINCE 1 YEAR INCEPTION(1) --------- ------------ WPG Core Bond Fund -- Investor Class 4.58% 3.34% Lehman Brothers Aggregate Index 5.26% 5.81% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 1.04%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period January 17, 2006 (commencement of operations) through August 31, 2007. 24 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (unaudited) (concluded) ================================================================================ Comparison of Change in Value of $10,000 Investment in Robeco WPG Core Bond Fund Retirement Class vs. Lehman Brothers Aggregate Index [GRAPH OMITTED] [EDGAR REPRESENTATION OF DATA POINTS AS FOLLOWS] WPG Core Bond Fund-- Lehman Brothers Retirement Class Aggregate Index ---------------- ---------------- 8/31/05 $10,000 $10,000 9/30/05 9,882 9,897 10/31/05 9,794 9,819 11/30/05 9,835 9,862 12/31/05 9,923 9,956 1/31/06 9,928 9,956 2/28/06 9,958 9,989 3/31/06 9,854 9,891 4/30/06 9,823 9,881 5/31/06 9,806 9,902 6/30/06 9,815 10,036 7/31/06 9,949 10,189 8/31/06 10,084 10,364 9/30/06 10,162 10,455 10/31/06 10,222 10,524 11/30/06 10,335 10,646 12/31/06 10,264 10,584 1/31/07 10,283 10,580 2/28/07 10,430 10,743 3/31/07 10,413 10,743 4/30/07 10,465 10,801 5/31/07 10,379 10,719 6/30/07 10,340 10,687 7/31/07 10,420 10,775 8/31/07 10,561 10,908 The chart assumes a hypothetical $10,000 initial investment in the Fund made on September 1, 2005 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the Lehman Brothers Aggregate Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2007 Average Annual Total Return SINCE 1 YEAR INCEPTION(1) --------- ------------ WPG Core Bond Fund -- Retirement Class 4.73% 2.77% Lehman Brothers Aggregate Index 5.26% 4.44% THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ROBECO INVESTMENT MANAGEMENT, INC. 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. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS IS 0.89%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-261-4073 OR VISIT OUR WEB SITE AT WWW.ROBECOINVEST.COM. (1) For the period September 1, 2005 (commencement of operations) through August 31, 2007. ANNUAL REPORT 2007 | 25 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ FUND EXPENSE EXAMPLES (unaudited) ================================================================================ 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 Fund 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 six-month period from March 1, 2007 through August 31, 2007, 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 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 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.
ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $ 974.10 $ 7.71 Hypothetical (5% return before expenses) ....... 1,000.00 1,017.29 7.91 ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II -- INVESTOR CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $ 972.70 $ 8.95 Hypothetical (5% return before expenses) ....... 1,000.00 1,016.02 9.19 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $ 952.50 $17.62 Hypothetical (5% return before expenses) ....... 1,000.00 1,006.93 18.27 - ----------------------------------------------------------------------------------------------------------------------------------
26 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS ================================================================================ FUND EXPENSE EXAMPLES (unaudited) (continued) ================================================================================
ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND -- INVESTOR CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $ 951.20 $18.84 Hypothetical (5% return before expenses) ....... 1,000.00 1,005.65 19.55 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,053.60 $ 3.88 Hypothetical (5% return before expenses) ....... 1,000.00 1,021.38 3.83 ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND -- INVESTOR CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,052.60 $ 5.17 Hypothetical (5% return before expenses) ....... 1,000.00 1,020.10 5.10 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS MID CAP VALUE FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,033.40 $ 5.13 Hypothetical (5% return before expenses) ....... 1,000.00 1,020.10 5.10 ROBECO BOSTON PARTNERS MID CAP VALUE FUND -- INVESTOR CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,032.40 $ 6.40 Hypothetical (5% return before expenses) ....... 1,000.00 1,018.82 6.38 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,032.60 $ 4.87 Hypothetical (5% return before expenses) ....... 1,000.00 1,020.36 4.85 ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND -- INVESTOR CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,031.40 $ 6.14 Hypothetical (5% return before expenses) ....... 1,000.00 1,019.08 6.13 - ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL REPORT 2007 | 27 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ FUND EXPENSE EXAMPLES (unaudited) (concluded) ================================================================================
ROBECO WPG SMALL CAP VALUE FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $ 995.30 $ 7.29 Hypothetical (5% return before expenses) ....... 1,000.00 1,017.80 7.40 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO WPG LARGE CAP GROWTH FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,068.90 $ 7.30 Hypothetical (5% return before expenses) ....... 1,000.00 1,018.06 7.15 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO WPG CORE BOND FUND -- INSTITUTIONAL CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,013.00 $ 2.18 Hypothetical (5% return before expenses) ....... 1,000.00 1,023.01 2.19 ROBECO WPG CORE BOND FUND -- INVESTOR CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,011.80 $ 3.50 Hypothetical (5% return before expenses) ....... 1,000.00 1,021.68 3.52 ROBECO WPG CORE BOND FUND -- RETIREMENT CLASS ----------------------------------------------------------------------------- BEGINNING ACCOUNT ENDING ACCOUNT EXPENSES VALUE VALUE PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------- ------------------ --------------- Actual ......................................... $1,000.00 $1,012.50 $ 2.79 Hypothetical (5% return before expenses) ....... 1,000.00 1,022.40 2.81 - ------------------------------------------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's annualized six-month 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 (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period.
INSTITUTIONAL INVESTOR RETIREMENT --------------- ---------- ------------ Robeco Boston Partners Small Cap Value Fund II 1.55% 1.80% N/A Robeco Boston Partners Long/Short Equity Fund 3.58%(1) 3.83%(1) N/A Robeco Boston Partners Large Cap Value Fund 0.75% 1.00% N/A Robeco Boston Partners Mid Cap Value Fund 1.00% 1.25% N/A Robeco Boston Partners All-Cap Value Fund 0.95% 1.20% N/A Robeco WPG Small Cap Value Fund 1.45% N/A N/A Robeco WPG Large Cap Growth Fund 1.40% N/A N/A Robeco WPG Core Bond Fund 0.43% 0.69% 0.55%
(1) These amounts include dividends paid on securities which the Fund has sold short ("short-sale dividends") and related interest expense. The amount of short-sale dividends and related interest expense was 0.94% of average net assets for the most recent fiscal half-year. 28 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- COMMON STOCK Consumer Services ............................. 21.3% $ 53,095,294 Finance ....................................... 18.0 44,701,995 Health Care ................................... 13.3 33,195,285 Technology .................................... 10.7 26,724,314 Capital Goods ................................. 8.0 19,882,205 Other ......................................... 6.5 16,121,492 Consumer Non-Durables ......................... 5.8 14,462,114 Consumer Durables ............................. 4.4 10,928,078 Basic Industries .............................. 3.8 9,522,662 Energy ........................................ 3.6 8,881,272 Utilities ..................................... 0.7 1,767,014 Transportation ................................ 0.7 1,619,364 Communications ................................ 0.4 993,457 SHORT-TERM INVESTMENTS ........................... 3.1 7,669,114 RIGHTS/WARRANTS .................................. -- 13,028 LIABILITIES IN EXCESS OF OTHER ASSETS ............ (0.3) (693,389) ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $248,883,299 ===== ============ - ---------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 29 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- DOMESTIC COMMON STOCK Health Care ................................... 23.1% $ 20,440,467 Technology .................................... 19.2 17,030,869 Finance ....................................... 15.0 13,251,669 Consumer Non-Durables ......................... 11.8 10,478,367 Capital Goods ................................. 8.6 7,594,751 Consumer Services ............................. 7.9 6,968,767 Consumer Durables ............................. 4.0 3,545,747 Communications ................................ 2.6 2,326,458 Basic Industries .............................. 1.8 1,576,393 Other ......................................... 1.3 1,141,255 Utilities ..................................... 0.9 765,235 Energy ........................................ 0.1 74,846 SHORT-TERM INVESTMENTS ........................... 23.9 21,131,319 WARRANTS ......................................... 0.2 151,983 SECURITIES SOLD SHORT ............................ (47.0) (41,523,925) OTHER ASSETS IN EXCESS OF LIABILITIES ............ 26.6 23,479,920 ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $ 88,434,121 ===== ============ Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 30 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- COMMON STOCK Finance ....................................... 27.1% $ 18,115,012 Technology .................................... 18.1 12,050,735 Energy ........................................ 12.7 8,493,121 Health Care ................................... 12.5 8,323,697 Consumer Non-Durables ......................... 8.8 5,883,391 Capital Goods ................................. 8.0 5,321,576 Consumer Services ............................. 7.9 5,252,353 Communications ................................ 2.8 1,900,728 Utilities ..................................... 1.3 894,813 Basic Industries .............................. 0.4 272,128 SHORT-TERM INVESTMENTS ........................... 0.3 189,018 OTHER ASSETS IN EXCESS OF LIABILITIES ............ 0.1 73,148 ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $ 66,769,720 ===== ============ - ---------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 31 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS MID CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- COMMON STOCK Finance ....................................... 18.5% $ 8,972,462 Technology .................................... 17.8 8,651,080 Consumer Services ............................. 14.1 6,853,193 Health Care ................................... 10.1 4,881,252 Capital Goods ................................. 7.8 3,780,655 Consumer Non-Durables ......................... 5.5 2,660,712 Basic Industries .............................. 5.1 2,456,682 Other ......................................... 5.0 2,413,136 Energy ........................................ 4.3 2,100,893 Utilities ..................................... 2.8 1,359,443 Communications ................................ 2.7 1,335,223 Consumer Durables ............................. 1.2 585,273 Transportation ................................ 1.2 574,477 SHORT-TERM INVESTMENTS ........................... 3.2 1,544,265 OTHER ASSETS IN EXCESS OF LIABILITIES ............ 0.7 331,286 ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $ 48,500,032 ===== ============ - ---------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 32 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- COMMON STOCK Finance ....................................... 30.2% $ 5,363,778 Health Care ................................... 15.6 2,764,837 Technology .................................... 14.6 2,594,544 Consumer Non-Durables ......................... 13.8 2,442,028 Energy ........................................ 8.3 1,468,491 Consumer Services ............................. 4.0 709,831 Capital Goods ................................. 3.8 676,070 Communications ................................ 3.0 529,775 Other ......................................... 2.9 515,525 Consumer Durables ............................. 1.9 339,126 Utilities ..................................... 1.5 276,331 Basic Industries .............................. 0.5 83,407 SHORT-TERM INVESTMENTS ........................... 1.8 311,661 OPTIONS WRITTEN .................................. (0.6) (103,555) LIABILITIES IN EXCESS OF OTHER ASSETS ............ (1.3) (230,458) ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $ 17,741,391 ===== ============ - ------------------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 33 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG SMALL CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- COMMON STOCK Consumer Services ............................. 20.9% $ 11,275,472 Finance ....................................... 12.3 6,661,934 Technology .................................... 9.3 5,022,555 Health Care ................................... 8.7 4,704,058 Consumer Durables ............................. 8.0 4,328,080 Consumer Non-Durables ......................... 8.0 4,309,852 Energy ........................................ 6.2 3,317,853 Other ......................................... 5.9 3,185,511 Utilities ..................................... 5.1 2,765,154 Capital Goods ................................. 5.1 2,765,028 Transportation ................................ 4.1 2,210,386 Communications ................................ 0.5 247,929 Basic Industries .............................. 0.3 175,747 SHORT-TERM INVESTMENTS ........................... 5.2 2,791,425 RIGHTS/WARRANTS .................................. 0.4 207,178 LIABILITIES IN EXCESS OF OTHER ASSETS ............ -- (6,179) ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $ 53,961,983 ===== ============ - ------------------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 34 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG LARGE CAP GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- COMMON STOCK Technology .................................... 25.9% $ 4,827,361 Consumer Services ............................. 16.8 3,134,846 Health Care ................................... 15.4 2,873,440 Consumer Non-Durables ......................... 8.7 1,613,012 Energy ........................................ 7.6 1,410,350 Finance ....................................... 7.4 1,376,301 Capital Goods ................................. 5.8 1,085,745 Basic Industries .............................. 4.3 799,458 Transportation ................................ 3.5 643,391 Communications ................................ 1.6 307,437 Utilities ..................................... 1.5 278,057 Investment Company ............................ 0.9 171,825 OTHER ASSETS IN EXCESS OF LIABILITIES ............ 0.6 108,603 ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $ 18,629,826 ===== ============ - ------------------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 35 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 (unaudited) - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND PORTFOLIO HOLDINGS SUMMARY TABLE ================================================================================ % of Net Security Type/Industry Classification Assets Value - ------------------------------------------- ---------- -------------- GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS .... 38.7% $ 42,489,371 CORPORATE BONDS .................................. 17.8 19,555,565 U.S. TREASURY OBLIGATIONS ........................ 17.2 18,922,730 GOVERNMENT AGENCY OBLIGATIONS .................... 11.6 12,754,351 ASSET-BACKED SECURITIES .......................... 9.9 10,905,031 COLLATERALIZED MORTGAGE OBLIGATIONS .............. 4.0 4,331,792 COMMERCIAL PAPER DISCOUNTED ...................... 1.6 1,697,008 MUNICIPAL BONDS .................................. 1.0 1,130,560 SHORT-TERM INVESTMENTS ........................... 0.7 721,687 LIABILITIES IN EXCESS OF OTHER ASSETS ............ (2.5) (2,710,907) ----- ------------ NET ASSETS -- 100.0% ............................. 100.0% $109,797,188 ===== ============ - ---------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 36 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ COMMON STOCK--97.2% BASIC INDUSTRIES--3.8% Neenah Paper, Inc. .............................. 29,260 $ 1,015,030 Olin Corp. ...................................... 32,420 695,085 Rock-Tenn Co. ................................... 23,005 666,915 Ryerson, Inc. ................................... 31,730 1,057,878 Schweitzer-Mauduit International, Inc. .......... 19,175 436,998 Silgan Holdings, Inc. ........................... 48,080 2,456,407 Spartech Corp. .................................. 17,570 380,566 UAP Holding Corp. ............................... 94,075 2,813,783 ------------ 9,522,662 ------------ CAPITAL GOODS--8.0% Actuant Corp., Class A .......................... 15,015 915,765 Acuity Brands, Inc. ............................. 22,485 1,181,362 Brady Corp., Class A ............................ 44,648 1,738,147 CIRCOR International, Inc. ...................... 15,715 664,587 Drew Industries, Inc.* .......................... 56,605 2,222,878 DRS Technologies, Inc. .......................... 38,151 2,002,164 Federal Signal Corp. ............................ 48,860 747,558 Griffon Corp.* .................................. 59,525 932,162 Lennox International, Inc. ...................... 63,685 2,290,749 LSI Industries, Inc. ............................ 54,665 1,108,606 NN, Inc. ........................................ 94,850 974,109 Nordson Corp. ................................... 10,475 525,950 Quanta Services, Inc.* .......................... 48,798 1,379,511 RBC Bearings, Inc.* ............................. 20,475 726,863 Rofin-Sinar Technologies, Inc.* ................. 12,195 849,626 Trimas Corp.* ................................... 64,830 794,816 WD-40 Co. ....................................... 23,795 827,352 ------------ 19,882,205 ------------ COMMUNICATIONS--0.4% EarthLink, Inc.* ................................ 130,375 993,457 ------------ CONSUMER DURABLES--4.4% Champion Enterprises, Inc.* ..................... 175,125 2,022,694 MDC Holdings, Inc. .............................. 38,690 1,721,318 Natuzzi S.p.A. - ADR* ........................... 67,380 516,131 Sealy Corp. ..................................... 171,265 2,613,504 Tempur-Pedic International, Inc. ................ 67,000 1,936,300 Winnebago Industries, Inc. ...................... 79,420 2,118,131 ------------ 10,928,078 ------------ CONSUMER NON-DURABLES--5.8% Alliance One International, Inc.* ............... 145,310 1,118,887 Brown Shoe Co., Inc. ............................ 37,337 852,777 Hartmarx Corp.* ................................. 213,025 1,550,822 Matthews International Corp., Class A ........... 45,890 1,979,695 Nu Skin Enterprises, Inc., Class A .............. 35,805 557,126 Oxford Industries, Inc. ......................... 50,465 1,827,842 Playtex Products, Inc.* ......................... 112,850 2,053,870 Tupperware Corp. ................................ 32,955 1,014,684 Universal Corp. ................................. 10,240 503,091 Warnaco Group, Inc., (The)* ..................... 86,055 3,003,320 ------------ 14,462,114 ------------ Number of Shares Value --------- ------------ CONSUMER SERVICES--21.3% ACCO Brands Corp.* .............................. 77,545 $ 1,757,945 Asbury Automative Group, Inc. ................... 62,370 1,348,439 Bowne & Co., Inc. ............................... 70,380 1,192,941 CBIZ, Inc.* ..................................... 144,700 1,085,250 Charlotte Russe Holding, Inc.* .................. 69,290 1,210,496 Charming Shoppes, Inc.* ......................... 208,865 1,888,140 Children's Place Retail Stores, Inc. (The)* ..... 34,425 990,063 Cornell Companies, Inc.* ........................ 32,255 777,023 Dress Barn, Inc., (The)* ........................ 62,760 1,098,300 Ennis, Inc. ..................................... 54,520 1,185,810 Finish Line, Inc., (The), Class A ............... 73,950 417,078 FTI Consulting, Inc.* ........................... 64,293 3,376,668 G&K Services, Inc., Class A ..................... 36,130 1,504,814 Gevity HR, Inc. ................................. 126,370 1,455,782 Golfsmith International Holdings, Inc.* ......... 133,855 777,698 Group 1 Automotive, Inc. ........................ 45,785 1,605,222 IKON Office Solutions, Inc. ..................... 123,600 1,735,344 infoUSA, Inc. ................................... 125,370 1,271,252 Journal Communications, Inc., Class A ........... 43,430 450,369 Kforce, Inc.* ................................... 49,576 754,547 Knoll, Inc. ..................................... 84,080 1,598,361 Lithia Motors, Inc., Class A .................... 29,650 531,032 Live Nation, Inc.* .............................. 187,505 3,881,353 MAXIMUS, Inc. ................................... 30,945 1,323,827 Mothers Work, Inc.* ............................. 44,890 918,000 MPS Group, Inc.* ................................ 93,170 1,282,019 Performance Food Group Co.* ..................... 65,840 1,872,490 PetMed Express, Inc.* ........................... 66,231 992,803 Restoration Hardware, Inc.* ..................... 501,695 1,765,966 Schawk, Inc. .................................... 58,190 1,256,904 Scholastic Corp.* ............................... 74,155 2,527,202 School Specialty, Inc.* ......................... 22,690 826,824 Spherion Corp.* ................................. 78,465 693,631 Standard Parking Corp.* ......................... 48,405 1,687,398 Steiner Leisure Ltd.* ........................... 20,175 872,771 Tetra Tech, Inc.* ............................... 20,768 407,053 Universal Technical Institute, Inc.* ............ 53,080 956,502 Valassis Communications, Inc.* .................. 39,655 361,654 Watson Wyatt Worldwide, Inc., Class A ........... 38,410 1,817,177 World Fuel Services Corp. ....................... 42,520 1,639,146 ------------ 53,095,294 ------------ ENERGY--3.6% Berry Petroleum Co. ............................. 20,325 692,676 Bristow Group, Inc.* ............................ 49,975 2,166,416 Compton Petroleum Corp* ......................... 111,120 1,010,081 Comstock Resources, Inc.* ....................... 48,595 1,337,820 Newpark Resources, Inc.* ........................ 189,730 1,062,488 Petrohawk Energy Corp.* ......................... 59,910 907,038 Rosetta Resources, Inc.* ........................ 38,500 646,030 Swift Energy Co.* ............................... 28,445 1,058,723 ------------ 8,881,272 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 37 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (continued) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ FINANCE--18.0% Advanta Corp., Class B .......................... 89,367 $ 2,339,628 American Equity Investment Life Holding Co. ..... 95,135 971,328 Amerisafe, Inc.* ................................ 89,970 1,480,006 Apollo Investment Corp. ......................... 86,395 1,886,867 Aspen Insurance Holdings Ltd. ................... 51,065 1,281,221 BankUnited Financial Corp., Class A ............. 187,508 3,206,387 CNA Surety Corp.* ............................... 85,105 1,528,486 Cowen Group., Inc.* ............................. 70,045 895,175 FBR Capital Markets Corp.* ...................... 37,120 494,810 Federal Agricultural Mortgage Corp., Class C .. . 83,165 2,711,179 Hanover Insurance Group, Inc., (The) ............ 14,095 602,984 Hilb, Rogal & Hobbs Co. ......................... 16,325 762,377 Horace Mann Educators Corp. ..................... 65,235 1,261,645 IndyMac Bancorp, Inc. ........................... 129,525 3,134,505 Infinity Property & Casualty Corp. .............. 16,325 676,835 IPC Holdings Ltd. ............................... 115,740 2,942,111 KMG America Corp.* .............................. 278,845 1,070,765 Max Re Capital Ltd. ............................. 136,070 3,736,482 Navigators Group, Inc., (The)* .................. 46,295 2,509,189 Platinum Underwriters Holdings Ltd. ............. 170,770 5,922,304 ProAssurance Corp.* ............................. 35,505 1,866,853 Quanta Capital Holdings Ltd.* ................... 147,935 397,945 Seabright Insurance Holdings, Inc.* ............. 46,335 798,352 State Auto Financial Corp. ...................... 46,700 1,397,264 United America Indemnity Ltd., Class A* ......... 38,230 827,297 ------------ 44,701,995 ------------ HEALTH CARE--13.3% Alpharma, Inc., Class A ......................... 74,315 1,701,814 Amedisys, Inc.* ................................. 64,173 2,424,469 Conmed Corp.* ................................... 69,305 2,013,310 Haemonetics Corp.* .............................. 28,955 1,437,326 Healthspring, Inc.* ............................. 87,785 1,640,702 Home Diagnostics, Inc.* ......................... 118,515 1,163,817 ICU Medical, Inc.* .............................. 19,960 754,688 Invacare Corp. .................................. 76,855 1,780,730 Kindred Healthcare, Inc.* ....................... 90,425 1,792,223 LifePoint Hospitals, Inc.* ...................... 86,390 2,427,559 Magellan Health Services, Inc.* ................. 17,250 700,350 Medical Action Industries, Inc.* ................ 32,870 745,820 Mentor Corp. .................................... 71,410 3,184,172 Obagi Medical Products, Inc.* ................... 93,100 1,484,014 Odyssey HealthCare, Inc.* ....................... 102,800 1,005,384 Owens & Minor, Inc. ............................. 23,735 947,027 Perrigo Co. ..................................... 108,275 2,242,375 PharMerica Corp.* ............................... 33,095 586,774 PRA International* .............................. 27,880 812,702 RehabCare Group, Inc.* .......................... 54,325 883,868 Res-Care, Inc.* ................................. 32,180 686,078 Symmetry Medical, Inc.* ......................... 125,980 2,019,459 Vital Signs, Inc. ............................... 15,170 760,624 ------------ 33,195,285 ------------ Number of Shares Value --------- ------------ OTHER--6.5% Anworth Mortgage Asset Corp. (REIT) ............. 321,320 $ 1,728,702 Ares Capital Corp. .............................. 92,580 1,520,164 Ashford Hospitality Trust, Inc. (REIT) .......... 69,905 762,664 CapLease, Inc. (REIT) ........................... 83,140 802,301 Friedman, Billings, Ramsey Group, Inc., Class A . 469,430 2,201,627 Gladstone Commercial Corp. (REIT) ............... 46,110 836,435 KKR Financial Holdings LLC ...................... 61,515 952,867 Lexington Realty Trust (REIT) ................... 64,795 1,339,961 Meruelo Maddux Properties, Inc.* ................ 134,015 805,430 MFA Mortgage Investments, Inc. (REIT) ........... 322,995 2,503,211 Origen Financial, Inc. (REIT) ................... 162,040 1,038,676 Redwood Trust, Inc. (REIT) ...................... 43,650 1,629,454 ------------ 16,121,492 ------------ TECHNOLOGY--10.7% Avid Technology, Inc.* .......................... 40,005 1,233,354 Bel Fuse, Inc., Class B ......................... 22,395 705,443 Benchmark Electronics, Inc.* .................... 34,840 873,787 CIBER, Inc.* .................................... 113,200 897,676 Electronics For Imaging, Inc.* .................. 72,415 1,888,583 Emulex Corp.* ................................... 95,180 1,859,817 EnerSys* ........................................ 33,905 612,324 Gilat Satellite Networks Ltd.* .................. 89,430 840,642 Goldleaf Financial Solutions, Inc.* ............. 154,560 565,690 Hypercom Corp.* ................................. 141,505 689,129 Ikanos Communications, Inc.* .................... 90,330 528,431 Imation Corp. ................................... 31,035 902,808 Insight Enterprises, Inc.* ...................... 133,045 3,155,828 Mercury Computer Systems, Inc.* ................. 42,830 489,975 Neoware, Inc.* .................................. 68,260 1,094,890 Open Text Corp.* ................................ 47,050 1,170,134 PAR Technology Corp.* ........................... 100,265 825,181 Photronics, Inc.* ............................... 77,010 891,776 Planar Systems, Inc.* ........................... 112,580 710,380 Smart Modular Technologies* ..................... 134,915 1,477,319 Sycamore Networks, Inc.* ........................ 225,735 891,653 Technitrol, Inc. ................................ 92,430 2,541,825 Verigy Ltd.* .................................... 71,070 1,877,669 ------------ 26,724,314 ------------ TRANSPORTATION--0.7% Quality Distribution, Inc.* ..................... 86,525 839,292 Quintana Maritime Ltd. .......................... 44,935 780,072 ------------ 1,619,364 ------------ UTILITIES--0.7% Puget Energy, Inc. .............................. 75,740 1,767,014 ------------ TOTAL COMMON STOCK (Cost $217,190,626) ......................... 241,894,546 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 38 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ RIGHTS/WARRANTS--0.0% OTHER--0.0% KKR Financial Holdings LLC, Expires 09/19/07++ .. 11,952 $ 13,028 ------------ TOTAL RIGHTS/WARRANTS (Cost $0) ............... 13,028 ------------ SHORT-TERM INVESTMENTS--3.1% PNC Bank Money Market Deposit Account(a) 4.460% 09/04/07 ....................7,669,114 7,669,114 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $7,669,114) ........................... 7,669,114 ------------ TOTAL INVESTMENTS--100.3% (Cost $224,859,740) ............................. 249,576,688 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(0.3)% ...... (693,389) ------------ NET ASSETS--100.0% ................................. $248,883,299 ============ - ---------- * -- Non-income Producing. ++ -- Security has been 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. REIT -- Real Estate Investment Trust (a) Security is affiliated to the principal underwriter of the Fund. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 39 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ LONG POSITIONS--120.4% DOMESTIC COMMON STOCK--96.3% BASIC INDUSTRIES--1.8% Graphic Packaging Corp. +* ...................... 331,175 $ 1,576,393 ------------ CAPITAL GOODS--8.6% Dynamics Research Corp. +* ...................... 49,672 623,880 Keystone Consolidated Industries, Inc.* ......... 12,780 241,542 KHD Humboldt Wedag International Ltd. + ......... 40,620 2,563,122 LSB Industries, Inc. + .......................... 39,275 864,836 Thermadyne Holdings Corp. +* .................... 87,861 1,370,632 TurboSonic Technologies, Inc.* .................. 252,778 270,472 WD-40 Co. + ..................................... 47,750 1,660,267 ------------ 7,594,751 ------------ COMMUNICATIONS--2.6% Check Point Software Technologies Ltd. +* ....... 36,225 849,839 Copernic Inc* ................................... 77,128 146,543 Imergent, Inc.* ................................. 6,965 131,987 Optio Software, Inc.* ........................... 138,870 224,969 Progress Software Corp. +* ...................... 23,510 717,525 Quepasa Corp.* .................................. 23,915 113,357 Varsity Group, Inc.* ............................ 123,685 142,238 ------------ 2,326,458 ------------ CONSUMER DURABLES--4.0% Chromcraft Revington, Inc.* ..................... 23,810 132,622 Comstock Homebuilding Companies, Inc. +* ........ 215,930 548,462 Crown Crafts, Inc.* ............................. 51,039 199,563 iRobot Corp. +* ................................. 17,505 386,160 Natuzzi S.p.A. - ADR +* ......................... 57,190 438,075 Strattec Security Corp. +* ...................... 9,121 435,893 Toll Brothers, Inc. +* .......................... 49,745 1,062,553 Wescast Industries, Inc. ........................ 24,795 342,419 ------------ 3,545,747 ------------ CONSUMER NON-DURABLES--11.8% Brown Shoe Co., Inc. + .......................... 43,365 990,457 CCA Industries, Inc. + .......................... 69,418 687,238 Escalade, Inc. + ................................ 16,809 142,877 Female Health Co., (The)* ....................... 81,647 164,110 Hines Horticulture, Inc. +* ..................... 446,739 147,424 Loews Corp. + ................................... 47,650 2,240,026 Loews Corp. - Carolina Group + .................. 12,230 930,948 Mattel, Inc. + .................................. 47,910 1,036,293 Matthews International Corp., Class A + ......... 15,360 662,630 Natrol, Inc.* ................................... 139,892 491,021 Nestle S.A. - ADR + ............................. 11,180 1,215,569 Overhill Farms, Inc. +* ......................... 79,160 313,474 Skechers U.S.A., Inc., Class A* ................. 18,365 364,178 Tandy Brand Accessories, Inc. + ................. 37,741 409,490 Tefron Ltd. + ................................... 94,810 682,632 ------------ 10,478,367 ------------ Number of Shares Value --------- ------------ CONSUMER SERVICES--7.9% Children's Place Retail Stores, Inc. (The) +* ... 22,235 $ 639,479 Coinstar, Inc. +* ............................... 29,205 954,419 Cornell Companies, Inc. +* ...................... 57,665 1,389,150 Ennis, Inc. + ................................... 41,420 900,885 Global Traffic Network, Inc. +* ................. 42,295 308,753 Gmarket, Inc. - ADR +* .......................... 37,795 748,719 Innerworkings, Inc.* ............................ 7,444 105,035 Ituran Location and Control Ltd. + .............. 54,845 639,218 Local.Com Corp.* ................................ 26,305 155,989 New Frontier Media, Inc. + ...................... 35,785 244,054 Premier Exhibitions, Inc.* ...................... 15,850 250,747 The TJX Companies, Inc. ......................... 15,040 458,570 Thermoenergy Corp.* ............................. 144,791 173,749 ------------ 6,968,767 ------------ ENERGY--0.1% Particle Drilling Technologies* ................. 30,180 74,846 ------------ FINANCE--15.0% Aegon N.V. + .................................... 62,740 1,143,123 American International Group, Inc. + ............ 16,665 1,099,890 Bear Stearns Companies, Inc. (The) + ............ 5,295 575,355 Citigroup, Inc. + ............................... 37,060 1,737,373 Countrywide Financial Corp. ..................... 23,890 474,216 Freddie Mac ..................................... 20,350 1,253,763 Investors Title Co. + ........................... 7,080 290,280 IPC Holdings Ltd. + ............................. 24,850 631,687 Legg Mason, Inc. + .............................. 14,930 1,296,223 Life Partners Holdings, Inc. .................... 5,893 289,759 MGIC Investment Corp. + ......................... 11,740 354,078 PartnerRe Ltd. + ................................ 5,935 431,534 PHH Corp.* ...................................... 16,905 455,252 Platinum Underwriters Holdings Ltd. + ........... 13,290 460,897 State Street Corp. .............................. 7,220 443,019 TFS Financial Corp.* ............................ 79,170 918,372 Torchmark Corp. + ............................... 11,950 735,642 Wesco Financial Corp. + ......................... 1,675 661,206 ------------ 13,251,669 ------------ HEALTH CARE--23.1% Alpha Pro Tech Ltd.* ............................ 463,120 708,574 American BIO Medica Corp.* ...................... 315,075 326,103 American Dental Partners, Inc. +* ............... 53,302 1,276,583 American Physicians Service Group, Inc. + ....... 18,890 346,631 Amgen, Inc. +* .................................. 13,005 651,680 E-Z-Em, Inc. +* ................................. 105,831 1,571,590 GlaxoSmithKline PLC - ADR + ..................... 18,695 976,253 Health Grades, Inc. +* .......................... 71,380 413,290 Hi-Tech Pharmacal Co., Inc. +* .................. 56,758 647,041 Home Diagnostics, Inc. +* ....................... 129,745 1,274,096 iLinc Communications, Inc.* ..................... 208,290 122,891 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 40 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ HEALTH CARE--(CONTINUED) Johnson & Johnson + ............................. 35,000 $ 2,162,650 Lincare Holdings, Inc.* ......................... 12,240 440,518 Matrixx Initiatives, Inc. +* .................... 29,090 617,872 MEDecision, Inc.* ............................... 115,320 450,901 MTS Medication Technologies, Inc. +* ............ 64,075 701,621 Orthofix International N.V. +* .................. 32,496 1,554,609 Pfizer, Inc. + .................................. 107,565 2,671,915 Pharsight Corp.* ................................ 120,520 220,552 PHC, Inc., Class A* ............................. 377,980 1,152,839 Sanofi-Aventis - ADR + .......................... 26,110 1,069,204 Unilens Vision, Inc. ............................ 113,802 437,000 Vital Signs, Inc. + ............................. 12,885 646,054 ------------ 20,440,467 ------------ OTHER--1.3% Friedman, Billings, Ramsey Group, Inc., Class A . 117,630 551,685 United Capital Corp. +* ......................... 22,290 589,570 ------------ 1,141,255 ------------ TECHNOLOGY--19.2% Accenture Ltd., Class A + ....................... 32,870 1,354,573 Bel Fuse, Inc., Class A + ....................... 37,950 1,351,779 CAM Commerce Solutions, Inc. + .................. 35,126 1,387,477 Captaris, Inc.* ................................. 124,071 665,021 CGI Group, Inc. Class A +* ...................... 76,100 839,383 Communications Systems, Inc. .................... 14,690 162,178 DSP Group, Inc. +* .............................. 19,905 346,944 Electronic Clearing House, Inc. +* .............. 76,093 770,061 Electronics For Imaging, Inc. +* ................ 52,300 1,363,984 Emulex Corp. +* ................................. 41,570 812,278 Lawson Software, Inc. +* ........................ 75,470 740,361 McAfee, Inc. +* ................................. 34,590 1,236,592 Metalink Ltd.* .................................. 29,785 204,027 MIPS Technologies, Inc.* ........................ 68,445 535,240 MoneyGram International, Inc. ................... 20,420 434,333 Neoware, Inc. +* ................................ 40,960 656,998 NU Horizons Electronics Corp. +* ................ 94,236 874,510 Optical Cable Corp. +* .......................... 46,460 217,433 Radyne Corp. .................................... 32,230 339,382 Richardson Electronics Ltd. + ................... 87,345 631,504 Sigmatel, Inc.* ................................. 35,000 94,500 Syntax-Brillian Corp. +* ........................ 18,692 121,498 Telular Corp. +* ................................ 111,663 625,313 Tier Technologies, Inc., Class B +* ............. 126,550 1,265,500 ------------ 17,030,869 ------------ UTILITIES--0.9% Maine & Maritimes Corp. +* ...................... 24,685 765,235 ------------ TOTAL DOMESTIC COMMON STOCK (Cost $82,652,360) .......................... 85,194,824 ------------ Number of Shares Value --------- ------------ WARRANTS--0.2% CONSUMER SERVICES--0.2% Endeavor Acquisition Corp.* ..................... 32,755 $ 151,983 ------------ TOTAL WARRANTS (Cost $96,143) .............................. 151,983 ------------ SHORT-TERM INVESTMENTS--23.9% SHORT-TERM INVESTMENTS--23.9% PNC Bank Money Market Deposit Account(a) 4.460% 09/04/07 ..............................21,131,319 21,131,319 ------------ TOTAL SHORT-TERM INVESTMENTS (Cost $21,131,319) .......................... 21,131,319 ------------ TOTAL LONG POSITIONS--120.4% (Cost $103,879,822) ............................. 106,478,126 ------------ SECURITIES SOLD SHORT--(47.0%) BASIC INDUSTRIES--(1.6%) Allegheny Technologies, Inc. .................... (3,900) (387,621) Carpenter Technology Corp. ...................... (4,395) (513,512) Ethanex Energy, Inc.* ........................... (10,880) (4,352) Hybrid Technologies, Inc.* ...................... (37,722) (82,988) Titanium Metals Corp. ........................... (13,745) (430,906) Uranium Energy Corp.* ........................... (1,915) (6,703) ------------ (1,426,082) ------------ CAPITAL GOODS--(5.5%) Altair Nanotechnologies, Inc.* .................. (61,535) (196,912) Basin Water, Inc.* .............................. (21,550) (241,145) Ceradyne, Inc.* ................................. (8,575) (619,801) DynaMotive Energy Systems Corp.* ................ (42,618) (42,618) Fuel-Tech N.V.* ................................. (8,835) (257,099) Ionatron, Inc.* ................................. (76,970) (252,462) Ladish Co., Inc.* ............................... (5,710) (299,661) Layne Christensen Co.* .......................... (5,365) (264,870) Medefile International, Inc.* ................... (1,902) (314) Microvision, Inc.* .............................. (60,480) (289,699) Nano-Proprietary, Inc.* ......................... (13,185) (16,481) Research Frontiers, Inc.* ....................... (24,611) (288,195) Smith & Wesson Holding Corp.* ................... (18,275) (383,775) Sulphco, Inc.* .................................. (77,571) (531,361) Sun Hydraulics Corp. ............................ (18,075) (500,497) Titan International, Inc. ....................... (17,630) (510,917) TurboChef Technologies, Inc.* ................... (12,933) (165,542) ------------ (4,861,349) ------------ COMMUNICATIONS--(2.6%) Choice One Communications, Inc.++* .............. (37,790) (4) Copernic Inc.* .................................. (77,128) (146,543) CryptoLogic Ltd. ................................ (17,262) (360,949) CryptoLogic, Inc. ............................... (5,440) (113,750) CTC Communications Group,Inc.++* ................ (98,900) (10) DigitalFX International, Inc.* .................. (906) (3,171) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 41 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ COMMUNICATIONS--(CONTINUED) Globalstar, Inc* ................................ (32,437) $ (301,664) Imergent, Inc. .................................. (26,240) (497,248) Interliant, Inc.* ............................... (600) (1) j2 Global Communications, Inc.* ................. (6,915) (235,110) LivePerson, Inc.* ............................... (23,620) (136,051) On2 Technologies, Inc.* ......................... (51,285) (76,415) Quepasa Corp.* .................................. (23,915) (113,357) Terremark Worldwide, Inc.* ...................... (48,565) (328,299) Zingo, Inc.* .................................... (835) (1,670) ------------ (2,314,242) ------------ CONSUMER DURABLES--(1.6%) Amerityre Corp.* ................................ (41,515) (169,381) Brookfield Homes Corp.* ......................... (26,240) (520,077) iRobot Corp.* ................................... (17,505) (386,160) QSound Labs, Inc.* .............................. (6,840) (26,334) Raser Technologies, Inc.* ....................... (20,832) (296,231) ------------ (1,398,183) ------------ CONSUMER NON-DURABLES--(6.4%) Andersons, Inc. (The) ........................... (7,300) (344,998) Cal-Maine Foods, Inc. ........................... (26,340) (521,269) Crocs, Inc.* .................................... (3,100) (183,024) Force Protection, Inc.* ......................... (34,700) (597,881) Guess?, Inc. .................................... (5,585) (296,005) Hansen Natural Corp.* ........................... (6,320) (283,831) Heelys, Inc.* ................................... (22,216) (205,054) Imperial Sugar Co. .............................. (28,180) (810,175) Javo Beverage Co., Inc.* ........................ (27,215) (29,664) Jones Soda Co.* ................................. (25,260) (272,808) Seaboard Corp. .................................. (200) (415,800) Skins, Inc.* .................................... (22,913) (39,639) Star Scientific, Inc.* .......................... (143,137) (143,137) SunOpta, Inc.* .................................. (25,640) (332,551) True Religion Apparel, Inc.* .................... (15,185) (254,804) USANA Health Sciences, Inc.* .................... (6,000) (228,480) Valence Technology, Inc.* ....................... (60,915) (82,235) Volcom, Inc.* ................................... (16,625) (648,874) ------------ (5,690,229) ------------ CONSUMER SERVICES--(10.2%) Blockbuster, Inc. Class A ....................... (53,835) (267,022) Buffalo Wild Wings, Inc.* ....................... (7,040) (244,781) CarMax, Inc.* ................................... (15,850) (359,161) Citi Trends, Inc.* .............................. (11,380) (247,401) Concur Technologies, Inc.* ...................... (16,485) (441,468) Crown Media Holdings, Inc., Class A* ............ (32,815) (220,845) Document Securities Systems, Inc.* .............. (14,285) (189,133) Escala Group, Inc.* ............................. (7,966) (16,410) FTD Group, Inc.* ................................ (27,955) (496,760) Genius Products, Inc.* .......................... (67,000) (178,890) Industrial Services of America, Inc.* ........... (24,943) (276,867) Innerworkings, Inc.* ............................ (36,589) (516,271) Iron Mountain, Inc.* ............................ (15,050) (425,313) Number of Shares Value --------- ------------ CONSUMER SERVICES--(CONTINUED) L-1 Identity Soloutions, Inc.* .................. (22,610) $ (371,931) Liquidity Services, Inc.* ....................... (21,935) (241,285) Local.Com Corp.* ................................ (26,305) (155,989) Medis Technologies Ltd.* ........................ (19,884) (209,776) Neutron Enterprises, Inc.* ...................... (1,423) (861) Nutri/System, Inc.* ............................. (13,465) (730,207) Overstock.com, Inc.* ............................ (12,265) (272,406) PokerTek, Inc.* ................................. (12,245) (123,919) Premier Exhibitions, Inc.* ...................... (49,782) (787,551) Rewards Network, Inc.* .......................... (91,555) (370,798) Ritchie Bros. Auctioneers, Inc. ................. (6,700) (432,887) Satellite Newspapers Corp.* ..................... (8,615) (8) The9 Ltd. - ADR* ................................ (5,120) (182,170) Tween Brands, Inc.* ............................. (10,300) (303,850) Urban Outfitters, Inc.* ......................... (24,245) (555,211) Voyant International, Inc.* ..................... (23,230) (8,944) Zumiez, Inc.* ................................... (7,610) (369,313) ------------ (8,997,428) ------------ ENERGY--(0.7%) Energytec, Inc.* ................................ (1) 0 Powersecure International, Inc.* ................ (44,095) (596,165) ------------ (596,165) ------------ FINANCE--(2.2%) Ezcorp, Inc., Class A* .......................... (13,870) (168,798) First Marblehead Corp. (The) .................... (8,190) (274,283) Franklin Credit Management Corp.* ............... (19,934) (99,670) Ladenburg Thalmann Financial Services, Inc.* .. . (1) (2) Life Partners Holdings, Inc. .................... (13,486) (663,107) Optionsxpress Holdings Inc ...................... (18,240) (429,005) Triad Guaranty, Inc.* ........................... (10,035) (167,885) U.S. Global Investors, Inc., Class A ............ (8,575) (177,502) ------------ (1,980,252) ------------ HEALTH CARE--(4.0%) Align Technology, Inc.* ......................... (33,590) (763,501) Conceptus, Inc.* ................................ (12,500) (218,750) CPC of America, Inc.* ........................... (3,145) (47,647) Cyberonics, Inc.* ............................... (16,630) (250,946) Eclipsys Corp.* ................................. (17,745) (409,732) InterMune, Inc.* ................................ (8,200) (162,114) Isolagen, Inc.* ................................. (36,730) (92,927) Medivation Inc .................................. (8,890) (155,308) Minrad International, Inc.* ..................... (32,010) (150,127) Quality Systems, Inc. ........................... (7,700) (283,745) ReGeneRx Biopharmaceuticals, Inc.* .............. (200) (356) RemoteMDX, Inc.* ................................ (19,350) (42,570) Spectranetics Corp.* ............................ (14,885) (219,256) ThermoGenesis Corp.* ............................ (40,010) (104,026) Third Wave Technologies, Inc.* .................. (52,060) (398,259) Volcano Corp.* .................................. (18,495) (274,651) ------------ (3,573,915) ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 42 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ------------ OTHER--0.0% Dark Dynamite, Inc.* ............................ (13,984) $ (594) ------------ TECHNOLOGY--(11.6%) American Superconductor Corp.* .................. (11,065) (199,391) Anadigics, Inc.* ................................ (33,770) (555,854) ANTS Software, Inc.* ............................ (21,184) (37,072) Axis Technologies Group, Inc.* .................. (7,145) (4,644) Brightpoint, Inc.* .............................. (18,290) (213,078) Ciena Corp.* .................................... (6,955) (263,455) ConSyGen, Inc.* ................................. (200) 0 Convera Corp.* .................................. (31,262) (103,477) Exlservice Holdings, Inc.* ...................... (14,185) (269,515) Foldera, Inc.* .................................. (11,875) (879) Garmin Ltd. ..................................... (1,735) (176,675) Integral Technologies, Inc.* .................... (38,565) (65,175) Interactive Intelligence, Inc.* ................. (10,800) (211,140) LML Payment Systems, Inc.* ...................... (12,308) (40,124) MDI, Inc.* ...................................... (17,085) (15,206) Metalink Ltd.* .................................. (64,110) (439,154) Neomagic Corp.* ................................. (5,748) (22,877) Nestor, Inc.* ................................... (22,900) (20,610) Novatel Wireless, Inc.* ......................... (11,825) (270,083) NVE Corp.* ...................................... (5,705) (199,390) OpNext, Inc.* ................................... (21,825) (262,118) Palm, Inc.* ..................................... (71,550) (1,073,966) ParkerVision, Inc.* ............................. (27,207) (361,853) Sapient Corp.* .................................. (30,035) (193,425) Supertex, Inc.* ................................. (25,155) (902,058) Syntax-Brillian Corp.* .......................... (99,382) (645,983) Tessera Technologies, Inc.* ..................... (7,070) (258,974) Tiger Telematics, Inc.* ......................... (16,610) (42) Total Systems Services, Inc. .................... (15,270) (423,590) Trina Solar Ltd. - ADR* ......................... (5,250) (245,805) Universal Display Corp.* ........................ (8,875) (130,995) USA Technologies, Inc. .......................... (19,185) (188,013) Volterra Semiconductor Corp.* ................... (55,205) (599,526) Vyyo, Inc.* ..................................... (25,218) (146,517) Western Digital Corp.* .......................... (42,360) (989,530) Xybernaut Corp.++* .............................. (35,000) (980) Xyratex Ltd.* ................................... (33,155) (690,287) ------------ (10,221,461) ------------ Number of Shares Value --------- ------------ TRANSPORTATION--(0.3%) Tidewater, Inc. ................................. (3,415) $ (223,512) ------------ UTILITIES--(0.3%) SJW Corp. ....................................... (7,010) (240,513) ------------ TOTAL SECURITIES SOLD SHORT (Proceeds $43,706,238) ...................... (41,523,925) ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--26.6% ....... 23,479,920 ------------ NET ASSETS--100.0% ................................. $ 88,434,121 ============ - ---------- * -- Non-income producing. + -- Security position is either entirely or partially held in a segregated account as collateral for securities sold short. ++ -- Security has been 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. (a) Security is affiliated to the principal underwriter of the Fund. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 43 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- COMMON STOCK--99.6% BASIC INDUSTRIES--0.4% PPG Industries, Inc. ............................ 3,710 $ 272,128 ----------- CAPITAL GOODS--8.0% Emerson Electric Co. ............................ 7,305 359,625 Honeywell International, Inc. ................... 14,560 817,544 Koninklijke (Royal) Philips Electronics N.V. .. . 8,465 334,791 Lockheed Martin Corp. ........................... 22,720 2,252,461 United Technologies Corp. ....................... 20,865 1,557,155 ----------- 5,321,576 ----------- COMMUNICATIONS--2.8% Telecom Corp. New Zealand Ltd. - ADR ............ 11,475 278,154 Time Warner Cable, Inc.* ........................ 12,935 474,714 Vodafone Group PLC - ADR ........................ 20,287 657,299 Windstream Corp. ................................ 34,353 490,561 ----------- 1,900,728 ----------- CONSUMER NON-DURABLES--8.8% Altria Group, Inc. .............................. 18,952 1,315,458 Loews Corp. ..................................... 16,785 789,063 Loews Corp. - Carolina Group .................... 5,035 383,264 Molson Coors Brewing Co., Class B ............... 8,125 726,863 NIKE, Inc., Class B ............................. 14,615 823,409 Procter & Gamble Co., (The) ..................... 28,255 1,845,334 ----------- 5,883,391 ----------- CONSUMER SERVICES--7.9% Avis Budget Group, Inc.* ........................ 13,135 304,863 CBS Corp., Class B .............................. 15,965 503,057 Clear Channel Communications, Inc. .............. 15,995 595,974 Home Depot, Inc., (The) ......................... 11,605 444,588 Idearc, Inc. .................................... 7,605 259,559 Liberty Media Holding Capital, Series A* ........ 4,897 533,724 Omnicom Group, Inc. ............................. 6,795 346,069 R. R. Donnelley & Sons Co. ...................... 19,550 700,281 Ross Stores, Inc. ............................... 14,410 401,030 Time Warner, Inc. ............................... 61,286 1,163,208 ----------- 5,252,353 ----------- ENERGY--12.7% Anadarko Petroleum Corp. ........................ 20,735 1,015,600 Chesapeake Energy Corp. ......................... 19,230 620,360 Chevron Corp. ................................... 17,616 1,545,980 ConocoPhillips .................................. 29,000 2,374,810 Exxon Mobil Corp. ............................... 23,294 1,996,995 Total SA - ADR .................................. 12,510 939,376 ----------- 8,493,121 ----------- Number of Shares Value --------- ----------- FINANCE--27.1% ACE Ltd. ........................................ 14,684 $ 848,148 American International Group, Inc. .............. 28,888 1,906,608 Bank of New York Mellon Corp. (The) ............. 14,627 591,370 Berkshire Hathaway, Inc., Class B* .............. 578 2,248,420 Citigroup, Inc. ................................. 52,193 2,446,808 Commerce Bancorp, Inc. .......................... 23,715 871,052 Countrywide Financial Corp. ..................... 29,961 594,726 Discover Financial Services* .................... 16,155 373,827 Federated Investors, Inc., Class B .............. 18,270 641,460 Freddie Mac ..................................... 29,617 1,824,703 JPMorgan Chase & Co. ............................ 45,430 2,022,544 Lincoln National Corp. .......................... 7,305 444,728 MBIA, Inc. ...................................... 15,846 950,760 Merrill Lynch & Co., Inc. ....................... 8,705 641,558 State Street Corp. .............................. 5,065 310,788 Travelers Companies, Inc., (The) ................ 21,029 1,062,806 Wells Fargo & Co. ............................... 9,160 334,706 ----------- 18,115,012 ----------- HEALTH CARE--12.5% Amgen, Inc.* .................................... 7,515 376,577 CIGNA Corp. ..................................... 13,640 704,915 Coventry Health Care, Inc.* ..................... 9,380 538,131 Covidien Ltd.* .................................. 10,202 406,346 DaVita, Inc.* ................................... 12,835 738,269 Johnson & Johnson ............................... 24,366 1,505,575 Lincare Holdings, Inc.* ......................... 8,870 319,231 McKesson Corp. .................................. 5,685 325,239 Medco Health Solutions, Inc.* ................... 5,035 430,241 Pfizer, Inc. .................................... 70,012 1,739,098 Quest Diagnostics, Inc. ......................... 10,375 568,031 Wyeth ........................................... 14,515 672,044 ----------- 8,323,697 ----------- TECHNOLOGY--18.1% Accenture Ltd., Class A ......................... 10,860 447,541 Broadridge Financial Solutions, Inc. ............ 26,290 477,689 CA, Inc. ........................................ 19,650 494,984 Cadence Design Systems, Inc.* ................... 16,195 351,755 CGI Group, Inc. Class A* ........................ 54,605 602,293 First Data Corp. ................................ 28,930 961,055 Harris Corp. .................................... 18,590 1,130,830 Hewlett-Packard Co. ............................. 29,118 1,436,973 Ingram Micro, Inc., Class A* .................... 21,625 424,715 International Business Machines Corp. ........... 8,885 1,036,791 McAfee, Inc.* ................................... 11,355 405,941 Microsoft Corp. ................................. 23,684 680,441 Motorola, Inc. .................................. 23,600 400,020 Nokia OYI - ADR ................................. 32,090 1,055,119 Oracle Corp.* ................................... 29,385 595,928 Sun Microsystems, Inc.* ......................... 102,190 547,738 Symantec Corp.* ................................. 36,255 681,957 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 44 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- TECHNOLOGY--(CONTINUED) Taiwan Semiconductor Manufacturing Co., Ltd. - ADR ............................. 32,154 $ 318,965 ----------- 12,050,735 ----------- UTILITIES--1.3% Ameren Corp. .................................... 13,780 699,748 DTE Energy Co. .................................. 4,080 195,065 ----------- 894,813 ----------- TOTAL COMMON STOCK (Cost $59,153,563) .......................... 66,507,554 ----------- SHORT-TERM INVESTMENTS--0.3% PNC Bank Money Market Deposit Account(a) 4.460% 09/04/07 ............................... 189,018 189,018 ----------- TOTAL SHORT-TERM INVESTMENTS(Cost $189,018) 189,018 ----------- TOTAL INVESTMENTS--99.9% (Cost $59,342,581) .............................. 66,696,572 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.1% ........ 73,148 ----------- NET ASSETS--100.0% ................................. $66,769,720 =========== - ---------- * -- Non-income producing. ADR -- American Depository Receipt. (a) Security is affiliated to the principal underwriter of the Fund. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 45 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- COMMON STOCK--96.1% BASIC INDUSTRIES--5.1% Crown Holdings, Inc.* ........................... 24,670 $ 592,573 Lubrizol Corp., (The) ........................... 12,445 791,253 PPG Industries, Inc. ............................ 5,870 430,565 Valspar Corp., (The) ............................ 23,815 642,291 ----------- 2,456,682 ----------- CAPITAL GOODS--7.8% Dover Corp. ..................................... 13,245 654,303 Ingersoll-Rand Co. Ltd., Class A ................ 7,585 393,889 Masco Corp. ..................................... 10,675 277,764 Stanley Works, (The) ............................ 12,680 719,463 Terex Corp.* .................................... 4,845 387,019 Thomas & Betts Corp.* ........................... 12,515 693,206 W.W. Grainger, Inc. ............................. 7,150 655,011 ----------- 3,780,655 ----------- COMMUNICATIONS--2.7% CenturyTel, Inc. ................................ 10,625 509,787 Embarq Corp. .................................... 5,870 366,405 Windstream Corp. ................................ 32,145 459,031 ----------- 1,335,223 ----------- CONSUMER DURABLES--1.2% BorgWarner, Inc. ................................ 4,660 393,770 Sherwin-Williams Co., (The) ..................... 2,775 191,503 ----------- 585,273 ----------- CONSUMER NON-DURABLES--5.5% Brunswick Corp. ................................. 9,185 231,003 General Mills, Inc. ............................. 14,055 785,393 Loews Corp. - Carolina Group .................... 4,590 349,391 Mattel, Inc. .................................... 25,585 553,403 Scientific Games Corp., Class A* ................ 14,845 517,942 VF Corp. ........................................ 2,800 223,580 ----------- 2,660,712 ----------- CONSUMER SERVICES--14.1% Burger King Holdings, Inc. ...................... 11,835 280,608 CBS Corp., Class B .............................. 18,030 568,125 Dun & Bradstreet Corp., (The) ................... 3,095 301,917 Expedia, Inc.* .................................. 14,864 443,691 Family Dollar Stores, Inc. ...................... 8,805 257,810 Hewitt Associates, Inc., Class A* ............... 10,325 347,230 Idearc, Inc. .................................... 16,190 552,565 Knoll, Inc. ..................................... 17,380 330,394 Kohl's Corp.* ................................... 5,940 352,242 Kroger Co., (The) ............................... 18,450 490,401 Live Nation, Inc.* .............................. 21,950 454,365 McGraw-Hill Companies, Inc., (The) .............. 7,490 377,945 Meredith Corp. .................................. 14,875 831,513 R. R. Donnelley & Sons Co. ...................... 12,710 455,272 Staples, Inc. ................................... 25,595 607,881 The TJX Companies, Inc. ......................... 6,600 201,234 ----------- 6,853,193 ----------- Number of Shares Value --------- ----------- ENERGY--4.3% Anadarko Petroleum Corp. ........................ 8,985 $ 440,085 Chesapeake Energy Corp. ......................... 14,675 473,416 Murphy Oil Corp. ................................ 8,970 546,632 Pioneer Natural Resources Co. ................... 5,805 238,295 Pogo Producing Co. .............................. 8,080 402,465 ----------- 2,100,893 ----------- FINANCE--18.5% Affiliated Managers Group, Inc.* ................ 2,935 332,389 Assurant, Inc. .................................. 11,845 610,491 CNA Financial Corp. ............................. 5,130 215,255 Comerica, Inc. .................................. 7,690 428,948 Commerce Bancorp, Inc. .......................... 22,315 819,630 E*TRADE Financial Corp.* ........................ 16,170 251,929 Everest Re Group Ltd. ........................... 3,095 315,319 Federated Investors, Inc., Class B .............. 17,190 603,541 First American Corp. ............................ 8,120 339,660 Hanover Insurance Group, Inc., (The) ............ 14,090 602,770 Lincoln National Corp. .......................... 11,560 703,773 Marsh & McLennan Companies, Inc. ................ 21,880 583,102 MBIA, Inc. ...................................... 4,390 263,400 Mercury General Corp. ........................... 13,220 696,429 Nationwide Financial Services, Inc., Class A .. . 4,235 226,657 Progressive Corp., (The) ........................ 18,220 370,595 SLM Corp. ....................................... 8,915 448,246 State Street Corp. .............................. 7,195 441,485 Student Loan Corp., (The) ....................... 1,585 312,641 Unum Group ...................................... 16,600 406,202 ----------- 8,972,462 ----------- HEALTH CARE--10.1% C.R. Bard, Inc. ................................. 3,165 263,929 CIGNA Corp. ..................................... 5,580 288,374 Coventry Health Care, Inc.* ..................... 11,865 680,695 DaVita, Inc.* ................................... 12,280 706,346 Hospira, Inc.* .................................. 9,285 358,865 Lincare Holdings, Inc.* ......................... 15,460 556,405 McKesson Corp. .................................. 11,070 633,315 Mentor Corp. .................................... 16,550 737,965 Quest Diagnostics, Inc. ......................... 11,970 655,358 ----------- 4,881,252 ----------- OTHER--5.0% Annaly Capital Management, Inc. (REIT) .......... 74,366 1,047,817 AvalonBay Communities, Inc. (REIT) .............. 2,585 295,672 Nationwide Health Properties, Inc. (REIT) ....... 8,680 240,870 Prologis (REIT) ................................. 4,185 251,770 SL Green Realty Corp. (REIT) .................... 2,685 299,404 Ventas, Inc. (REIT) ............................. 7,290 277,603 ----------- 2,413,136 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 46 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS MID CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- TECHNOLOGY--17.8% Accenture Ltd., Class A ......................... 7,285 $ 300,215 Amdocs Ltd.* .................................... 12,280 433,484 Arrow Electronics, Inc.* ........................ 15,575 653,527 Avid Technology, Inc.* .......................... 15,650 482,489 Avnet, Inc.* .................................... 7,665 301,311 Broadridge Financial Solutions, Inc. ............ 32,815 596,248 CACI International, Inc., Class A* .............. 6,080 310,202 Comverse Technology, Inc.* ...................... 24,880 416,740 Cymer, Inc.* .................................... 15,220 603,321 Emulex Corp.* ................................... 18,155 354,749 First Data Corp. ................................ 14,540 483,019 Harris Corp. .................................... 14,630 889,943 Ingram Micro, Inc., Class A* .................... 28,695 563,570 McAfee, Inc.* ................................... 15,587 557,235 SRA International, Inc., Class A* ............... 15,275 430,908 Sybase, Inc.* ................................... 21,300 490,965 Symantec Corp.* ................................. 41,635 783,154 ----------- 8,651,080 ----------- TRANSPORTATION--1.2% Laidlaw International, Inc. ..................... 8,345 289,237 Norfolk Southern Corp. .......................... 5,570 285,240 ----------- 574,477 ----------- UTILITIES--2.8% Ameren Corp. .................................... 5,150 261,517 American Electric Power Co., Inc. ............... 4,965 220,843 DTE Energy Co. .................................. 4,865 232,596 Edison International ............................ 4,690 247,210 Nisource, Inc. .................................. 9,975 187,929 Sierra Pacific Resources ........................ 13,665 209,348 ----------- 1,359,443 ----------- TOTAL COMMON STOCK (Cost $43,140,988) .......................... 46,624,481 ----------- SHORT-TERM INVESTMENTS--3.2% PNC Bank Money Market Deposit Account(a) 4.460% 09/04/07 ...............................1,544,265 1,544,265 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $1,544,265) ........................... 1,544,265 ----------- TOTAL INVESTMENTS--99.3% (Cost $44,685,253) ............................ 48,168,746 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.7% ........ 331,286 ----------- NET ASSETS--100.0% ................................. $48,500,032 =========== - ---------- * -- Non-income Producing REIT -- Real Estate Investment Trust. (a) Security is affiliated to the principal underwriter of the Fund. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 47 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- COMMON STOCK--100.1% BASIC INDUSTRIES--0.5% Avery Dennison Corp. ............................ 1,395 $ 83,407 ----------- CAPITAL GOODS--3.8% Dover Corp. ..................................... 3,500 172,900 Makita Corp. - ADR .............................. 2,195 84,529 Parker-Hannifin Corp. ........................... 1,040 111,769 United Technologies Corp. ....................... 1,350 100,750 W.W. Grainger, Inc. ............................. 2,250 206,122 ----------- 676,070 ----------- COMMUNICATIONS--3.0% Embarq Corp. .................................... 2,000 124,840 Vodafone Group PLC - ADR ........................ 12,498 404,935 ----------- 529,775 ----------- CONSUMER DURABLES--1.9% Leggett & Platt, Inc. ........................... 2,710 55,284 Lennar Corp., Class A ........................... 3,700 104,599 National Presto Industries, Inc. ................ 1,530 84,395 Pulte Homes, Inc. ............................... 5,700 94,848 ----------- 339,126 ----------- CONSUMER NON-DURABLES--13.8% Jones Apparel Group, Inc. ....................... 4,180 80,214 Liz Claiborne, Inc. ............................. 4,070 139,072 Loews Corp. ..................................... 19,660 924,217 Mattel, Inc. .................................... 7,625 164,929 Nestle S.A. - ADR ............................... 1,995 216,911 NIKE, Inc., Class B ............................. 3,845 216,627 Oxford Industries, Inc. ......................... 1,440 52,157 Procter & Gamble Co., (The) ..................... 5,465 356,919 Tupperware Corp. ................................ 5,755 177,196 VF Corp. ........................................ 1,425 113,786 ----------- 2,442,028 ----------- CONSUMER SERVICES--4.0% BancTec 144A .................................... 7,030 56,240 Clear Channel Communications, Inc. .............. 2,430 90,542 Dun & Bradstreet Corp., (The) ................... 1,035 100,964 Expedia, Inc.* .................................. 4,254 126,982 Omnicom Group, Inc. ............................. 2,415 122,996 Pacific Sunwear of California, Inc.* ............ 10,345 144,933 Rent-A-Center, Inc.* ............................ 3,495 67,174 ----------- 709,831 ----------- ENERGY--8.3% Anadarko Petroleum Corp. ........................ 2,460 120,491 Apache Corp. .................................... 1,510 116,844 Arena Resources, Inc.* .......................... 865 53,076 ConocoPhillips .................................. 4,631 379,233 Devon Energy Corp. .............................. 2,365 178,108 Pioneer Natural Resources Co. ................... 3,705 152,090 Quest Resource Corp.* ........................... 1,988 18,011 Number of Shares Value --------- ----------- ENERGY--(CONTINUED) Quest Resource Corp. 144A ++* ................... 2,430 $ 22,016 Royal Dutch Shell PLC - ADR .................... 1,100 85,085 Total SA ........................................ 4,575 343,537 ----------- 1,468,491 ----------- FINANCE--30.2% ACE Ltd. ........................................ 11,730 677,525 Alleghany Corp.* ................................ 1,522 627,064 Allied World Assurance Holdings Ltd. Bermuda .. . 1,575 75,632 American International Group, Inc. .............. 3,375 222,750 AON Corp. ....................................... 3,130 135,592 Aspen Insurance Holdings Ltd. ................... 3,445 86,435 Castlepoint Holdings Ltd. 144A ++* .............. 3,725 42,167 Citigroup, Inc. ................................. 3,355 157,282 Countrywide Financial Corp. ..................... 1,419 28,167 First American Corp. ............................ 1,220 51,033 Flagstone Reinsurance Holdings Ltd.* ............ 10,790 137,249 Freddie Mac ..................................... 6,440 396,768 Hanover Insurance Group, Inc., (The) ............ 4,255 182,029 IndyMac Bancorp, Inc. ........................... 1,740 42,108 IPC Holdings Ltd. ............................... 5,600 142,352 J.G. Wentworth, Inc. 144A ....................... 4,470 53,640 Legg Mason, Inc. ................................ 1,945 168,865 Lincoln National Corp. .......................... 1,285 78,231 Maiden Holdings Ltd. 144A ....................... 3,315 30,664 Marsh & McLennan Companies, Inc. ................ 5,645 150,439 MBIA, Inc. ...................................... 7,090 425,400 Millea Holdings, Inc. - ADR ..................... 1,580 61,065 National Atlantic Holdings Corp., Class A* ...... 3,775 37,750 Peoples Choice Financial Corp. 144A ++* ......... 1,465 0 Platinum Underwriters Holdings Ltd. ............. 2,740 95,023 Quanta Capital Holdings Ltd.* ................... 22,160 59,610 RAM Holdings Ltd.* .............................. 2,825 26,386 SLM Corp. ....................................... 3,275 164,667 Solar Capital LLC 144A* ......................... 6,075 91,125 Specialty Underwriters' Alliance, Inc.* ......... 2,985 21,402 Travelers Companies, Inc., (The) ................ 5,200 262,808 Unum Group ...................................... 8,521 208,509 Wesco Financial Corp. ........................... 175 69,081 White Mountains Insurance Group Ltd. ............ 680 354,960 ----------- 5,363,778 ----------- THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 48 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- HEALTH CARE--15.6% Amgen, Inc.* .................................... 5,220 $ 261,574 AstraZeneca PLC - ADR ........................... 4,020 197,784 Becton, Dickinson & Co. ......................... 2,350 180,809 Covidien Ltd.* .................................. 2,290 91,211 DaVita, Inc.* ................................... 3,940 226,629 Johnson & Johnson ............................... 6,810 420,790 Lincare Holdings, Inc.* ......................... 5,200 187,148 Mentor Corp. .................................... 2,145 95,645 Pfizer, Inc. .................................... 21,501 534,085 Sanofi-Aventis - ADR ............................ 7,105 290,950 UnitedHealth Group, Inc. ........................ 2,295 114,773 Wyeth ........................................... 3,530 163,439 ----------- 2,764,837 ----------- OTHER--2.9% Annaly Capital Management, Inc. (REIT) .......... 17,570 247,561 Ashford Hospitality Trust, Inc. (REIT) .......... 3,840 41,894 CBRE Realty Finance, Inc. (REIT) 144A ++* ....... 210 1,260 CBRE Realty Finance, Inc. (REIT) ................ 9,775 58,650 Friedman, Billings, Ramsey Group, Inc., Class A (REIT) ................................ 9,675 45,376 Meruelo Maddux Properties, Inc.* ................ 3,065 18,421 National Health Investors, Inc. (REIT) .......... 3,385 102,363 Tac Acquisition Corp.++* ........................ 6,900 0 ----------- 515,525 ----------- TECHNOLOGY--14.6% Agilysys, Inc. .................................. 4,415 75,320 Avnet, Inc.* .................................... 2,160 84,910 Bel Fuse, Inc., Class B ......................... 1,335 42,052 Broadridge Financial Solutions, Inc. ............ 6,360 115,561 Fidelity National Information Serives, Inc. ..... 2,170 102,858 First Data Corp. ................................ 7,075 235,031 GSI Group, Inc.* ................................ 5,300 51,675 Hewlett-Packard Co. ............................. 9,160 452,046 International Business Machines Corp. ........... 5,460 637,127 Microsoft Corp. ................................. 11,590 332,981 Motorola, Inc. .................................. 6,605 111,955 Nokia OYI - ADR ................................. 5,760 189,389 Sybase, Inc.* ................................... 3,635 83,787 Tyco Electronics Ltd.* .......................... 2,290 79,852 ----------- 2,594,544 ----------- UTILITIES--1.5% Korea Electric Power Corp. - ADR ................ 12,265 276,331 ----------- TOTAL COMMON STOCK (Cost $15,796,440) .......................... 17,763,743 ----------- Number of Shares Value --------- ----------- SHORT-TERM INVESTMENTS--1.8% PNC Bank Money Market Deposit Account(a) 4.460% 09/04/07 ............................. 311,661 $ 311,661 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $311,661) ............................. 311,661 ----------- TOTAL INVESTMENTS--101.9% (Cost $16,108,101) ............................... 18,075,404 ----------- OPTIONS WRITTEN--(0.6%) Amgen, Inc. Call Options Expires 01/19/08 Strike Price $50 .............................. (18) (7,470) Lennar Corporation Call Options Expires 02/16/08 Strike Price $28 .............................. (37) (15,577) Microsoft Corp. Call Options Expires 01/19/08 Strike Price $30 .............................. (36) (4,507) Pacific Sunwear of California, Inc. Call Options Expires 03/22/08 Strike Price $12.50 ........................... (77) (22,345) Pulte Homes, Inc. Call Options Expires 01/17/09 Strike Price $20 .............................. (57) (17,693) SML Corporation Call Options Expires 01/19/08 Strike Price $50 .............................. (19) (9,500) Vodaphone Group Call Options Expires 01/19/08 Strike Price $30 .............................. (35) (13,307) Vodaphone Group Call Options Expires 03/22/08 Strike Price $31 .............................. (35) (13,156) ----------- TOTAL OPTIONS WRITTEN (Premiums received $134,602) ................ (103,555) ----------- LIABILITIES IN EXCESS OF OTHER ASSETS--(1.3)% ...... (230,458) ----------- NET ASSETS--100.0% ................................. $17,741,391 =========== - ---------- * -- Non-income producing. ++ -- Security has been valued at fair market value as determined in good faith by or under the direction of RBB's Board of Directors. 144A -- Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that Rule except to qualified institutional buyers. ADR -- American Depository Receipt. REIT -- Real Estate Investment Trust. (a) Security is affiliated to the principal underwriter of the Fund. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 49 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- COMMON STOCK--94.4% BASIC INDUSTRIES--0.3% Uranium Resources, Inc. #* ...................... 22,677 $ 175,747 ----------- CAPITAL GOODS--5.1% Altra Holdings, Inc.* ........................... 15,100 250,660 Beacon Roofing Supply, Inc.* .................... 7,800 90,870 ICF International, Inc.* ........................ 39,800 980,274 Lakeland Industries, Inc. #* .................... 56,914 666,459 Omnova Solutions, Inc.* ......................... 55,300 326,823 Trimas Corp.* ................................... 36,700 449,942 ----------- 2,765,028 ----------- COMMUNICATIONS--0.5% LCC International, Inc.* ........................ 68,300 247,929 ----------- CONSUMER DURABLES--8.0% Cavco Industries, Inc.* ......................... 7,400 259,888 Champion Enterprises, Inc. #* ................... 25,700 296,835 Jarden Corp.* ................................... 39,800 1,305,042 Libbey, Inc. .................................... 63,600 1,151,160 Lifetime Brands, Inc. # ......................... 64,500 1,315,155 ----------- 4,328,080 ----------- CONSUMER NON-DURABLES--8.0% Chiquita Brands International, Inc. # ........... 107,200 1,672,320 Del Monte Foods Co. ............................. 49,200 518,568 Quiksilver, Inc.* ............................... 59,500 796,705 Skechers U.S.A., Inc., Class A* ................. 25,800 511,614 Universal Corp. ................................. 16,500 810,645 ----------- 4,309,852 ----------- CONSUMER SERVICES--20.9% California Pizza Kitchen, Inc.* ................. 15,100 308,795 Carrols Restaurant Group, Inc.* ................. 47,000 515,120 Cheesecake Factory, Inc. (The)* ................. 17,100 426,303 CKE Restaurants, Inc. ........................... 16,300 276,285 LECG Corp.* ..................................... 89,900 1,379,066 MDC Partners, Inc., Class A* .................... 262,010 2,832,328 Navigant Consulting, Inc.* ...................... 23,200 409,480 P.F. Chang's China Bistro, Inc. #* .............. 8,500 286,705 PeopleSupport, Inc.* ............................ 97,100 1,221,518 Pre-Paid Legal Services, Inc.* .................. 2,400 132,456 Princeton Review, Inc. (The)* ................... 229,308 1,531,778 Providence Service Corp. (The) #* ............... 13,600 408,816 Shoe Carnival, Inc.* ............................ 27,000 465,750 Stage Stores, Inc. .............................. 7,600 131,708 Tween Brands, Inc.* ............................. 23,000 678,500 Valassis Communications, Inc.* .................. 29,700 270,864 ----------- 11,275,472 ----------- ENERGY--6.2% American Oil & Gas, Inc. #* ..................... 50,600 293,480 Aurora Oil & Gas Corp.* ......................... 201,300 340,197 Edge Petroleum Corp. #* ......................... 65,100 850,206 Number of Shares Value --------- ----------- ENERGY--(CONTINUED) Geomet, Inc.* ................................... 123,100 $ 726,290 Newpark Resources, Inc.* ........................ 197,800 1,107,680 ----------- 3,317,853 ----------- FINANCE--12.3% AmCOMP, Inc.* ................................... 17,100 162,963 Aspen Insurance Holdings Ltd. ................... 15,100 378,859 Assured Guaranty Ltd. ........................... 11,300 294,591 BankUnited Financial Corp., Class A ............. 17,000 290,700 Berkshire Hills Bancorp, Inc. ................... 15,100 447,413 Darwin Professional Underwriters, Inc.* ......... 12,300 305,532 Dearborn Bancorp, Inc.* ......................... 26,250 336,000 Encore Bancshares, Inc.* ........................ 9,900 217,701 First Financial Bankshares, Inc. ................ 1 42 First State Bancorporation ...................... 13,800 266,478 FirstFed Financial Corp.* ....................... 8,300 417,075 Marlin Business Services Corp.* ................. 31,300 518,641 Meadowbrook Insurance Group, Inc.* .............. 17,400 153,642 Procentury Corp. ................................ 11,600 164,488 Superior Bancorp* ............................... 48,000 451,200 Synergy Financial Group, Inc. ................... 44,300 621,972 Validus Holdings Ltd.* .......................... 25,700 565,914 Westfield Financial, Inc. ....................... 49,700 502,467 WSFS Financial Corp. ............................ 9,400 566,256 ----------- 6,661,934 ----------- HEALTH CARE--8.7% DexCom, Inc.* ................................... 36,100 332,120 First Consulting Group, Inc.* ................... 117,600 1,113,672 HealthTronics, Inc.* ............................ 108,400 515,984 ICU Medical, Inc.* .............................. 14,100 533,121 Kensey Nash Corp.* .............................. 18,300 436,089 LifePoint Hospitals, Inc.* ...................... 50,400 1,416,240 Matrixx Initiatives, Inc.* ...................... 16,800 356,832 ----------- 4,704,058 ----------- OTHER--5.9% Ashford Hospitality Trust, Inc. (REIT) .......... 30,300 330,573 CapLease, Inc. (REIT) ........................... 112,900 1,089,485 Sun Communities, Inc. (REIT) .................... 47,800 1,362,778 Technology Investment Capital Corp. ............. 30,645 402,675 ----------- 3,185,511 ----------- TECHNOLOGY--9.3% ACI Worldwide, Inc.* ............................ 8,600 223,428 Axesstel, Inc.* ................................. 300,760 342,867 CPI International, Inc.* ........................ 41,250 798,600 Foundry Networks, Inc.* ......................... 27,800 514,022 Measurement Specialties, Inc.* .................. 13,200 318,516 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 50 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG SMALL CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- TECHNOLOGY--(CONTINUED) MoneyGram International, Inc. ................... 9,430 $ 200,576 Neoware, Inc.* .................................. 42,400 680,096 OmniVision Technologies, Inc. #* ................ 13,600 283,832 Rackable Systems, Inc. #* ....................... 80,400 1,103,088 RADWARE Ltd.* ................................... 29,800 400,810 WidePoint Corp.* ................................ 195,900 156,720 ----------- 5,022,555 ----------- TRANSPORTATION--4.1% Double Hull Tankers, Inc. ....................... 52,500 809,550 JetBlue Airways Corp.* .......................... 46,000 437,920 Mesa Air Group, Inc.* ........................... 127,900 721,356 Navios Maritime Holdings, Inc. .................. 19,800 241,560 ----------- 2,210,386 ----------- UTILITIES--5.1% El Paso Electric Co.* ........................... 21,800 486,576 Great Plains Energy, Inc. ....................... 9,700 274,898 Hawaiian Electric Industries, Inc. # ............ 10,200 213,894 Portland General Electric Co. ................... 25,400 675,386 UGI Corp. ....................................... 34,000 868,700 Vectren Corp. ................................... 9,000 245,700 ----------- 2,765,154 ----------- TOTAL COMMON STOCK (Cost $48,926,860) .......................... 50,969,559 ----------- RIGHTS/WARRANTS--0.4% TRANSPORTATION--0.4% Navios Maritime Holdings, Inc. Expires 12/09/08 $5.00* ....................... 28,695 207,178 ----------- TOTAL RIGHTS/WARRANTS (Cost $0) ............... 207,178 ----------- SHORT-TERM INVESTMENTS--5.2% Dreyfus Government Cash Management 5.120% 09/04/07 ...............................2,791,425 2,791,425 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $2,791,425) ........................... 2,791,425 ----------- TOTAL INVESTMENTS(a)--100.0% (Cost $51,718,285) .............................. 53,968,162 ----------- LIABILITIES IN EXCESS OF OTHER ASSETS--0.0% ........ (6,179) ----------- NET ASSETS--100.0% ................................. $53,961,983 =========== - ---------- * -- Non-income producing. # -- Portion of security out on loan (See Note 6). REIT -- Real Estate Investment Trust (a) At August 31, 2007, the market value of securities on loan was $5,306,220. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 51 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS ================================================================================ Number of Shares Value --------- ----------- COMMON STOCK--99.4% BASIC INDUSTRIES--4.3% Celanese Corp. Series A ......................... 5,700 $ 204,744 Lyondell Chemical Co. ........................... 5,250 243,390 Mosaic Co., (The)* .............................. 6,000 252,120 United States Steel Corp. ....................... 1,050 99,204 ----------- 799,458 ----------- CAPITAL GOODS--5.8% Fluor Corp. ..................................... 3,000 381,450 General Dynamics Corp. .......................... 4,550 357,448 Raytheon Co. .................................... 3,050 187,087 Terex Corp.* .................................... 2,000 159,760 ----------- 1,085,745 ----------- COMMUNICATIONS--1.6% Google, Inc., Class A* .......................... 300 154,575 Verizon Communications, Inc. .................... 3,650 152,862 ----------- 307,437 ----------- CONSUMER NON-DURABLES--8.7% Campbell Soup Co. ............................... 7,400 279,350 Energizer Holdings, Inc.* ....................... 5,000 529,650 Kimberly-Clark Corp. ............................ 3,950 271,326 Pepsi Bottling Group, Inc. ...................... 15,400 532,686 ----------- 1,613,012 ----------- CONSUMER SERVICES--16.8% AutoZone, Inc.* ................................. 3,300 400,257 Dollar Tree Stores, Inc.* ....................... 9,150 397,567 Expedia, Inc.* .................................. 13,250 395,512 J.C. Penney Co., Inc. ........................... 4,800 330,048 McGraw-Hill Companies, Inc., (The) .............. 5,550 280,053 Nordstrom, Inc. ................................. 4,100 197,210 Safeway, Inc. ................................... 8,150 258,600 Time Warner, Inc. ............................... 19,900 377,702 Wal-Mart Stores, Inc. ........................... 2,300 100,349 Yum! Brands, Inc. ............................... 12,150 397,548 ----------- 3,134,846 ----------- ENERGY--7.6% Exxon Mobil Corp. ............................... 6,150 527,239 Frontier Oil Corp. .............................. 6,650 272,849 Marathon Oil Corp. .............................. 5,100 274,839 McDermott International, Inc.* .................. 1,250 119,988 Transocean, Inc.* ............................... 2,050 215,435 ----------- 1,410,350 ----------- FINANCE--7.4% Allstate Corp., (The) ........................... 1,900 104,025 American Express Co. ............................ 6,500 381,030 Ameriprise Financial, Inc. ...................... 1,660 101,277 Goldman Sachs Group, Inc., (The) ................ 2,050 360,820 JPMorgan Chase & Co. ............................ 5,950 264,894 Number of Shares Value --------- ----------- FINANCE--(CONTINUED) Travelers Companies, Inc., (The) ................ 3,250 $ 164,255 ----------- 1,376,301 ----------- HEALTH CARE--15.4% AmerisourceBergen Corp. ......................... 2,150 102,878 AstraZeneca PLC - ADR ........................... 2,850 140,220 Becton, Dickinson & Co. ......................... 1,600 123,104 Express Scripts, Inc.* .......................... 5,350 292,912 Gilead Sciences, Inc.* .......................... 12,750 463,717 Humana, Inc.* ................................... 3,150 201,884 Johnson & Johnson ............................... 4,750 293,502 Kinetic Concepts, Inc.* ......................... 2,750 165,303 McKesson Corp. .................................. 5,950 340,399 UnitedHealth Group, Inc. ........................ 6,000 300,060 Waters Corp.* ................................... 7,300 449,461 ----------- 2,873,440 ----------- INVESTMENT COMPANY--0.9% iShares Russell 1000 Growth Index Fund .......... 2,900 171,825 ----------- TECHNOLOGY--25.9% Accenture Ltd., Class A ......................... 10,950 451,250 Hewlett-Packard Co. ............................. 14,950 737,782 Intel Corp. ..................................... 26,150 673,362 International Business Machines Corp. ........... 5,300 618,457 Intersil Corp., Class A ......................... 9,450 314,874 Micron Technology, Inc.* ........................ 18,500 211,825 Microsoft Corp. ................................. 19,600 563,108 Motorola, Inc. .................................. 6,650 112,718 Nokia OYI - ADR ................................. 12,700 417,576 Novell, Inc.* ................................... 40,200 299,088 Seagate Technology, Inc. ........................ 16,550 427,321 ----------- 4,827,361 ----------- TRANSPORTATION--3.5% Con-Way, Inc. ................................... 4,850 235,128 CSX Corp. ....................................... 4,950 202,950 Ryder System, Inc. .............................. 3,750 205,313 ----------- 643,391 ----------- UTILITIES--1.5% NRG Energy, Inc.* ............................... 7,300 278,057 ----------- TOTAL COMMON STOCK (Cost $15,172,842) .......................... 18,521,223 ----------- TOTAL INVESTMENTS--99.4% (Cost $15,172,842) .............................. 18,521,223 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.6% ........ 108,603 ----------- NET ASSETS--100.0% ................................. $18,629,826 =========== - ---------- * -- Non-income producing. ADR -- American Depository Receipt. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 52 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND PORTFOLIO OF INVESTMENTS ================================================================================ Moody's/ S&P Par (Unaudited) (000's) Value ----------- ------- ------------ GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS--38.7% FEDERAL HOME LOAN MORTGAGE CORP.--9.9% 5.500% 09/01/19 ................... Aaa/AAA $ 1,993 $ 1,981,275 6.000% 08/01/22 ................... Aaa/AAA 3,260 3,293,152 6.000% 09/01/37 TBA ............... Aaa/AAA 2,115 2,116,322 5.500% 09/15/37 TBA ............... Aaa/AAA 1,700 1,660,155 5.500% 02/01/37 ................... Aaa/AAA 1,872 1,828,430 ------------ 10,879,334 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--22.2% 9.000% 11/01/10 ................... Aaa/AAA 22 23,800 6.500% 12/01/14 ................... Aaa/AAA 306 310,709 5.000% 05/01/20 ................... Aaa/AAA 1,062 1,036,586 5.000% 06/01/20 ................... Aaa/AAA 541 527,870 5.000% 04/01/22 ................... Aaa/AAA 4,471 4,365,217 7.500% 02/01/31 ................... Aaa/AAA 12 11,910 7.500% 02/01/31 ................... Aaa/AAA 23 23,366 7.500% 02/01/31 ................... Aaa/AAA 14 14,229 5.500% 07/01/34 ................... Aaa/AAA 3,627 3,542,072 5.000% 03/01/36 ................... Aaa/AAA 10,304 9,793,231 6.000% 09/01/36 ................... Aaa/AAA 1,711 1,709,356 5.500% 01/12/36 ................... Aaa/AAA 3,125 3,052,389 ------------ 24,410,735 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--6.6% 6.500% 02/15/24 ................... Aaa/AAA 161 164,109 6.500% 04/15/24 ................... Aaa/AAA 94 96,236 6.500% 10/15/24 ................... Aaa/AAA 304 309,547 3.999% 05/16/27(c) ................ Aaa/AAA 1,607 1,567,664 5.000% 09/09/36 ................... Aaa/AAA 2,319 2,233,904 5.500% 02/15/37 ................... Aaa/AAA 2,878 2,827,842 ------------ 7,199,302 ------------ TOTAL GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS (Cost $42,991,397) ...................... 42,489,371 ------------ GOVERNMENT AGENCY OBLIGATIONS--11.6% FEDERAL HOME LOAN MORTGAGE CORP.--7.7% 3.350% 04/01/08(c) .............. Aaa/AAA 570 563,933 4.125% 10/18/10 ................. Aaa/AAA 645 633,999 4.875% 11/18/11 ................. Aaa/AAA 7,190 7,217,739 ------------ 8,415,671 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--3.9% 4.600% 09/13/07+ .................. Aaa/AAA 915 913,948 5.000% 02/13/17 ................... Aaa/AAA 3,450 3,424,732 ------------ 4,338,680 ------------ TOTAL GOVERNMENT AGENCY OBLIGATIONS (Cost $12,731,629) ............ 12,754,351 ------------ Moody's/ S&P Par (Unaudited) (000's) Value ----------- ------- ------------ ASSET-BACKED SECURITIES--9.9% AUTOMOBILES--6.8% BMW Vehicle Owner Trust Series 2006-A Class A3 5.130% 09/27/10(c) .............. Aaa/AAA $ 350 $ 348,863 Daimler Chrysler Auto Trust Series 2006-C A4 4.980% 11/08/11(c) .............. Aaa/AAA 510 506,552 Honda Auto Receivables Owner Trust Series 2006-2 Class A4 5.280% 01/23/12(c) .............. Aaa/AAA 1,460 1,457,878 Honda Auto Receivables Owner Trust Series 2006-3 Class A4 5.110% 04/15/12(c) .............. Aaa/AAA 1,850 1,832,858 USAA Auto Owner Trust Series 2006-3 Class A4 5.360% 06/15/12(c) .............. Aaa/AAA 645 645,267 USAA Auto Owner Trust Series 2006-4 Class A4 4.980% 10/15/12(c) ..... Aaa/AAA 1,890 1,872,242 Volkswagen Auto Lease Trust Series 2006-A Class A3 5.500% 09/21/09(c) ..... Aaa/AAA 795 795,348 ------------ 7,459,008 ------------ CREDIT CARDS--3.1% Chase Issuance Trust Series 2005-A10 Class A10 4.650% 12/17/12(c) .... Aaa/AAA 1,470 1,453,577 Citibank Credit Card Issuance Trust Series 2003-A11 Class A11 5.410% 10/15/09(a)(c) Aaa/AAA 1,200 1,199,552 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 53 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (continued) PORTFOLIO OF INVESTMENTS ================================================================================ Moody's/ S&P Par (Unaudited) (000's) Value ----------- ------- ------------ CREDIT CARDS--(CONTINUED) Citibank Credit Card Issuance Trust Series 2006-A5 Class A5 5.300% 05/20/11(c) ..... Aaa/AAA $ 790 $ 792,894 ------------ 3,446,023 ------------ TOTAL ASSET-BACKED SECURITIES (Cost $10,929,566) ...................... 10,905,031 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--4.0% Commerical Mortgage Asset Trust Series 1999-C2 Class A2 7.546% 11/17/32(a)(c) .. Aaa/AAA 319 327,394 GSR Mortgage Loan Trust Series 2005-AR6 Class 3A1 4.561% 09/25/35(a)(c) . Aaa/AAA 1,588 1,560,725 JP Morgan Mortgage Trust Series 2004-S2 Class 4A5 6.000% 11/25/34(c) .... Aaa/AAA 1,028 1,023,833 Washington Mutual Series 2005-AR12 Class 1A8 4.835% 10/25/35(a)(c) . Aaa/AAA 1,448 1,419,840 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $4,406,822) ............. 4,331,792 ------------ CORPORATE BONDS--17.8% AEROSPACE/DEFENSE--0.8% Northrop Grumman Corp. 7.125% 02/15/11(c) .............. Baa1/BBB+ 780 827,893 ------------ BANKING--2.1% First Tennessee Bank NA 5.316% 12/08/08(c) .............. A1/A 560 559,624 Northern Rock PLC, 144A 6.594% 06/28/17(b) .............. A1/A- 570 548,119 Santander 4.750% 10/21/08 ................. Aa1/AA 800 797,890 Santander 144A 7.625% 11/03/09(b) .............. A1/A+ 390 409,010 ------------ 2,314,643 ------------ Moody's/ S&P Par (Unaudited) (000's) Value ----------- ------- ------------ BEVERAGES--0.1% Diageo Capital PLC 3.375% 03/20/08 ................. A3/A- $ 95 $ 93,796 ------------ COMPUTERS--0.4% Hewlett-Packard Co. 3.625% 03/15/08(c) .............. A2/A 485 480,090 ------------ ELECTRIC--1.5% DPL, Inc. 6.875% 09/01/11(c) .............. Baa3/BBB- 520 544,162 Midamerica Energy Holding Co., 144A 6.500% 09/15/37(b) .............. Baa1/BBB+ 1,125 1,134,040 ------------ 1,678,202 ------------ FINANCE--4.9% American Express Co. 5.250% 09/12/11 ................. A1/A+ 920 921,806 American Express Co. 6.150% 08/28/17 ................. A1/A+ 370 372,195 American General Finance Corp. 4.875% 05/15/10 ................. A1/A+ 1,985 1,967,268 Caterpillar Financial Services Corp. 4.300% 06/01/10(c) .............. A2/A 1,185 1,162,316 CIT Group Funding Co. of Canada 4.650% 07/01/10 ................. A2/A 1,045 961,305 ------------ 5,384,890 ------------ INSURANCE--1.8% AON Capital Trust 8.205% 01/01/27 ................. Baa3/BBB- 585 618,057 Chubb Corp. 4.934% 11/16/07 ................. A2/A 980 979,810 Progressive Corp. (The) 6.700% 06/15/37(c) .............. A2/A- 370 358,554 ------------ 1,956,421 ------------ MEDIA--0.3% Comcast Corp.6.950% 08/15/37(c) ... Baa2/BBB+ 360 368,762 ------------ METALS & MINING--0.4% BHP Billiton Finance USA Ltd. 5.000% 12/15/10 ................. A1/A+ 425 424,979 ------------ THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 54 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (continued) PORTFOLIO OF INVESTMENTS ================================================================================ Moody's/ S&P Par (Unaudited) (000's) Value ----------- ------- ------------ OIL & GAS--1.1% Norsk Hydro ASA 6.360% 01/15/09(c) .............. A2/A- $ 1,185 $ 1,206,114 ------------ PHARMACEUTICALS & BIOTECHNOLOGY--1.0% Abbott Laboratories 3.750% 03/15/11(c) .............. A1/AA 1,090 1,045,253 ------------ REAL ESTATE--0.3% ERP Operating LLP 4.750% 06/15/09(c) .............. Baa1/A- 345 340,700 ------------ RETAIL STORES--0.8% Wal-Mart Stores, Inc. 6.500% 08/15/37 ................. Aa2/AA 875 897,239 ------------ TELECOMMUNICATIONS--2.3% AT&T, Inc. 4.125% 09/15/09(c) .............. A2/A 1,220 1,193,461 AT&T, Inc. 6.500% 09/01/37 ................. A2/A 495 495,708 BellSouth Corp. 4.200% 09/15/09(c) .............. A2/A 865 847,414 ------------ 2,536,583 ------------ TOTAL CORPORATE BONDS (Cost $19,577,295) ............ 19,555,565 ------------ U.S. TREASURY OBLIGATIONS--17.2% U.S. TREASURY NOTES--15.0% 4.875% 05/31/08 ................... Aaa/AAA 410 411,089 4.875% 08/31/08(d) ................ Aaa/AAA 60 60,309 4.625% 07/31/09 ................... Aaa/AAA 710 715,824 4.500% 04/30/12 ................... Aaa/AAA 1,140 1,151,578 4.750% 05/31/12# .................. Aaa/AAA 4,120 4,204,975 4.875% 06/30/12 ................... Aaa/AAA 2,140 2,196,509 4.625% 07/31/12 ................... Aaa/AAA 1,510 1,534,184 4.125% 05/15/15 ................... Aaa/AAA 1,570 1,536,760 4.625% 02/15/17(d) ................ Aaa/AAA 15 15,086 4.750% 08/15/17 ................... Aaa/AAA 2,815 2,861,183 4.750% 02/15/37 ................... Aaa/AAA 1,815 1,790,327 ------------ 16,477,824 ------------ Moody's/ S&P Par (Unaudited) (000's) Value ----------- ------- ------------ U.S. TREASURY STRIP+--2.2% 4.848% 05/15/17 ...................... Aaa/AAA $ 3,855 $ 2,444,906 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $18,701,704) ............ 18,922,730 ------------ MUNICIPAL BONDS--1.0% CALIFORNIA--0.6% State of California 5.000% 06/01/27(c) .............. Aaa/AAA 660 679,965 ------------ NEW YORK--0.4% City of New York 5.000% 02/01/26(c) .............. Aa3/AA 440 450,595 ------------ TOTAL MUNICIPAL BONDS (Cost $1,123,141) ............. 1,130,560 ------------ COMMERCIAL PAPER--1.6% FINANCE--1.6% Bank of America Corp.+ 5.240% 09/13/07 ................. 850 848,512 Wells Fargo & Co.+ 5.240% 09/13/07 ................. 850 848,496 ------------ TOTAL COMMERCIAL PAPER (Cost $1,697,008) ............. 1,697,008 ------------ SHORT-TERM INVESTMENT--0.7% SWEEP ACCOUNT--0.7% Dreyfus Government Cash Management 5.170% 09/04/07 ................. 721,687 721,687 ------------ TOTAL SHORT-TERM INVESTMENT (Cost $721,687) ............... 721,687 ------------ TOTAL INVESTMENTS(e)--102.5% (Cost $112,880,249) ............... 112,508,095 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS(f)--(2.5)% ........... (2,710,907) ------------ NET ASSETS--100.0% $109,797,188 ============ - ---------- # -- Portion of security out on loan (See Note 6). + -- Discount security. The rate shown is the effective yield at purchase date. TBA -- To Be Announced. (a) Adjustable rate security. (b) Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that Rule except to qualified institutional buyers. (c) Callable security. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 55 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ ROBECO WPG CORE BOND FUND (concluded) PORTFOLIO OF INVESTMENTS ================================================================================ (d) All or a portion of the security was held as collateral for the following futures contracts open at August 31, 2007:
NUMBER VALUE VALUE UNREALIZED OF AT TRADE AT APPRECIATION CONTRACTS TYPE EXPIRATION DATE 8/31/07 (DEPRECIATION) --------- ------------------------- ---------- ----------- ----------- -------------- Long Positions: 21 U.S. Treasury 5 Year Bond 12/2007 $ 2,243,719 $ 2,240,766 $(2,953) 31 U.S. Treasury 2 Year Bond 12/2007 6,396,656 6,390,844 (5,812) 4 U.S. Treasury 2 Year Note 12/2007 446,156 446,250 (94) ------- $(8,859) ------- Short Positions: (20) U.S. Treasury 10 Year Note 12/2007 $(2,182,813) $(2,180,938) $ 1,875 -------
(e) At August 31, 2007, the market value of securities on loan was $4,082,500. (f) Liabilities in excess of other assets includes credit default swaps as follows: Protection purchased:
NOTIONAL ANNUAL UNREALIZED REFERENCE TERMINATION AMOUNT PROTECTION APPRECIATION COUNTERPARTY OBLIGATION DATE (000) PAYMENTS (DEPRECIATION) - -------------- ------------ ----------- -------- ------------ -------------- Bank of America CBS Corp. 09/20/12 $2,030 0.60% $(14,819) Bank of America Gannett Co. 09/20/12 2,030 0.62% (8,323) Bank of America JPMorgan 06/20/12 1,855 0.75% 52,682 Bank of America Mohawk Industries 09/20/12 2,110 0.75% (8,440) Bank of America Whirlpool Corp. 09/20/12 2,110 0.58% (14,137) -------- $ 6,963 ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 56 | ANNUAL REPORT 2007 [THIS PAGE INTENTIONALLY LEFT BLANK] ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ STATEMENTS OF ASSETS AND LIABILITIES ================================================================================
ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON PARTNERS PARTNERS PARTNERS PARTNERS PARTNERS 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 -- $224,859,740, $103,879,822, $59,342,581, $44,685,253 and $16,108,101, respectively) ...................... $249,576,688 $106,478,126 $66,696,572 $48,168,746 $18,075,404 Receivable from Investment Advisor ................ -- -- -- -- 9,760 Deposits with brokers for securities sold short ... -- 41,944,195 -- -- -- Receivable for investments sold ................... -- 298,006 -- 97,879 346,278 Receivable for capital shares sold ................ 55,908 1,121 24,263 192,310 12 Dividends and interest receivable ................. 244,720 242,600 130,938 88,740 32,538 Prepaid expenses and other assets ................. 23,355 12,532 10,868 14,871 12,414 ------------ ------------ ----------- ----------- ----------- Total assets .................................... 249,900,671 148,976,580 66,862,641 48,562,546 18,476,406 ------------ ------------ ----------- ----------- ----------- LIABILITIES Payable for investments purchased ................. -- 655,512 -- -- 596,636 Securities sold short, at fair value (proceeds received $43,706,238) ................. -- 41,523,925 -- -- -- Options written, at value (premiums received $134,602) .................... -- -- -- -- 103,555 Payable due to broker ............................. -- 17,996,254 -- -- -- Payable for capital shares redeemed ............... 568,747 6,786 29,323 905 -- Payable to Investment Adviser ..................... 259,919 157,457 5,588 13,694 -- Interest Payable .................................. -- 94,686 -- -- -- Other accrued expenses and liabilities ............ 188,706 100,543 58,010 47,915 34,824 Payable for dividends on securities sold short .... -- 7,296 -- -- -- ------------ ------------ ----------- ----------- ----------- Total liabilities ............................... 1,017,372 60,542,459 92,921 62,514 735,015 ------------ ------------ ----------- ----------- ----------- NET ASSETS Capital stock, $0.001 par value ................... 11,747 5,146 4,325 4,265 1,078 Paid-in capital ................................... 165,876,852 78,549,548 53,449,735 39,856,485 14,286,763 Undistributed net investment income ............... -- -- 504,220 100,077 104,062 Accumulated net realized gain/(loss) from investments ................................ 58,277,752 5,098,809 5,457,449 5,055,712 1,351,138 Net unrealized appreciation on investments and foreign currency translation .................... 24,716,948 2,598,304 7,353,991 3,483,493 1,998,350 Net unrealized appreciation on investments sold short ...................................... -- 2,182,314 -- -- -- ------------ ------------ ----------- ----------- ----------- Net assets ........................................ $248,883,299 $ 88,434,121 $66,769,720 $48,500,032 $17,741,391 ============ ============ =========== =========== =========== INSTITUTIONAL CLASS Net assets ........................................ $ 94,337,290 $ 73,770,083 $43,147,860 $35,721,767 $13,719,951 ------------ ------------ ----------- ----------- ----------- Shares outstanding ................................ 4,394,249 4,281,750 2,812,795 3,119,819 833,018 ------------ ------------ ----------- ----------- ----------- Net asset value, offering and redemption price per share ....................................... $ 21.47 $ 17.23 $ 15.34 $ 11.45 $ 16.47 ============ ============ =========== =========== =========== INVESTOR CLASS Net assets ........................................ $154,546,009 $ 14,664,038 $23,621,860 $12,778,265 $ 4,021,440 ============ ============ =========== =========== =========== Shares outstanding ................................ 7,353,056 864,309 1,512,747 1,144,860 245,133 ============ ============ =========== =========== =========== Net asset value, offering and redemption price per share ....................................... $ 21.02 $ 16.97 $ 15.62 $ 11.16 $ 16.41 ============ ============ =========== =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 58 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ STATEMENTS OF ASSETS AND LIABILITIES ================================================================================
ROBECO ROBECO WPG WPG ROBECO SMALL CAP LARGE CAP WPG VALUE FUND GROWTH FUND CORE BOND FUND ------------ ------------ ------------- ASSETS Investments, at value (cost -- $51,718,285, $15,172,842 and $112,880,249, respectively) ..... $53,968,162 $18,521,223 $112,508,095 Cash .............................................. -- 34,514 227,363 Swap agreements at value (cost -- $69,601) ........ -- -- 76,564 Receivable for investments sold ................... 165,617 69,243 16,865,854 Dividends and interest receivable ................. 23,658 28,233 732,576 Prepaid expenses and other assets ................. 11,369 8,968 29,985 ----------- ----------- ------------ Total assets .................................... 54,168,806 18,662,181 130,440,437 ----------- ----------- ------------ LIABILITIES Payable for investments purchased ................. 117,211 -- 20,577,301 Payable for capital shares redeemed ............... 1,765 -- 11,237 Payable to Investment Adviser ..................... 40,653 410 -- Due to broker-variation margin .................... -- -- 6,984 Other accrued expenses and liabilities ............ 47,194 31,945 47,727 ----------- ----------- ------------ Total liabilities ............................... 206,823 32,355 20,643,249 ----------- ----------- ------------ NET ASSETS Capital stock, $0.001 par value ................... 3,165 795 10,459 Paid-in capital ................................... 45,932,165 13,776,729 113,817,156 Undistributed net investment income ............... 43,780 -- 28,628 Accumulated net realized gain/(loss) from investments ..................................... 5,732,996 1,503,921 (3,688,000) Net unrealized appreciation (depreciation) on investments and foreign currency translation .... 2,249,877 3,348,381 (371,055) ----------- ----------- ------------ Net assets ...................................... $53,961,983 $18,629,826 $109,797,188 =========== =========== ============ INSTITUTIONAL CLASS Net assets ........................................ $53,961,983 $18,629,826 $109,754,967 ----------- ----------- ------------ Shares outstanding ................................ 3,164,856 795,411 10,454,579 ----------- ----------- ------------ Net asset value, offering and redemption price per share ....................................... $ 17.05 $ 23.42 $ 10.50 =========== =========== ============ INVESTOR CLASS Net assets ........................................ N/A N/A $ 21,097 ----------- ----------- ------------ Shares outstanding ................................ N/A N/A 2,010 ----------- ----------- ------------ Net asset value, offering and redemption price per share ....................................... N/A N/A $ 10.50 =========== =========== ============ RETIREMENT CLASS Net assets ........................................ N/A N/A $ 21,124 ----------- ----------- ------------ Shares outstanding ................................ N/A N/A 2,012 ----------- ----------- ------------ Net asset value, offering and redemption price per share ....................................... N/A N/A $ 10.50 =========== =========== ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 59 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ STATEMENTS OF OPERATIONS ================================================================================
ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON PARTNERS PARTNERS PARTNERS PARTNERS PARTNERS 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) ...................................... $ 4,255,564 $ 1,362,920 $1,225,644 $ 513,915 $ 317,322 Interest(2) ....................................... 481,029 1,201,207 57,715 72,793 23,163 ----------- ----------- ---------- ---------- ---------- 4,736,593 2,564,127 1,283,359 586,708 340,485 ----------- ----------- ---------- ---------- ---------- EXPENSES Advisory fees ..................................... 4,015,263 2,536,618 395,132 339,828 145,900 Distribution fees (Investor Class) ................ 523,662 46,454 61,633 23,599 10,762 Administration and accounting fees ................ 397,726 164,498 100,563 92,355 89,598 Printing and shareholder reporting fees ........... 141,418 28,927 15,146 14,480 6,280 Transfer agent fees ............................... 139,696 83,726 75,911 79,028 79,006 Directors' and officers' fees ..................... 82,943 36,363 24,030 19,910 16,238 Professional fees ................................. 81,186 47,015 40,158 26,950 21,576 Custodian fees .................................... 57,808 45,891 19,188 20,800 21,497 Registration and filing fees ...................... 38,120 31,355 25,942 25,529 25,678 Administrative services fees ...................... 35,766 12,567 7,366 4,764 2,038 Dividend expense on securities sold short ......... -- 191,063 -- -- -- Interest expense .................................. -- 870,071 -- -- -- Other expenses .................................... 29,382 10,089 4,592 3,807 1,286 ----------- ----------- ---------- ---------- ---------- Total expenses before waivers and reimbursements ................................ 5,542,970 4,104,637 769,661 651,050 419,859 Less: waivers and reimbursements ................ (46,594) (178,584) (214,112) (202,665) (235,844) ----------- ----------- ---------- ---------- ---------- Net expenses after waivers and reimbursements ... 5,496,376 3,926,053 555,549 448,385 184,015 ----------- ----------- ---------- ---------- ---------- Net investment income/(loss) ...................... (759,783) (1,361,926) 727,810 138,323 156,470 ----------- ----------- ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS Net realized gain/(loss) from: Investments ..................................... 69,018,171 18,687,345 6,058,378 5,912,750 1,550,966 Investments sold short .......................... -- (7,954,988) -- -- -- Written options ................................. -- -- -- -- 133,312 Net change in unrealized appreciation/ (depreciation) on: Investments ..................................... (29,653,912) (5,047,250) 2,361,865 873,125 488,832 Investments sold short .......................... -- (1,316,538) -- -- -- Written options ................................. -- -- -- -- 31,046 ----------- ----------- ---------- ---------- ---------- Net realized and unrealized gain/(loss) from investments ................................ 39,364,259 4,368,569 8,420,243 6,785,875 2,204,156 ----------- ----------- ---------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................. $38,604,476 $ 3,006,643 $9,148,053 $6,924,198 $2,360,626 =========== =========== ========== ========== ==========
(1) Net of foreign taxes of $2,646, $35,527, $17,188, $4,462 and $1,669 for the Small Cap Value Fund II, Long/Short Equity Fund, Large Cap Value Fund, All-Cap Value Fund and Small Cap Value Fund, respectively. (2) Includes interest income on affiliated short-term investments of $481,029, $592,680, $57,715, $72,793, and $23,163 for the Small Cap Value Fund II, Long/Short Equity Fund, Large Cap Value Fund, All-Cap Value Fund and Small Cap Value Fund, respectively. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 60 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ STATEMENTS OF OPERATIONS ================================================================================
ROBECO ROBECO WPG WPG ROBECO SMALL CAP LARGE CAP WPG VALUE FUND GROWTH FUND CORE BOND FUND ------------ ------------ ------------- INVESTMENT INCOME Dividends(1) ............................................... $ 829,371 $ 233,567 $ -- Interest ................................................... -- -- 8,009,298 Income from securities loaned--Note 6 ...................... 15,847 -- 5,613 ----------- ---------- ---------- 845,218 233,567 8,014,911 ----------- ---------- ---------- EXPENSES Advisory fees .............................................. 488,942 142,413 700,141 Distribution fees (Investor Class) ......................... 10,426 5,012 51 Shareholder servicing fees (Retirement Class) .............. -- -- 22 Administration and accounting fees ......................... 92,685 87,495 224,603 Printing and shareholder reporting fees .................... 6,120 8,497 23,432 Transfer agent fees ........................................ 85,152 61,326 112,334 Directors' and officers' fees .............................. 24,566 16,323 46,587 Professional fees .......................................... 40,028 25,233 64,158 Custodian fees ............................................. 18,329 8,016 50,345 Registration and filing fees ............................... 21,357 15,434 48,911 Administrative services fees ............................... 5,000 5,000 5,000 Other expenses ............................................. 6,274 2,712 15,069 ----------- ---------- ---------- Total expenses before waivers and reimbursements ......... 798,879 377,461 1,290,653 Less: waivers and reimbursements ......................... -- (111,580) (621,556) Less: fees paid indirectly--Note 3 ....................... (79) -- -- ----------- ---------- ---------- Net expenses after waivers and reimbursements ............ 798,800 265,881 669,097 ----------- ---------- ---------- Net investment income/(loss) ............................... 46,418 (32,314) 7,345,814 ----------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS Net realized gain/(loss) from: Investments .............................................. 8,063,660 1,682,467 780,885 Futures transactions ..................................... -- -- (67,705) Swap agreements .......................................... -- -- 163,553 Net change in unrealized appreciation/(depreciation) on: Investments .............................................. (1,260,902) 1,142,225 (880,460) Futures transactions ..................................... -- -- (6,278) Swap agreements .......................................... -- -- 6,724 ----------- ---------- ---------- Net realized and unrealized gain/(loss) from investments ... 6,802,758 2,824,692 (3,281) ----------- ---------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ 6,849,176 $2,792,378 $7,342,533 =========== ========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2007 | 61 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS ================================================================================
ROBECO BOSTON PARTNERS ROBECO BOSTON PARTNERS 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, 2007 AUGUST 31, 2006 AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .......................... $ (759,783) $ (1,979,222) $(1,361,926) $ (1,779,467) Net realized gain from investments and foreign currency related transactions .............. 69,018,171 54,269,230 10,732,357 13,242,415 Net change in unrealized appreciation/ (depreciation)from investments and foreign currency related transactions .............. (29,653,912) (28,189,951) (6,363,788) 929,617 ------------ ------------ ------------ ------------ Net increase in net assets resulting from operations .. 38,604,476 24,100,057 3,006,643 12,392,565 ------------ ------------ ------------ ------------ LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (Institutional Class) ........... (391,961) -- -- -- Net investment income (Investor Class) ................ (158,933) -- -- -- Net realized capital gains (Institutional Class) ...... (16,867,927) (17,432,693) (9,144,393) (8,173,605) Net realized capital gains (Investor Class) ........... (34,020,717) (37,687,563) (1,852,903) (1,912,801) ------------ ------------ ------------ ------------ Total dividends and distributions to shareholders ..... (51,439,538) (55,120,256) (10,997,296) (10,086,406) ------------ ------------ ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ................. (82,797,055) (37,255,744) (14,594,704) (15,750,794) ------------ ------------ ------------ ------------ Total increase/(decrease) in net assets ............... (95,632,117) (68,275,943) (22,585,357) (13,444,635) ------------ ------------ ------------ ------------ NET ASSETS Beginning of year ..................................... 344,515,416 412,791,359 111,019,478 124,464,113 ------------ ------------ ------------ ------------ End of year* .......................................... $248,883,299 $344,515,416 $ 88,434,121 $111,019,478 ============ ============ ============ ============ ROBECO BOSTON PARTNERS ROBECO BOSTON PARTNERS 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, 2007 AUGUST 31, 2006 AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .......................... $ 727,810 $ 513,758 $ 138,323 $ 109,793 Net realized gain from investments and foreign currency related transactions .............. 6,058,378 5,873,442 5,912,750 11,341,607 Net change in unrealized appreciation/ (depreciation)from investments and foreign currency related transactions .............. 2,361,865 (389,329) 873,125 (8,093,974) ------------ ----------- ----------- ----------- Net increase in net assets resulting from operations .. 9,148,053 5,997,871 6,924,198 3,357,426 ------------ ----------- ----------- ----------- LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (Institutional Class) ........... (424,565) (302,304) (65,744) (79,664) Net investment income (Investor Class) ................ (197,951) (138,363) (1,191) -- Net realized capital gains (Institutional Class) ...... (3,114,117) (3,892,863) (8,391,078) (6,614,827) Net realized capital gains (Investor Class) ........... (1,837,246) (2,200,756) (1,834,532) (661,661) ------------ ----------- ----------- ----------- Total dividends and distributions to shareholders ..... (5,573,879) (6,534,286) (10,292,545) (7,356,152) ------------ ----------- ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ................. 6,087,387 17,645,734 18,996,364 (21,778,232) ------------ ----------- ----------- ----------- Total increase/(decrease) in net assets ............... 9,661,561 17,109,319 15,628,017 (25,776,958) ------------ ----------- ----------- ----------- NET ASSETS Beginning of year ..................................... 57,108,159 39,998,840 32,872,015 58,648,973 ------------ ----------- ----------- ----------- End of year* .......................................... $ 66,769,720 $57,108,159 $48,500,032 $32,872,015 ============ =========== =========== =========== ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND --------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) .......................... $ 156,470 $ 104,902 Net realized gain from investments and foreign currency related transactions .............. 1,684,278 1,138,420 Net change in unrealized appreciation/ (depreciation)from investments and foreign currency related transactions .............. 519,878 (283,425) ----------- ----------- Net increase in net assets resulting from operations .. 2,360,626 959,897 ----------- ----------- LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (Institutional Class) ........... (104,775) (42,593) Net investment income (Investor Class) ................ (22,078) (12,566) Net realized capital gains (Institutional Class) ...... (1,060,815) (498,306) Net realized capital gains (Investor Class) ........... (321,372) (217,331) ----------- ----------- Total dividends and distributions to shareholders ..... (1,509,040) (770,796) ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ................. 3,776,353 2,769,018 ----------- ----------- Total increase/(decrease) in net assets ............... 4,627,939 2,958,119 ----------- ----------- NET ASSETS Beginning of year ..................................... 13,113,452 10,155,333 ----------- ----------- End of year* .......................................... $17,741,391 $13,113,452 =========== ===========
* Includes undistributed net investment income as follows:
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------- --------------- Robeco Boston Partners Large Cap Value Fund ........... $504,220 $398,926 Robeco Boston Partners Mid Cap Value Fund ............. 100,077 30,129 Robeco Boston Partners All-Cap Value Fund ............. 104,062 64,802
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 62 AND 63 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ STATEMENTS OF CHANGES IN NET ASSETS (continued) ================================================================================
ROBECO ROBECO WPG SMALL CAP VALUE FUND WPG LARGE CAP GROWTH FUND --------------------------------- -------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) ......................... $ 46,418 $ 10,059 $ (32,314) $ (11,477) Net realized gain/(loss) from investments and foreign exchange transactions ..................... 8,063,660 4,377,236 1,682,467 1,822,426 Net change in unrealized appreciation/(depreciation) on investments and foreign currency transactions .. (1,260,902) (867,418) 1,142,225 (579,777) ----------- ----------- ----------- ----------- Net increase in net assets resulting from operations . 6,849,176 3,519,877 2,792,378 1,231,172 ----------- ----------- ----------- ----------- LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (Institutional Class) .......... (12,697) -- -- -- Net investment income (Investor Class) ............... -- -- -- -- Net investment income (Retirement Class) ............. -- -- -- -- Net realized capital gains (Institutional Class) ..... (5,092,584) (5,701,181) (1,770,663) (2,136,641) Net realized capital gains (Investor Class) .......... -- -- -- -- ----------- ----------- ----------- ----------- Total dividends and distributions to shareholders .... (5,105,281) (5,701,181) (1,770,663) (2,136,641) ----------- ----------- ----------- ----------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ............... 3,610,754 (1,579,130) (1,326,445) (785,662) ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets .............. 5,354,649 (3,760,434) (304,730) (1,691,131) ----------- ----------- ----------- ----------- NET ASSETS Beginning of year .................................... 48,607,334 52,367,768 18,934,556 20,625,687 ----------- ----------- ----------- ----------- End of year* ......................................... $53,961,983 $48,607,334 $18,629,826 $18,934,556 =========== =========== =========== =========== ROBECO WPG CORE BOND FUND --------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income/(loss) ......................... $ 7,345,814 $ 6,907,525 Net realized gain/(loss) from investments and foreign exchange transactions ..................... 876,733 (4,367,742) Net change in unrealized appreciation/(depreciation) on investments and foreign currency transactions .. (880,014) (437,931) ------------ ------------ Net increase in net assets resulting from operations . 7,342,533 2,101,852 ------------ ------------ LESS DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (Institutional Class) .......... (7,345,475) (6,921,517) Net investment income (Investor Class) ............... (925) (633) Net investment income (Retirement Class) ............. (955) (830) Net realized capital gains (Institutional Class) ..... -- -- Net realized capital gains (Investor Class) .......... -- -- ------------ ------------ Total dividends and distributions to shareholders .... (7,347,355) (6,922,980) ------------ ------------ INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (NOTE 5) ............... (68,728,906) 21,591,046 ------------ ------------ Total increase/(decrease) in net assets .............. (68,733,728) 16,769,918 ------------ ------------ NET ASSETS Beginning of year .................................... 178,530,916 161,760,998 ------------ ------------ End of year* ......................................... $109,797,188 $178,530,916 ============ ============
* Includes undistributed net investment income as follows:
FOR THE FOR THE YEAR ENDED PERIOD ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- Robeco WPG Small Cap Value Fund ...................... $ 43,780 $10,059 Robeco WPG Core Bond Fund ............................ 28,628 1,156
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 64 AND 65 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ 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 YEAR INCOME/(LOSS) INVESTMENTS INCOME GAINS OF CAPITAL FEES - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II - ---------------------------------------------- INSTITUTIONAL CLASS 8/31/07 $22.82 $(0.01)* $2.41 $(0.09) $(3.67) $ -- $ 0.01 8/31/06 24.75 (0.08)* 1.57 -- (3.42) -- --(3) 8/31/05 22.80 (0.10) 5.07 -- (3.03) -- 0.01 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 INVESTOR CLASS 8/31/07 $22.40 $(0.07)* $2.37 $(0.02) $(3.67) $ -- $ 0.01 8/31/06 24.35 (0.13)* 1.54 -- (3.36) -- --(3) 8/31/05 22.53 (0.17) 5.01 -- (3.03) -- 0.01 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 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND - --------------------------------------------- INSTITUTIONAL CLASS 8/31/07 $18.57 $(0.21)* $0.73 $ -- $(1.86) $ -- $ --(3) 8/31/06 17.89 (0.26)* 2.40 -- (1.47) -- 0.01 8/31/05 14.70 (0.25) 3.43 -- -- -- 0.01 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 INVESTOR CLASS 8/31/07 $18.36 $(0.26)* $0.73 $ -- $(1.86) $ -- $ --(3) 8/31/06 17.74 (0.30)* 2.38 -- (1.47) -- 0.01 8/31/05 14.62 (0.28) 3.39 -- -- -- 0.01 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 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND - ------------------------------------------- INSTITUTIONAL CLASS 8/31/07 $14.53 $ 0.20* $2.02 $(0.17) $(1.24) $ -- $ -- 8/31/06 15.00 0.16* 1.55 (0.16) (2.02) -- -- 8/31/05 12.67 0.11* 2.33 (0.11) -- -- -- 8/31/04 10.84 0.09* 1.84 (0.10) -- -- -- 8/31/03 10.33 0.09* 0.57 (0.06) (0.09) -- -- RATIO OF EXPENSES TO AVERAGE NET RATIO OF ASSETS WITH NET NET EXPENSES TO WAIVERS AND ASSET ASSETS, AVERAGE NET REIMBURSEMENTS VALUE, TOTAL END OF ASSETS WITH (EXCLUDING END OF INVESTMENT YEAR WAIVERS AND DIVIDEND AND YEAR RETURN(1,2) (000) REIMBURSEMENTS INTEREST EXPENSE) - -------------------------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II - ---------------------------------------------- INSTITUTIONAL CLASS 8/31/07 $21.47 10.53% $ 94,337 1.55% -- 8/31/06 22.82 6.39 114,153 1.52 -- 8/31/05 24.75 22.65 138,143 1.53 -- 8/31/04 22.80 13.96 133,060 1.49 -- 8/31/03 20.19 28.55 98,383 1.55 -- INVESTOR CLASS 8/31/07 $21.02 10.26% $154,546 1.80% -- 8/31/06 22.40 6.12 230,362 1.77 -- 8/31/05 24.35 22.32 274,648 1.78 -- 8/31/04 22.53 13.69 327,569 1.74 -- 8/31/03 20.00 28.16 279,593 1.80 -- - ------------------------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND - --------------------------------------------- INSTITUTIONAL CLASS 8/31/07 $17.23 2.61% $ 73,770 3.44% 2.50% 8/31/06 18.57 12.93 90,313 3.24 2.50 8/31/05 17.89 21.70 99,748 3.13 2.50 8/31/04 14.70 2.73 58,293 3.02 2.50 8/31/03 14.31 (1.13) 57,351 3.05 2.50 INVESTOR CLASS 8/31/07 $16.97 2.35% $ 14,664 3.69% 2.75% 8/31/06 18.36 12.69 20,706 3.48 2.75 8/31/05 17.74 21.34 24,716 3.37 2.75 8/31/04 14.62 2.45 14,322 3.27 2.75 8/31/03 14.27 (1.32) 15,381 3.32 2.75 - ------------------------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND - ------------------------------------------- INSTITUTIONAL CLASS 8/31/07 $15.34 15.70% $ 43,148 0.75% -- 8/31/06 14.53 12.43 35,994 0.86 -- 8/31/05 15.00 19.30 27,172 1.00 -- 8/31/04 12.67 17.87 42,066 1.00 -- 8/31/03 10.84 6.54 43,722 1.00 -- RATIO OF NET INVESTMENT RATIO OF INCOME (LOSS) EXPENSES TO TO AVERAGE AVERAGE NET NET ASSETS ASSETS WITHOUT WITH WAIVERS PORTFOLIO WAIVERS AND AND TURNOVER REIMBURSEMENTS REIMBURSEMENTS RATE - -------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS SMALL CAP VALUE II - ----------------------------------------- INSTITUTIONAL CLASS 8/31/07 1.56% (0.09)% 46.19% 8/31/06 1.53 (0.34) 33.60 8/31/05 1.54 (0.42) 37.61 8/31/04 1.49 (0.53) 47.06 8/31/03 1.79 (0.54) 72.72 INVESTOR CLASS 8/31/07 1.81% (0.32)% 46.19% 8/31/06 1.78 (0.58) 33.60 8/31/05 1.79 (0.64) 37.61 8/31/04 1.74 (0.77) 47.06 8/31/03 2.04 (0.77) 72.72 - -------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND - --------------------------------------------- INSTITUTIONAL CLASS 8/31/07 3.60% (1.17)% 93.21% 8/31/06 3.40 (1.51) 108.59 8/31/05 3.30 (1.82) 107.14 8/31/04 3.20 (2.26) 239.06 8/31/03 3.44 (1.94) 282.36 INVESTOR CLASS 8/31/07 3.85% (1.42)% 93.21% 8/31/06 3.65 (1.77) 108.59 8/31/05 3.55 (2.07) 107.14 8/31/04 3.45 (2.50) 239.06 8/31/03 3.69 (2.13) 282.36 - -------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND - ------------------------------------------- INSTITUTIONAL CLASS 8/31/07 1.07% 1.20% 61.70% 8/31/06 1.22 1.11 58.04 8/31/05 1.35 0.83 76.91 8/31/04 1.22 0.73 47.21 8/31/03 1.41 0.94 81.13 - ---------- * Calculated based on average shares outstanding for the period. (1) Total return is calculated by 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 $0.01 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 66 AND 67 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ 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, TOTAL BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT REALIZED END OF INVESTMENT OF YEAR INCOME/(LOSS) INVESTMENTS INCOME GAINS YEAR RETURN(1),(2) - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND (CONTINUED) - ------------------------------------------------------- INVESTOR CLASS 8/31/07 $14.77 $ 0.15* $2.07 $(0.13) $(1.24) $15.62 15.45% 8/31/06 15.22 0.13* 1.57 (0.13) (2.02) 14.77 12.14 8/31/05 12.86 0.08* 2.36 (0.08) -- 15.22 19.04 8/31/04 11.01 0.05* 1.88 (0.08) -- 12.86 17.53 8/31/03 10.50 0.07* 0.57 (0.04) (0.09) 11.01 6.22 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS MID CAP VALUE FUND - ----------------------------------------- INSTITUTIONAL CLASS 8/31/07 $13.05 $ 0.05* $2.44 $(0.03) $(4.06) $11.45 21.32% 8/31/06 14.02 0.04* 0.86 (0.02) (1.85) 13.05 6.82 8/31/05 13.16 --(2) 3.22 (0.01) (2.35) 14.02 25.97 8/31/04 11.57 0.01* 1.65 (0.07) -- 13.16 14.39 8/31/03 9.69 0.05* 1.83 --(2) -- 11.57 19.41 INVESTOR CLASS 8/31/07 $12.81 $ 0.02* $2.39 $ -- $(4.06) $11.16 21.02% 8/31/06 13.80 (0.01)(2)* 0.87 -- (1.85) 12.81 6.59 8/31/05 13.02 --(2) 3.13 -- (2.35) 13.80 25.47 8/31/04 11.43 (0.02)* 1.65 (0.04) -- 13.02 14.08 8/31/03 9.58 0.02* 1.83 -- -- 11.43 19.31 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND - ----------------------------------------- INSTITUTIONAL CLASS 8/31/07 $15.69 $ 0.16* $2.05 $(0.13) $(1.30) $16.47 14.38% 8/31/06 15.54 0.15* 1.03 (0.08) (0.95) 15.69 7.95 8/31/05 13.29 0.07 2.83 (0.05) (0.60) 15.54 22.33 8/31/04 10.82 0.06 2.48 (0.07) -- 13.29 23.50 8/31/03 9.45 0.06 1.34 (0.03) -- 10.82 14.84 INVESTOR CLASS 8/31/07 $15.63 $ 0.11* $2.06 $(0.09) $(1.30) $16.41 14.16% 8/31/06 15.49 0.11* 1.03 (0.05) (0.95) 15.63 7.72 8/31/05 13.26 0.03 2.83 (0.03) (0.60) 15.49 22.06 8/31/04 10.80 0.02 2.48 (0.04) -- 13.26 23.13 8/31/03 9.44 0.04 1.34 (0.02) -- 10.80 14.63 RATIO OF NET INVESTMENT RATIO OF RATIO OF INCOME (LOSS) NET EXPENSES TO EXPENSES TO TO AVERAGE ASSETS, AVERAGE NET AVERAGE NET NET ASSETS END OF ASSETS WITH ASSETS WITHOUT WITH WAIVERS PORTFOLIO YEAR WAIVERS AND WAIVERS AND AND TURNOVER (000) REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS RATE - -------------------------------------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS LARGE CAP VALUE FUND (CONTINUED) - ------------------------------------------------------- INVESTOR CLASS 8/31/07 $23,622 1.00% 1.32% 0.95% 61.70% 8/31/06 21,114 1.11 1.46 0.87 58.04 8/31/05 12,827 1.25 1.61 0.53 76.91 8/31/04 8,112 1.25 1.47 0.43 47.21 8/31/03 5,116 1.25 1.66 0.66 81.13 - --------------------------------------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS MID CAP VALUE FUND - ----------------------------------------- INSTITUTIONAL CLASS 8/31/07 $35,722 1.00% 1.48% 0.38% 88.80% 8/31/06 27,538 1.00 1.38 0.28 97.30 8/31/05 54,187 1.00 1.31 0.03 74.08 8/31/04 42,240 1.00 1.26 0.07 67.40 8/31/03 57,052 1.00 1.40 0.55 77.87 INVESTOR CLASS 8/31/07 $12,778 1.25% 1.73% 0.14% 88.80% 8/31/06 5,334 1.25 1.70 (0.04) 97.30 8/31/05 4,462 1.25 1.56 (0.22) 74.08 8/31/04 2,819 1.25 1.51 (0.18) 67.40 8/31/03 3,159 1.25 1.65 0.21 77.87 - --------------------------------------------------------------------------------------------------------------- ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND - ----------------------------------------- INSTITUTIONAL CLASS 8/31/07 $13,720 0.95% 2.24% 0.92% 45.26% 8/31/06 9,374 1.09 2.93 0.94 51.10 8/31/05 7,315 1.25 3.90 0.53 28.72 8/31/04 5,177 1.25 5.82 0.51 27.40 8/31/03 2,890 1.25 9.49 0.62 38.36 INVESTOR CLASS 8/31/07 $ 4,021 1.20% 2.49% 0.67% 45.26% 8/31/06 3,739 1.34 3.19 0.69 51.10 8/31/05 2,840 1.50 4.04 0.20 28.72 8/31/04 649 1.50 5.84 0.14 27.40 8/31/03 106 1.50 9.88 0.41 38.36 - ---------- * Calculated based on average shares outstanding for the period. (1) Total return is calculated by 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) Amount is less than $0.01 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 68 and 69 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS AUGUST 31, 2007 - -------------------------------------------------------------------------------- ================================================================================ 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 REDEMPTION END OF OF PERIOD INCOME/(LOSS) INVESTMENTS INCOME GAINS FEES PERIOD - -------------------------------------------------------------------------------------------------------------------------------- ROBECO WPG SMALL CAP VALUE FUND - ------------------------------- INSTITUTIONAL CLASS 8/31/07 $16.54 $ 0.01 $ 2.31 $ -- $(1.81) $ -- $17.05 8/31/06 17.42 -- 1.10 -- (1.98) -- 16.54 8/31/052 17.55 (0.04) (0.09) -- -- -- 17.42 12/31/04 16.34 -- 3.11 -- (1.90) -- 17.55 12/31/03 11.24 -- 5.10 -- -- -- 16.34 12/31/02 15.21 -- (3.97) -- -- -- 11.24 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO WPG LARGE CAP GROWTH FUND - -------------------------------- INSTITUTIONAL CLASS 8/31/07 $22.27 $(0.04) $ 3.40 $ -- $(2.21) $ -- $23.42 8/31/06 23.36 (0.01) 1.42 -- (2.50) -- 22.27 8/31/052 23.10 (0.07) 0.33 -- -- -- 23.36 12/31/04 25.27 -- 0.93 -- (3.10) -- 23.10 12/31/03 19.16 -- 6.11 -- -- -- 25.27 12/31/02 26.46 -- (7.30) -- -- -- 19.16 - ------------------------------------------------------------------------------------------------------------------------------------ ROBECO WPG CORE BOND FUND - ------------------------- INSTITUTIONAL CLASS 8/31/07 $10.50 $ 0.50** $ -- $(0.50) $ -- $ --(6) $10.50 8/31/06 10.84 0.45** (0.34) (0.45) -- --(6) 10.50 8/31/052 10.81 0.25 0.03 (0.25) -- --(6) 10.84 12/31/04 10.66 0.31 0.15 (0.31) -- -- 10.81 12/31/03 10.44 0.30 0.22 (0.30) -- -- 10.66 12/31/02 9.80 0.40 0.64 (0.40) -- -- 10.44 INVESTOR CLASS 8/31/07 $10.50 $ 0.47 $ -- $(0.47) $ -- $ --(6) $10.50 1/17/06* to 8/31/06 10.69 0.28** (0.19) (0.28) -- -- 10.50 RETIREMENT CLASS 8/31/07 $10.50 $ 0.49 $ -- $(0.49) $ -- $ --(6) $10.50 9/01/05* to 8/31/06 10.86 0.44** (0.36) (0.44) -- -- 10.50 RATIO OF NET INVESTMENT RATIO OF RATIO OF INCOME (LOSS) NET EXPENSES TO EXPENSES TO TO AVERAGE ASSETS, AVERAGE NET AVERAGE NET NET ASSETS TOTAL END OF ASSETS WITH ASSETS WITHOUT WITH WAIVERS PORTFOLIO INVESTMENT PERIOD WAIVERS AND WAIVERS AND AND TURNOVER RETURN(1) (000) REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS RATE - --------------------------------------------------------------------------------------------------------------------- ROBECO WPG SMALL CAP VALUE FUND - ------------------------------- INSTITUTIONAL CLASS 8/31/07 14.28% $ 53,962 1.47% 1.47% 0.09% 138.38% 8/31/06 7.16 48,607 1.43(3) 1.43 0.02 139.15 8/31/052 (0.74) 52,368 1.57(3,5) 1.57(5) (0.35)(5) 135.85 12/31/04 19.35 57,787 1.55 1.55 (0.55) 159.20 12/31/03 45.37 58,282 1.68 1.68 0.83 228.30 12/31/02 (26.10) 47,705 1.54 1.54 (0.81) 105.60 - --------------------------------------------------------------------------------------------------------------------- ROBECO WPG LARGE CAP GROWTH FUND - -------------------------------- INSTITUTIONAL CLASS 8/31/07 15.74% $ 18,630 1.40% 1.99% (0.17)% 94.09% 8/31/06 6.10 18,935 1.40(3) 1.79 (0.06) 93.80 8/31/052 1.13 20,626 1.40(3,5) 2.08(5) (0.42)(5) 100.01 12/31/04 3.82 26,222 1.40 1.50 (0.06) 138.70 12/31/03 31.89 52,355 1.44 1.44 (0.52) 126.80 12/31/02 (27.59) 43,412 1.25 1.25 (0.42) 107.90 - --------------------------------------------------------------------------------------------------------------------- ROBECO WPG CORE BOND FUND - ------------------------- INSTITUTIONAL CLASS 8/31/07 4.84% $109,755 0.43% 0.83% 4.72% 448.33% 8/31/06 1.11 178,491 0.43(3) 0.79 4.29 626.69(4) 8/31/052 2.65 161,761 0.43(3,5) 0.75(5) 3.52(5) 602.95(4) 12/31/04 4.38 144,349 0.43 0.71 2.90 805.80(4) 12/31/03 5.04 145,818 0.45 0.75 2.81 561.80 12/31/02 10.87 105,261 0.50 0.83 4.02 539.20 INVESTOR CLASS 8/31/07 4.58% $ 21 0.68% 1.08% 4.49% 448.33% 1/17/06* to 8/31/06 0.84 20 0.66(3,5) 1.04(5) 4.23(5) 626.69(4) RETIREMENT CLASS 8/31/07 4.73% $ 21 0.53% 0.94% 4.63% 448.33% 9/01/05* to 8/31/06 0.84 20 0.50(3,5) 0.86(5) 4.21(5) 626.69(4) - ---------- * Commencement of operations. ** Calculated based on average shares outstanding for the period. (1) Total return is calculated by 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. Total returns for periods less than one year has not been annualized. (2) For the period January 1, 2005 through August 31, 2005. (3) Excludes the effects of fees paid indirectly. Had such offsets been included, the ratio would not differ. (4) The portfolio turnover rates excluding mortgage dollar roll transactions were 301.04%, 295.59%, 295.21% and 573.60% for the years ended August 31, 2007 and 2006, for the period ended August 31, 2005 and the year ended December 31, 2004, respectively. (5) Annualized. (6) Amount is less than $0.01 per share.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 70 and 71 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS ================================================================================ 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 eight active investment portfolios, including Robeco Boston Partners Small Cap Value Fund II ("BP Small Cap Value Fund II"), Robeco Boston Partners Long/Short Equity Fund ("BP Long/Short Equity Fund"), Robeco Boston Partners Large Cap Value Fund ("BP Large Cap Value Fund"), Robeco Boston Partners Mid Cap Value Fund ("BP Mid Cap Value Fund"), Robeco Boston Partners All-Cap Value Fund ("BP All-Cap Value Fund") (collectively "BP Funds"), Robeco WPG Small Cap Value Fund, formerly Robeco WPG Tudor Fund ("WPG Small Cap Value Fund"), Robeco WPG Large Cap Growth Fund ("WPG Large Cap Growth Fund") and Robeco WPG Core Bond Fund ("WPG Core Bond Fund") (collectively "WPG Funds") (each a "Fund," collectively the "Funds"). As of August 31, 2007, the BP Funds each offer two classes of shares, Institutional Class and Investor Class. The WPG Small Cap Value and WPG Large Cap Growth Funds are single class funds offering only the Institutional Class of shares. The WPG Core Bond Fund offers three classes of shares, Institutional Class, Investor Class and Retirement Class. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen 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." PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York Stock Exchange ("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 the National Association of Securities Dealers Automatic Quotation System ("NASDAQ") market system where they are primarily traded. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed income securities having a remaining maturity of 60 days or less are valued at amortized cost. Foreign securities are valued based on prices from the primary market in which they are traded, and are translated from the local currency into U.S. dollars using current exchange rates. Investments in other open-end investment companies are valued based on the NAV of the investment companies (which may use fair value pricing as discussed in their prospectuses). If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Company's Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. USE OF ESTIMATES -- The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. 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. Distributions received on securities that represent a return of capital or capital gains are recorded as a reduction of cost of investments and/or as a realized gain. The Funds estimate the components of distributions received that may be considered return of capital distributions or capital gain distributions. 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 fund 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. 72 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ 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-dividend date for all Funds with the exception of the WPG Core Bond Fund which declares daily and pays monthly dividends from net investment income. Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations which may differ from U.S. generally accepted accounting principles. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. 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. 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. FOREIGN SECURITIES -- There are certain risks resulting from investing in foreign securities in addition to the usual risks inherent in domestic investments. Such risks include future political, economic and currency exchange developments including investment restrictions and changes in foreign laws. FORWARD CURRENCY CONTRACTS -- The Funds may enter into forward currency contracts. Such contracts may be utilized in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolios denominated in foreign currencies. Fluctuations in the value of the forward contracts are recorded as unrealized gains or losses by the Funds. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of the foreign currency relative to the U.S. dollar. Upon entering into such a contract, a Fund is required to segregate assets with its custodian at least equal to the value of the Fund's assets committed to fulfilling the forward currency contract. At August 31, 2007, the Funds did not hold any forward currency contracts. FUTURES -- The WPG Small Cap Value Fund and the WPG Core Bond Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy and sell a security at a set price on a future date. Upon entering into such a contract, a Fund is required to pledge to the broker an amount of cash and/or securities equal to the minimum "initial margin" requirements of the exchange on which such contract is traded. Pursuant to the contract, the Fund agrees to receive from, or pay to the broker, an amount of cash equal to the daily fluctuation in value of the contract. Such a receipt of payment is known as a "variation margin" and is recorded by each Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The Fund is also required to fully collateralize futures contracts purchased. The Funds only enter into futures contracts that are traded on exchanges. LINE OF CREDIT -- Each Robeco Boston Partners Fund may borrow an amount up to its prospectus-defined limitations, from a committed line of credit of 10% of the Fund's net assets through Custodial Trust Company available to the Funds in the Robeco Boston Partners Fund Family. Borrowings from the line of credit will bear interest at the Federal Funds Rate plus 125 basis points. The Funds had no outstanding borrowings at August 31, 2007 or at any time during the year ended August 31, 2007. MORTGAGE DOLLAR ROLLS (WPG CORE BOND FUND) -- The WPG Core Bond Fund may enter into mortgage dollar rolls in which the WPG Core Bond Fund sells mortgage securities for delivery in the current month and simultaneously contracts to repurchase similar, but not identical, securities at an agreed upon price on a fixed date. The WPG Core Bond Fund accounts for such dollar rolls as purchases and sales and records an unrealized gain or loss each day equal to the difference between the original value of the purchase and the current market value. The WPG Core Bond Fund must maintain liquid securities having a value not less than the repurchase price (including accrued interest) for such dollar rolls. Losses may arise due to changes in value of the securities or if the counterparty does not perform under the terms of the agreement. If the counterparty files for bankruptcy or becomes insolvent, the WPG Core Bond Fund's right to repurchase or sell securities may be limited. ANNUAL REPORT 2007 | 73 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ OPTIONS -- The BP All-Cap Value Fund, WPG Small Cap Value Fund, WPG Large Cap Growth Fund and WPG Core Bond 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 a Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that a 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 a Fund pays a premium whether or not the option is exercised. A 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. A 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. Gains or losses are realized 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 BP All-Cap Value Fund had transactions in options written during the year ended August 31, 2007 as follows: NUMBER OF PREMIUMS CONTRACTS RECEIVED ----------- ----------- Options outstanding at August 31, 2006 247 $ 83,679 Options written 536 197,123 Options terminated in closing purchase transactions (24) (8,328) Options exercised (445) (137,872) ----- --------- Options outstanding at August 31, 2007 314 $ 134,602 ===== ========= SHORT SALES -- When the investment adviser believes that a security is overvalued, the BP Long/Short Equity Fund and the BP All-Cap Value Fund 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 the decline in price exceeds the costs of borrowing the security and other transaction costs. There can be no assurance that a Fund will be able to close out a short position at any particular time or at an acceptable price. Although a Fund's gain is limited to the amount at which it sold a security short, its potential loss is unlimited. 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. At August 31, 2007, the BP Long/Short Equity Fund had securities sold short valued at $41,523,925 for which securities of $66,125,709 and cash deposits of $41,944,195 were pledged as collateral. In accordance with the Special Custody and Pledge Agreement with Goldman Sachs, the Fund may borrow from Goldman Sachs to the extent necessary to maintain required margin cash deposits on short positions. Interest on such borrowings is charged to the Fund based on the Fed Funds rate plus a spread. The BP Long/Short Equity Fund utilized cash borrowings to meet required margin cash deposits as follows during the year ended August 31, 2007: AVERAGE DAILY WEIGHTED AVERAGE DAYS UTILIZED BORROWINGS INTEREST RATE ------------- -------------- -------------------- 365 $14,340,931 5.84% At August 31, 2007, the Fund had borrowings of $17,996,254. Interest expense for the year ended August 31, 2007 totaled $870,071. 74 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ SWAP AGREEMENTS -- The WPG Core Bond Fund may enter into credit default swap agreements. A credit default swap agreement is where one party (the protection buyer) makes a stream of payments to another party (the protection seller) in exchange for the right to receive a specified payment in the event of a default by a third party, typically corporate issues or sovereign issues of an emerging country, on its obligation. The maximum amount of the payment may equal the notional, at par, of the underlying index or security as a result of a default (or "credit event"). In addition to bearing the risk that the credit event will occur, the WPG Core Bond Fund could be exposed to market risk due to unfavorable changes in interest rates or in the price of the underlying security or index, to the risk that the WPG Core Bond Fund may be unable to close out its position at the same time or at the same price as if it had purchased comparable publicly traded securities, or to the risk that the counterparty may default on its obligation to perform. The WPG Core Bond Fund may enter into swap agreements as either the protection buyer or seller. The swaps are valued daily at current market value and any change in value is included in net unrealized appreciation or depreciation on investments. Periodic payments received or paid by the WPG Core Bond Fund are recorded as realized gains or losses. Upfront payments made or received are amortized over the life of the agreement. Risk of loss may exceed amounts recognized on the statements of assets and liabilities. Swap agreements outstanding at period end, if any, are listed on the Portfolio of Investments. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Effective January 1, 2007, Boston Partners Asset Management, L.L.C. and Robeco USA, L.L.C. (formerly known as Weiss, Peck and Greer Investments) ("WPG"), the former entities that provided investment advisory services to the BP Funds and the WPG Funds, respectively, merged into and with Robeco USA, Inc., with Robeco USA, Inc. remaining as the surviving entity. In addition, effective January 1, 2007, Robeco USA, Inc., which had been doing business under the name Robeco Investment Management, officially changed its name to Robeco Investment Management, Inc. For its advisory services with respect to the BP Funds, Robeco Investment Management, Inc. ("Robeco") is entitled to receive 1.25% of the BP Small Cap Value Fund II's average daily net assets, 2.25% of the BP Long/Short Equity Fund's average daily net assets, 0.60% of the BP Large Cap Value Fund's average daily net assets, 0.80% of the BP Mid Cap Value Fund's average daily net assets and 0.80% of the BP All-Cap Value Fund's average daily net assets, each accrued daily and payable monthly. Until December 31, 2007, Robeco has contractually agreed to limit the BP Funds' total operating expenses to the extent that such expenses exceed the ratios in the table below. This limit is calculated daily based on each Fund's average daily net assets. This limitation is effected in waivers of advisory fees and reimbursements of expenses exceeding the advisory fee as necessary. The BP Funds will not pay Robeco at a later time for any amounts waived or any amounts assumed. INSTITUTIONAL INVESTOR --------------- ---------- BP Small Cap Value Fund II 1.55% 1.80% BP Long/Short Equity Fund 2.50%* 2.75%* BP Large Cap Value Fund 0.75% 1.00% BP Mid Cap Value Fund 1.00% 1.25% BP All-Cap Value Fund 0.95% 1.20% * Excluding short sale dividend expense and interest expense. For its advisory services with respect to the WPG Funds, Robeco is entitled to receive advisory fees, accrued daily and paid monthly, as follows: WPG Small Cap Value Fund 0.90% of net assets up to $300 million 0.80% of net assets $300 million to $500 million 0.75% of net assets in excess of $500 million WPG Large Cap Growth Fund 0.75% of net assets WPG Core Bond Fund 0.45% of net assets Until December 31, 2007, Robeco has contractually agreed to cap the WPG Funds' operating expenses. The WPG Small Cap Value Fund's expenses are capped at 1.70%, WPG Large Cap Growth Fund's expenses are capped at 1.40%, and WPG Core Bond Fund, Institutional Class, Investor Class, and Retirement Class expenses are capped at 0.43%, 0.68% and 0.53%, respectively. ANNUAL REPORT 2007 | 75 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ For the year ended August 31, 2007, investment advisory fees, waivers and reimbursements of expenses were as follows:
GROSS NET EXPENSE ADVISORY FEES WAIVERS ADVISORY FEES REIMBURSEMENT ---------------- ------------ ----------------- ---------------- BP Small Cap Value Fund II $4,015,263 $ (46,594) $3,968,669 $ -- BP Long/Short Equity Fund 2,536,618 (178,584) 2,358,034 -- BP Large Cap Value Fund 395,132 (214,112) 181,020 -- BP Mid Cap Value Fund 339,828 (202,665) 137,163 -- BP All-Cap Value Fund 145,900 (145,900) -- 89,944 WPG Small CapValue Fund 488,942 -- 488,942 -- WPG Large Cap Growth Fund 142,413 (111,580) 30,833 -- WPG Core Bond Fund 700,141 (621,556) 78,585 --
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 administration and accounting services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.1125% of each Fund's first $200 million of average net assets; and 0.095% of each Fund's average net assets in excess of $200 million with a minimum monthly fee of $5,833 for each Fund. For the year ended August 31, 2007, PFPC administration and accounting service fees were as follows: ADMINISTRATION AND ACCOUNTING SERVICE FEES ------------------ BP Small Cap Value Fund II $397,726 BP Long/Short Equity Fund 164,498 BP Large Cap Value Fund 100,563 BP Mid Cap Value Fund 92,355 BP All-Cap Value Fund 89,598 WPG Small Cap Value Fund 92,685 WPG Large Cap Growth Fund 87,495 WPG Core Bond Fund 224,603 Included in the administration and accounting service fees, shown above, are fees for providing regulatory administrative services to RBB. For providing these services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each Fund in proportion to its net assets of the RBB funds. In addition, PFPC serves as the Funds' 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 $3,000 per class plus per account charges and out of pocket expenses. For providing custodial services to the BP Funds, PFPC Trust Company, a wholly-owned subsidiary of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of the PNC Financial Services Group, Inc. is entitled to receive a monthly fee equal to an annual rate of 0.01% of the Funds' average daily gross assets or a minimum monthly fee of $1,000. PFPC Distributors, Inc., provides certain administrative services to the Funds. As compensation for such administrative services, PFPC Distributors, Inc. is entitled to receive an annual fee of $62,500 from the BP Funds, which is allocated to the BP Funds in proportion to their net assets. PFPC Distributors, Inc. is entitled to receive an annual fee of $5,000 per Fund from the WPG Funds. The Board of Directors of the Company has approved a Distribution Agreement and adopted a separate Plan of Distribution for the Investor Class (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, PFPC Distributors, Inc. (the "Distributor") is entitled to receive from the Funds a distribution fee with respect to the Investor Class, which is accrued daily and paid monthly, of up to 0.25% on an annualized basis of the average daily net assets of the Class. 76 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ Amounts paid to the Distributor under the Plan may be used by the Distributor to cover expenses that are related to (i) the sale of the Shares, (ii) ongoing servicing and/or maintenance of the accounts of shareholders, and (iii) sub-transfer agency services, subaccounting services or administrative services related to the sale of the Investor Class, all as set forth in the Funds' 12b-1 Plan. Ongoing servicing and/or maintenance of the accounts of shareholders may include updating and mailing prospectuses and shareholder reports, responding to inquiries regarding shareholder accounts and acting as agent or intermediary between shareholders and the Funds or their service providers. The Board of Directors of the Company has adopted a Shareholder Services Plan (the "Plan") for the WPG Core Bond Fund's Retirement Class authorizing the WPG Core Bond Fund to pay securities dealers, plan administrators or other service organizations ("Service Organizations") who agree to provide certain shareholder and administrative services to plans or plan participants holding Retirement Class of the WPG Core Bond Fund a service fee at an annual rate of up to 0.10% of the average daily net asset value of WPG Core Bond Fund's Retirement Class. At August 31, 2007, PFPC and its affiliates were due fees for their services of $53,264, $34,946, $15,970, $16,948, $13,645, $15,831, $13,402 and $23,527 from the BP Small Cap Value Fund II, BP Long/Short Equity Fund, BP Large Cap Value Fund, BP Mid Cap Value Fund, BP All-Cap Value Fund, WPG Small Cap Value Fund, WPG Large Cap Growth Fund and WPG Core Bond Fund, respectively. 3. CUSTODIAN FEES (WPG SMALL CAP VALUE FUND, WPG LARGE CAP GROWTH FUND AND WPG CORE BOND FUND) Mellon Trust of New England, N.A. ("Mellon") provides custodial services to the WPG Funds. Each WPG Fund has entered into an expense offset agreement with Mellon, wherein it receives a credit toward the reduction of custodian fees whenever there are uninvested cash balances. For the year ended August 31, 2007, the Funds' custodian fees and related offset fees were as follows: CUSTODIAN FEE OFFSET FEES ------------- ------------- WPG Small Cap Value Fund $18,329 $(79) WPG Large Cap Growth Fund 8,016 -- WPG Core Bond Fund 50,345 -- 4. INVESTMENT IN SECURITIES For the year ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments and U.S. government obligations) were as follows: INVESTMENT SECURITIES --------------------------------- PURCHASES SALES -------------- --------------- BP Small Cap Value Fund II $141,514,490 $275,709,158 BP Long/Short Equity Fund 102,515,606 143,846,597 BP Large Cap Value Fund 41,785,118 39,542,097 BP Mid Cap Value Fund 44,223,328 36,251,346 BP All-Cap Value Fund 11,471,775 7,882,161 WPG Small Cap Value Fund 69,818,822 69,176,334 WPG Large Cap Growth Fund 17,769,792 20,968,027 WPG Core Bond Fund 148,942,364 249,534,354 Purchases and sales of long-term U.S. government obligations were: PURCHASES SALES -------------- --------------- WPG Core Bond Fund $352,157,600 $297,936,012 ANNUAL REPORT 2007 | 77 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ 5. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, each class of each Fund has 100,000,000 shares of $0.001 par value common stock authorized except for the Institutional Class of the WPG Small Cap Value Fund, WPG Large Cap Growth Fund and WPG Core Bond Fund, each of which has 50,000,000 shares of $0.001 par value common stock authorized. Transactions in capital shares for the respective periods were as follows:
BP SMALL CAP VALUE FUND II --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 1,034,990 $ 23,670,644 578,461 $ 13,652,888 Repurchases ........................... (2,344,722) (53,907,304) (1,858,219) (43,364,503) Redemption Fees* ...................... -- 27,871 -- 17,806 Reinvestments ......................... 702,290 15,127,331 699,447 15,555,696 ----------- ------------ ---------- ------------ Net Decrease ............................. (607,442) $(15,081,458) (580,311) $(14,138,113) =========== ============ ========== ============ INVESTOR CLASS Sales ................................. 536,231 $ 11,987,659 1,601,378 $ 37,613,254 Repurchases ........................... (5,057,946) (113,394,985) (4,293,955) (97,878,085) Redemption Fees* ...................... -- 51,706 -- 36,512 Reinvestments ......................... 1,592,045 33,640,023 1,696,876 37,110,688 ----------- ------------ ---------- ------------ Net Decrease ............................. (2,929,670) $(67,715,597) (995,701) $(23,117,631) =========== ============ ========== ============
BP LONG/SHORT EQUITY FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 246,703 $ 4,512,232 125,886 $ 2,126,079 Repurchases ........................... (1,344,360) (23,478,775) (1,323,512) (21,652,614) Redemption Fees* ...................... -- 1,069 -- 46,371 Reinvestments ......................... 516,071 9,062,212 484,194 8,105,408 ----------- ----------- ---------- ------------- Net Decrease ............................. (581,586) $(9,903,262) (713,432) $(11,374,756) =========== =========== ========== ============= INVESTOR CLASS Sales ................................. 36,741 $ 655,085 12,505 $ 215,550 Repurchases ........................... (406,674) (7,188,380) (390,664) (6,473,943) Redemption Fees* ...................... -- 206 -- 10,786 Reinvestments ......................... 106,331 1,841,647 112,881 1,871,569 ----------- ----------- ---------- ------------- Net Decrease ............................. (263,602) $(4,691,442) (265,278) $ (4,376,038) =========== =========== ========== =============
78 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================
BP LARGE CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 382,517 $ 5,830,726 646,767 $ 9,254,760 Repurchases ........................... (286,558) (4,367,917) (288,561) (4,191,539) Reinvestments ......................... 240,187 3,518,750 307,357 4,164,692 ----------- ----------- ---------- ------------ Net Increase ............................. 336,146 $ 4,981,559 665,563 $ 9,227,913 =========== =========== ========== ============ INVESTOR CLASS Sales ................................. 312,719 $ 4,776,947 782,378 $ 11,308,245 Repurchases ........................... (364,458) (5,694,073) (364,636) (5,219,721) Reinvestments ......................... 135,405 2,022,954 168,790 2,329,297 ----------- ----------- ---------- ------------ Net Increase ............................. 83,666 $ 1,105,828 586,532 $ 8,417,821 =========== =========== ========== ============
BP MID CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 598,181 $ 7,048,998 342,353 $ 4,464,259 Repurchases ........................... (349,796) (4,287,051) (2,612,779) (33,998,155) Reinvestments ......................... 761,214 8,129,767 516,918 6,544,181 ----------- ------------ ---------- ------------ Net Increase / (Decrease) ................ 1,009,599 $10,891,714 (1,753,508) $(22,989,715) =========== ============ ========== ============ INVESTOR CLASS Sales ................................. 872,884 $ 9,927,310 173,429 $ 2,258,578 Repurchases ........................... (319,738) (3,651,207) (133,206) (1,706,074) Reinvestments ......................... 175,316 1,828,547 52,930 658,979 ----------- ------------ ---------- ------------ Net Increase ............................. 728,462 $ 8,104,650 93,153 $ 1,211,483 =========== ============ ========== ============
BP ALL-CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 244,596 $3,879,814 266,146 $ 4,018,137 Repurchases ........................... (81,903) (1,347,601) (171,528) (2,587,589) Reinvestments ......................... 72,940 1,165,590 31,915 476,166 ----------- ------------ ---------- ------------ Net Increase ............................. 235,633 $3,697,803 126,533 $ 1,906,714 =========== ============ ========== ============ INVESTOR CLASS Sales ................................. 78,840 $1,292,161 90,797 $ 1,401,095 Repurchases ........................... (92,246) (1,521,598) (48,842) (746,935) Reinvestments ......................... 19,310 307,987 13,979 208,144 ----------- ------------ ---------- ------------ Net Increase ............................. 5,904 $ 78,550 55,934 $ 862,304 =========== ============ ========== ============
ANNUAL REPORT 2007 | 79 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================
WPG SMALL CAP VALUE FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 378,085 $ 6,633,831 77,517 $ 1,234,067 Repurchases ........................... (432,509) (7,719,866) (483,726) (8,013,166) Reinvestments ......................... 279,752 4,696,789 338,981 5,199,969 ----------- ------------ ---------- ------------ Net Increase / (Decrease) ................ 225,328 $ 3,610,754 (67,228) $ (1,579,130) =========== ============ ========== ============ WPG LARGE CAP GROWTH FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 12,595 $ 293,696 23,820 $ 534,282 Repurchases ........................... (134,442) (3,094,889) (135,322) (3,056,426) Reinvestments ......................... 67,217 1,474,748 78,538 1,736,482 ----------- ------------ ---------- ------------ Net Decrease ............................. (54,630) $ (1,326,445) (32,964) $ (785,662) =========== ============ ========== ============ WPG CORE BOND FUND --------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ---------------------------- ----------------------------- SHARES VALUE SHARES VALUE ----------- --------------- ----------- -------------- INSTITUTIONAL CLASS Sales ................................. 868,315 $ 9,148,462 3,490,182 $3 6,295,041 Repurchases ........................... (8,066,059) (84,762,113) (2,023,134) (21,207,704) Redemption Fees* ...................... -- 140 -- 3,747 Reinvestments ......................... 654,018 6,882,709 615,292 6,458,337 ----------- ------------ ----------- ------------ Net Increase / (Decrease) ................ (6,543,726) $(68,730,802) 2,082,340 $ 21,549,421 =========== ============ =========== ============ INVESTOR CLASS Sales ................................. -- $ -- 3,113 $ 33,164 Repurchases ........................... -- -- (1,251) (12,979) Reinvestments ......................... 89 933 59 617 ----------- ------------ ----------- ------------ Net Increase ............................. 89 $ 933 1,921 $ 20,802 =========== ============ =========== ============ RETIREMENT CLASS Sales ................................. -- $ -- 1,842 $ 20,000 Repurchases ........................... -- -- -- -- Reinvestments ......................... 91 963 79 823 ----------- ------------ ----------- ------------ Net Increase ............................. 91 $ 963 1,921 $ 20,823 =========== ============ =========== ============
- ---------------------------- * There is a 1.00% redemption fee on shares redeemed which have been held 365 days or less on the BP 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 BP Long/Short Equity Fund. The redemption fees are retained by the Funds for the benefit of the remaining shareholders and recorded as paid-in capital. The WPG Small Cap Value Fund, WPG Large Cap Growth Fund, and WPG Core Bond Fund have a 2.00% redemption fee on shares redeemed within 60 days of purchase. 80 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ As of August 31, 2007, the following shareholders held 10% or more of the outstanding shares of the Funds. These shareholders may be omnibus accounts which are comprised of many underlying shareholders. BP Small Cap Value Fund II (3 shareholders) 70% BP Long/Short Equity Fund (3 shareholders) 70% BP Large Cap Value Fund (2 shareholders) 72% BP Mid Cap Value Fund (3 shareholders) 90% BP All-Cap Value Fund (4 shareholders) 83% WPG Small Cap Value Fund -- WPG Large Cap Growth Fund (1 shareholder) 12% WPG Core Bond Fund (4 shareholders) 64% 6. SECURITIES LENDING (WPG SMALL CAP VALUE FUND AND WPG CORE BOND FUND) At August 31, 2007, the WPG Small Cap Value Fund loaned securities valued at $5,306,220. For collateral, the WPG Small Cap Value Fund received a letter of credit from Banco Santander Bank in an amount equal to $6,495,000. At August 31, 2007, the WPG Core Bond Fund loaned a U.S. Treasury Note, 4.75%, maturing 5/31/12, valued at $4,082,500 (including accrued interest). For collateral, the WPG Core Bond Fund received U.S. Treasury securities which were valued at $4,312,868. For the year ended August 31, 2007, the WPG Small Cap Value Fund earned $15,847 and the WPG Core Bond Fund earned $5,613 in securities lending fees, net of custodian expenses. Securities may be loaned to financial institutions, such as broker-dealers, and are required to be secured continuously by collateral in cash, cash equivalents or U.S. government securities maintained on a current basis at an amount at least equal to the market value of the securities loaned. 7. FEDERAL INCOME TAX INFORMATION At August 31, 2007, federal tax cost and 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) - ------ -------------- -------------- -------------- ---------------- BP Small Cap Value Fund II $225,727,831 $45,418,909 $(21,570,052) $23,848,857 BP Long/Short Equity Fund 104,770,153 9,481,286 (7,773,313) 1,707,973 BP Large Cap Value Fund 59,506,461 8,385,833 (1,195,722) 7,190,111 BP Mid Cap Value Fund 44,710,751 4,676,599 (1,218,604) 3,457,995 BP All-Cap Value Fund 16,142,195 2,606,488 (673,279) 1,933,209 WPG Small Cap Value Fund 52,671,282 5,565,671 (4,268,791) 1,296,880 WPG Large Cap Growth Fund 15,238,128 3,662,211 (379,116) 3,283,095 WPG Core Bond Fund 113,008,914 478,754 (979,573) (500,819)
The following permanent differences as of August 31, 2007, primarily attributable to net investment loss, redesignation of distributions, capitalization of short sale dividends, tax treatment of partnership income, non-taxable distributions received, tax treatment of swaps and paydowns and expiration of prior year capital loss carryover, were reclassified to the following accounts:
INCREASE/(DECREASE) INCREASE/(DECREASE) ACCUMULATED INCREASE/(DECREASE) UNDISTRIBUTED NET REALIZED ADDITIONAL NET INVESTMENT GAIN/(LOSS) PAID-IN FUND INCOME/(LOSS) ON INVESTMENTS CAPITAL - ------ -------------------- --------------------- ------------------- BP Small Cap Value Fund II 1,310,677 (1,310,677) -- BP Long/Short Equity Fund 1,361,926 (1,361,926) -- BP Mid Cap Value Fund (1,440) 1,440 -- BP All-Cap Value Fund 9,643 (9,643) -- WPG Large Cap Growth Fund 32,314 (32,314) -- WPG Core Bond Fund 29,013 2,702,085 (2,731,098)
ANNUAL REPORT 2007 | 81 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM FUND INCOME GAINS - ------ ------------ -------------- BP Small Cap Value Fund II $ 1,124,853 $58,020,990 BP Long/Short Equity Fund 188,800 6,420,944 BP Large Cap Value Fund 1,229,639 4,895,910 BP Mid Cap Value Fund 2,684,455 2,496,832 BP All-Cap Value Fund 577,185 912,109 WPG Small Cap Value Fund 4,029,658 2,700,115 WPG Large Cap Growth Fund 501,423 1,067,784 WPG Core Bond Fund 35,591 -- At August 31, 2007, the WPG Core Bond Fund had capital loss carryforwards of $2,305,123 available to offset future capital gains which expire in 2014 ($481,592) and in 2015 ($1,823,531). $2,731,098 of prior year capital loss carryovers expired at August 31, 2007. 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, 2007, the WPG Core Bond Fund deferred post-October capital losses of $1,261,196. 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. The tax character of dividend and distributions paid during the last two fiscal years or periods were as follows:
FISCAL YEAR PERIOD ORDINARY LONG-TERM FUND ENDED INCOME GAINS TOTAL - ------ --------------- -------------- -------------- ---------------- BP Small Cap Value Fund II 08/31/2007 $4,530,319 $46,909,219 $51,439,538 08/31/2006 7,646,694 47,473,562 55,120,256 BP Long/Short Equity Fund 08/31/2007 6,233,765 4,763,531 10,997,296 08/31/2006 5,602,232 4,484,174 10,086,406 BP Large Cap Value Fund 08/31/2007 2,389,261 3,184,618 5,573,879 08/31/2006 890,296 5,643,990 6,534,286 BP Mid Cap Value Fund 08/31/2007 1,915,207 8,377,338 10,292,545 08/31/2006 1,413,839 5,942,313 7,356,152 BP All-Cap Value Fund 08/31/2007 327,477 1,181,563 1,509,040 08/31/2006 185,626 585,170 770,796 WPG Small Cap Value Fund 08/31/2007 2,051,274 3,054,007 5,105,281 08/31/2006 3,007,949 2,693,232 5,701,181 WPG Large Cap Growth Fund 08/31/2007 650,613 1,120,050 1,770,663 08/31/2006 -- 2,136,641 2,136,641 WPG Core Bond Fund 08/31/2007 7,347,355 -- 7,347,355 08/31/2006 6,922,980 -- 6,922,980
Distributions from net investment income, foreign currency gains, and short-term capital gains are treated as ordinary income for federal tax purposes. 82 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ NOTES TO FINANCIAL STATEMENTS (continued) ================================================================================ 8. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FAS Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits, a reduction of an income tax refund receivable, a reduction of deferred tax assets, an increase in deferred tax liability, or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of FIN 48 to the Funds, and is not in a position at this time to estimate the significance of its impact, if any, on the Funds' financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair valuation and requires companies to expand their disclosure about the use of fair valuation to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the impact, if any, of SFAS 157 on the Funds' financial statements. 9. CHANGE OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM PricewaterhouseCoopers LLP ("PwC") resigned as the Funds' registered public accounting firm on November 21, 2006 due to PwC's business relationship with certain affiliates of Robeco. As a result of PwC's engagement to provide certain contemplated services to Robeco affiliates in the future, PwC would no longer be independent with respect to the Funds. On December 20, 2006, RBB, by action of the Board of Directors and upon the recommendation of its Audit Committee, approved Ernst & Young LLP to serve as the independent registered public accounting firm to audit the Funds' financial statements for the fiscal year ending August 31, 2007. PwC's reports on the Funds' financial statements for each of the fiscal years ended August 31, 2006 and August 31, 2005 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Funds' fiscal years ended August 31, 2006 and August 31, 2005 and the interim period September 1, 2006 through December 20, 2006 ("Interim Period"), (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 Funds' 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 the Funds' fiscal year ended August 31, 2006 and August 31, 2005 and Interim Period, neither RBB, the Funds nor anyone on their behalf has consulted Ernst & Young 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 the Funds' financial statements or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and related instructions) or reportable events (as described in paragraph (a)(1)(v) of said Item 304). 10. SUBSEQUENT EVENT Effective September 4, 2007, the name of the Robeco WPG Large Cap Growth Fund was changed to Robeco WPG 130/30 Large Cap Core Fund. The name change was made in connection with a change in the Fund's investment strategy to a 130/30 strategy following the approval of changes to certain of the Fund's fundamental investment limitations by shareholders of the Fund at a Special Meeting of Shareholders held on August 31, 2007. ANNUAL REPORT 2007 | 83 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ================================================================================ To the Board of Directors and Shareholders of The RBB Fund, Inc.: We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of Robeco Boston Partners Small Cap Value Fund II, Robeco Boston Partners Long/Short Equity Fund, Robeco Boston Partners Large Cap Value Fund, Robeco Boston Partners Mid Cap Value Fund, Robeco Boston Partners All-Cap Value Fund, Robeco WPG Small Cap Value Fund, Robeco WPG Large Cap Growth Fund, and Robeco WPG Core Bond Fund (eight of the series of The RBB Fund, Inc.) (the "Funds") as of August 31, 2007, and the related statements of operations, statements of changes in net assets, and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The statements of changes in net assets for the year ended August 31, 2006 and the financial highlights for each of the periods presented through August 31, 2006 were audited by other auditors, whose reports dated October 26, 2006 and February 14, 2005 expressed unqualified opinions on those financial statements and financial highlights. We conducted our audits 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. We were not engaged to perform an audit of the Funds' internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodians and brokers or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the 2007 financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Robeco Boston Partners Small Cap Value Fund II, Robeco Boston Partners Long/Short Equity Fund, Robeco Boston Partners Large Cap Value Fund, Robeco Boston Partners Mid Cap Value Fund, Robeco Boston Partners All-Cap Value Fund, Robeco WPG Small Cap Value Fund, Robeco WPG Large Cap Growth Fund, and Robeco WPG Core Bond Fund of The RBB Fund, Inc. at August 31, 2007, and the results of their operations, the changes in their net assets, and their financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. Philadelphia, Pennsylvania October 26, 2007 84 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ SHAREHOLDER TAX INFORMATION (unaudited) ================================================================================ BP SMALL CAP VALUE FUND II BP LONG/SHORT EQUITY FUND BP LARGE CAP VALUE FUND BP MID CAP VALUE FUND BP ALL-CAP VALUE FUND WPG SMALL CAP VALUE FUND WPG LARGE CAP GROWTH FUND WPG CORE BOND 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, 2007) 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, 2007, the following dividends and distributions were paid by each of the Funds: LONG-TERM ORDINARY INCOME CAPITAL GAINS ----------------- ---------------- BP Small Cap Value Fund II .......... $4,530,319 $46,909,219 BP Long/Short Equity Fund ........... 6,233,765 4,763,531 BP Large Cap Value Fund ............. 2,389,261 3,184,618 BP Mid Cap Value Fund ............... 1,915,207 8,377,338 BP All-Cap Value Fund ............... 327,477 1,181,563 WPG Small Cap Value Fund ............ 2,051,274 3,054,007 WPG Large Cap Growth Fund ........... 650,613 1,120,050 WPG Core Bond Fund .................. 7,347,355 -- Distributions from net investment income and short-term capital gains are treated as ordinary income for federal tax purposes. The percentage of total ordinary income dividends paid qualifying for the 15% dividend income tax rate for each Fund is as follows: BP Small Cap Value Fund II ................ 50% BP Long/Short Equity Fund ................. 31% BP Large Cap Value Fund ................... 45% BP Mid Cap Value Fund ..................... 20% BP All-Cap Value Fund ..................... 69% WPG Small Cap Value Fund .................. 23% WPG Large Cap Growth Fund ................. 41% WPG Core Bond Fund ........................ --% The percentage of total ordinary income dividends paid qualifying for the corporate dividends received deduction for each Fund is as follows: BP Small Cap Value Fund II ................ 66% BP Long/Short Equity Fund ................. 31% BP Large Cap Value Fund ................... 45% BP Mid Cap Value Fund ..................... 22% BP All-Cap Value Fund ..................... 73% WPG Small Cap Value Fund .................. 24% WPG Large Cap Growth Fund ................. 41% WPG Core Bond Fund ........................ --% For WPG Core Bond Fund, 93% of total ordinary dividends paid represent Qualified Interest Income for non-U.S. resident shareholders. These amounts were reported to shareholders as income in 2006. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. 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 2008. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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 Funds. ANNUAL REPORT 2007 | 85 ROBECO INVESTMENT 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 ("SEC") website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULE The Company files a complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q will be available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. SPECIAL MEETING OF SHAREHOLDERS The RBB Fund, Inc., on behalf of the Robeco WPG Large Cap Growth Fund (the "Fund"), convened a Special Meeting of Shareholders of the Fund on August 31, 2007 (the "Meeting"). At the Meeting, the Fund's shareholders voted to approve changes to certain fundamental investment limitations for the Fund. The results of the voting were as follows:
ROBECO NUMBER OF VOTES NUMBER OF VOTES WGP LARGE CAP GROWTH FOR THE AGAINST THE FUND RESOLUTION RESOLUTION ABSTAINED - ---------------------------------------------------------------------------------------------------------------------- (A) Limitation on issuer concentration 396,843 51,629 14,289 (B) Limitation on industry concentration 396,592 50,921 15,247 (C) Limitation on lending 393,584 54,637 14,540 (D) Limitation on borrowing, pledging and issuance of senior securities 390,531 55,990 16,240
Accordingly, the changes to fundamental investment limitations were approved by the Fund's shareholders. As a result of the approval of fundamental investment limitation (D) above, effective September 4, 2007, the Fund implemented a 130/30 investment strategy and changed its name to the Robeco WPG 130/30 Large Cap Core Fund. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS As required by the 1940 Act, the Board of Directors (the "Board") of the Company, including all of the Directors who are not "interested persons" of the Company, as that term is defined in the 1940 Act (the "Independent Directors"), considered the renewal of the investment advisory agreements between Robeco Investment Management, Inc. (the "Adviser") and the Company. Robeco Investment Management, Inc., with respect to Robeco Boston Partners Large Cap Value Fund, Robeco Boston Partners Mid Cap Value Fund, Robeco Boston Partners Long/Short Equity Fund, Robeco Boston Partners Small Cap Value Fund II, Robeco Boston Partners All-Cap Value Fund, Robeco WPG Small Cap Value Fund (f/k/a WPG Tudor Fund), Robeco WPG Large Cap Growth Fund and Robeco WPG Core Bond Fund (each a "Fund" and together, the "Funds") (the "Advisory Agreements") at a meeting of the Board held on May 24, 2007. At the Meeting, the Board approved the Advisory Agreements for an additional one-year term. The Board's decision to approve the Advisory Agreements reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreements, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreements, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's 86 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ OTHER INFORMATION (unaudited) (continued) ================================================================================ services provided to the Funds; (ii) descriptions of the experience and qualifications of the personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analyses related to providing advisory services to the Funds; (ix) the extent to which economies of scale are relevant to each Fund; (x) a report prepared by Lipper, Inc. ("Lipper") comparing each Fund's management fee and total expense ratio to those of its Lipper peer group median and comparing each Fund's performance to that of its Lipper peer group median; (xi) the Funds' contractual management fees in comparison to the fees the Adviser charges for managing assets pursuant to a strategy similar to that of a Fund for its other clients; (xii) a report comparing the performance of each Fund to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreements. The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreements as well as the Directors' responsibilities and duties in approving the Advisory Agreements. The Directors began with an evaluation of the BP Large Cap Value Fund, considering that both the contractual management fees and actual management fees for both the Investor Class and Institutional Class were lower than the Lipper peer group median. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' assets in a similar strategy as that of the Fund and found the fees to be comparable to the advisory fees charged to the Fund. The Directors examined the total expense ratios, including Rule 12b-1 fees and shareholder servicing fees, for both Classes of the Fund, noting that both classes were slightly lower than the Lipper peer group medians. The Directors then noted that the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the total annual operating expenses of the Fund's Institutional Class and Investor Class to 0.75% and 1.00%, respectively. Next, the Director's evaluated the performance of the Fund. For the one, two, three, four and five-year periods ended March 31, 2007, both classes of the Fund performed better than the medians of both the Lipper peer group and universe. The Fund also outperformed its benchmark, the S&P 500(R) Index, for the one, three and five-year periods ended March 31, 2007. Next, the Directors evaluated the BP Mid Cap Value Fund, considering that the contractual management fee for the Investor Class was at the median of the Lipper peer group, while the contractual management fee for the Institutional Class was slightly above the Lipper peer group. The Directors noted that actual management fees for both Classes were below the median of the Lipper peer group. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' assets in a similar strategy as that of the Fund and found the fees to be comparable to the advisory fees charged to the fund. The Directors examined the total expense ratios, including Rule 12b-1 fees and shareholder servicing fees, for both Classes of the Fund, noting Investor Class was at the median for its peers while the Institutional Class was lower than the median for its peers. The Directors then noted that the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the total annual operating expenses of the Fund's Institutional Class and Investor Class to 1.00% and 1.25%, respectively. Next, the Directors evaluated the performance of the Fund. The Investor Class of the Fund was above the median performance of its peers for the one, two, three, and four-year periods ended March 31, 2007 and was at the median of its peers for the five-year period. The Institutional Class of the Fund was above or at the median performance of its peers for the one, two, and three-year periods ended March 31, 2007 and was slightly below the median performance of its peer group for the four and five-year periods. The Directors noted that the Fund lagged its benchmark, the Russell Mid Cap Value Index for the one, three and five-year periods ended March 31, 2007. The Directors considered and assessed the reasons that the contractual management fee for the Institutional Class of the Fund was slightly higher than the Lipper peer group median and that the performance of the Fund lagged its peer group and benchmark. The Directors continued by evaluating the BP Small Cap Value Fund II, considering that the contractual management fees and actual management fees for both the Investor Class and Institutional Class were higher than the medians of the respective Lipper peer groups. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' assets in a similar strategy as that of the Fund and found the fees to be comparable in comparison to the fees charged to the Fund. The Directors examined the total expense ratios, including Rule 12b-1 fees and shareholder servicing fees, for both Classes of the Fund, noting that each Class had the highest expense ratio of its peer group. The Directors then noted that ANNUAL REPORT 2007 | 87 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ OTHER INFORMATION (unaudited) (continued) ================================================================================ the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the total annual operating expenses of the Fund's Institutional Class and Investor Class to 1.55% and 1.80%, respectively. The Directors then evaluated the performance of the Fund. The Investor Class of the Fund was below the median performance of its Lipper peer group for the two, three, four and five-year periods ended March 31, 2007, and was above the median of its Lipper peer group for the one-year period. The Institutional Class of the Fund was below the median performance of its peers for the three and five-year periods ended March 31, 2007, and was above the median of its peers for the one, two and four-year periods. The Directors noted that both Classes underperformed the Fund's benchmark, the Russell 2000(R) Value Index, for the one, three and five-year periods ended March 31, 2007 by outperformed its benchmark year-to-date. The Directors considered and assessed the reasons for the higher advisory fees and total expense ratios and mixed performance. The Directors next evaluated the BP All-Cap Value Fund, considering that the contractual management fees for the Investor Class were slightly lower than the median of the Lipper peer group while contractual management fees for the Institutional Class were slightly higher than the median of the Lipper peer group. The Directors evaluated the actual management fees for both the Investor Class and Institutional Class, noting that the Adviser was currently waiving its advisory fees. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' assets in a similar strategy as that of the Fund and found the fees to be lower in comparison to the fees charged to the Fund. The Directors examined the total expense ratios, including Rule 12b-1 fees and shareholder servicing fees, for both Classes of the Fund, noting the expense ratio for the Investor Class was at the median for its Lipper peer group, while the expense ratio for the Institutional Class was slightly higher. The Directors then noted that the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the Fund's total annual operating expenses of the Institutional Class and Investors Class to 0.95% and 1.20%, respectively. The Directors then evaluated the performance of the Fund. The Investor Class of the Fund exceeded the median performance of its Lipper peer group for the one, two, three and four-year periods ended March 31, 2007. The Institutional Class of the Fund was above the median performance of its peers for the three and four-year periods ended March 31, 2007 and was below the median performance of its peer group for the one and three-year periods. The Directors noted that the performance for both classes of the Fund was below that of its benchmark, the Russell 3000(R) Value Index, for the one and three-year periods ended March 31, 2007 but was above that of the benchmark for the period since inception. The Directors considered and assessed the contractual management fees and total expenses for the Classes as well as the Fund's underperformance. The Directors then evaluated the BP Long/Short Equity Fund, considering that the contractual management fees and actual management fees for both the Investor Class and Institutional Class were considerably higher than the medians of the Lipper peer groups. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' assets noting that the fees for the Fund were slightly higher than other funds or accounts managed by the Adviser due to the complexity of the Fund. The Directors examined the total expense ratios, including Rule 12b-1 fees and shareholder servicing fees, for both Classes of the Fund, noting each Class was significantly higher than the median of its peers. The Directors then evaluated the performance of the Fund. The Directors noted that the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the Fund's annual total annual operating expenses of the Institutional Class and Investor Class to 2.50% and 2.75%, respectively. Both Classes of the Fund exceeded the median performance of its Lipper peer group and universe for the one, two, three, four and five-year periods ended March 31, 2007. The Fund also outperformed its benchmark, the S&P 500(R), for the one, three and five-year periods ended March 31, 2007. The Directors considered and assessed the reasons for the higher contractual management fees for both Classes of the Fund as well as the higher total expense ratios. The Directors continued by evaluating the WPG Small Cap Value Fund, considering that the contractual management fees for the Institutional Class were slightly lower than the median of the Fund's Lipper peer group while the actual management fees for the Institutional Class ranked slightly above the median of the Lipper peer group. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' asses in a similar strategy as that of the Fund and found the fees to be higher in comparison to the fees charge to the Fund. The Directors examined the total expense ratio, including Rule 12b-1 fees and shareholder servicing fees, of the Fund, noting the Institutional Class was slightly higher than the median for its peers. The Directors then noted that the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the total annual operating expenses of the Fund's Institutional Class to 1.70%. Next, the Directors evaluated the performance of the Fund. The Institutional Class of the Fund was below the median 88 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ OTHER INFORMATION (unaudited) (concluded) ================================================================================ performance of its Lipper peer for the two and three-year periods ended March 31, 2007 and was above the median performance of its peer group for the one, four and five-year periods. The Directors noted that the Fund lagged its benchmark, the Russell 2000(R) Value Index, for the three and five-year periods ended March 31, 2007 and significantly outperformed its benchmark for the one-year period ended March 31, 2007. The Directors considered and assessed the reasons for the mixed performance of the Fund relative to its peer group and benchmark. The Directors next evaluated the WPG Core Bond Fund, considering that the contractual management fees and the actual management fees for the Institutional, Investor and Retirement Classes were at or lower than the median of their Lipper peer group. The Directors reviewed the advisory fees charged by the Adviser to manage other clients' assets in a similar strategy as that of the Fund and found the fees to be slightly lower in comparison to the fees charged to the Fund. The Directors examined the total expense ratio, including Rule 12b-1 fees and shareholder servicing fees of the Fund, noting that the expense ratio for each Class was lower than the median for its peer group. The Directors then noted that the Adviser agreed to waive its advisory fee and reimburse expenses of the Fund through December 31, 2007 to limit the total annual operating expenses of the Institutional Class, Investor Class and Retirement Class to 0.43%, 0.68% and 0.53%, respectively. Next, the Directors evaluated the performance of the Fund. The Institutional Class of the Fund was at or above the median performance of its Lipper peer group for the one, three, four and five-year periods ended March 31, 2007, but fell below the median of its Lipper peer group for the two-year period ended March 31, 2007. The performance of the each class of the Fund lagged its benchmark, the Lehman Brothers Aggregate Index, for the one-year period ended March 31, 2007, while the performance of the Institutional Class lagged the benchmark for the three-year period and performed above the benchmark for the five-year period ended March 31, 2007. The Directors considered and assessed the reasons for the lagging short-term performance of the Fund relative to its benchmark. The Directors then concluded that the nature, extent and quality of services provided by the Adviser in advising the Funds was satisfactory; the profits earned by the Adviser seemed reasonable; and the benefits derived by the Adviser from managing the Funds, including their use of soft dollars and methods for selecting brokers, seemed reasonable. The Directors discussed and considered any economies of scale realized by each Fund as a result of asset growth. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately the Independent Directors, concluded that the advisory fee structure was reasonable for each Fund and determined that the AdviserAdvisory Agreements with respect to the Funds should be continued for another one-year period ending August 16, 2008. ANNUAL REPORT 2007 | 89 ROBECO INVESTMENT 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.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Corporation; Comcast Corporation Vice Chairman, Comcast AMDOCS Limited (service 1500 Market Street, Corporation (cable provider to 35th Floor television and telecommunications Philadelphia, PA 19102 communications); companies) DOB: 7/16/33 Director, NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial 16 Kalmar Pooled Investment 103 Bellevue Parkway services organizations Trust; WT Mutual Fund; Wilmington, DE 19809 from 1997 to present. Independence Blue Cross; DOB: 3/7/43 IntriCon Corporation (industrial furnaces and ovens) - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice 16 None Fox Chase Cancer Center President, Fox Chase 333 Cottman Avenue Cancer Center (biomedical Philadelphia, PA 19111 research and medical DOB: 12/6/35 care). - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group 16 None 106 Pierrepont Street Capital Partners, L.P. Brooklyn, NY 11201 Director 1991 to present (an investment DOB: 5/21/48 partnership) from 2000-2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor of 16 WT Mutual Fund Villanova University Law, Villanova University (registered investment School of Law School of Law since July company); NYSE 299 North Spring Mill Road 1997. Regulation, Inc.; Villanova, PA 19085 Financial Industry DOB: 4/28/51 Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 90 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ FUND MANAGEMENT (unaudited) (continued) ================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, 16 Moyco Technologies, Moyco Technologies, Inc. Director and President, Inc. 200 Commerce Drive Moyco Technologies, Inc. Montgomeryville, PA 18936 (manufacturer of DOB: 3/24/34 precision coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York 16 Reid and Tang Group 300 East 57th Street State Assembly (asset management); New York, NY 10022 (1981- 2004); The Sparx Japan DOB: 3/28/41 Founding Partner, Funds Group Straniere Law Firm (registered (1980 to date); investment company) Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. ANNUAL REPORT 2007 | 91 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ FUNDMANAGEMENT (unaudited) (continued) ================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, 16 Kensington Funds Oppenheimer & Company, Inc. Senior Vice (registered 200 Park Avenue President and prior investment company) New York, NY 10166 thereto, Executive DOB: 4/16/38 Vice President of Oppenheimer & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC 16 Cornerstone Bank 103 Bellevue Parkway Inc. from January Wilmington, DE 19809 1987 to April 2002, DOB: 9/25/38 Chairman and Chief 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 (sub sidiary of Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc., 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 92 | ANNUAL REPORT 2007 ROBECO INVESTMENT FUNDS - -------------------------------------------------------------------------------- ================================================================================ FUND MANAGEMENT (unaudited) (concluded) ================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public N/A N/A 103 Bellevue Parkway and 1988 to present Accountant; Vice Wilmington, DE 19809 Treasurer Chairman of the DOB: 6/29/24 Board, Fox Chase Cancer Center; Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, Vice N/A N/A 301 Bellevue Parkway President and 2nd Floor Counsel, PFPC Inc. Wilmington, DE 19809 (financial services DOB: 7/28/74 company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 President, Vigilant N/A N/A Vigilant Compliance Services Compliance Compliance Services 186 Dundee Drive, Suite 700 Officer since 2004; Senior Williamstown, NJ 08094 Legal Counsel, PFPC DOB: 12/25/62 Inc. from 2002 to 2004; Chief Legal Counsel, Corviant Corporation (Investment Adviser, Broker-Dealer and Service Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL REPORT 2007 | 93 INVESTMENT ADVISERS --------------------------------- Robeco Investment Management Inc. 909 Third Avenue New York, NY 10022 ADMINISTRATOR ------------------ PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT ----------------------- PFPC Inc.101 Sabin Street Pawtucket, RI 02860 PRINCIPAL UNDERWRITER -------------------------- PFPC Distributors, Inc.760 Moore Road King of Prussia, PA 19406 CUSTODIANS ----------------------- PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 Mellon Trust of New England N.A. One Boston Place Boston, MA 02108 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM --------------------------------------------------- Ernst & Young LLP Two Commerce Square 2001 Market Street, Suite 4000 Philadelphia, PA 19103 COUNSEL ---------------------------- Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 --------- THE SCHNEIDER FUNDS --------- OF THE RBB FUND, INC. SCHNEIDER VALUE FUND SCHNEIDER SMALL CAP VALUE FUND --------------- ANNUAL REPORT AUGUST 31, 2007 --------------- [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- SCHNEIDER CAPITAL MANAGEMENT This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution unless preceded or accompanied by a current prospectus for the Funds. THE SCHNEIDER FUNDS ANNUAL INVESTMENT ADVISER'S REPORT AUGUST 31, 2007 (UNAUDITED) Dear Fellow Shareholder: We are pleased to provide you with the annual report for the Schneider Funds for the fiscal year ended August 31, 2007. Although U.S. equities delivered healthy returns overall, performance was uneven as a strong start eventually faded toward a weak finish during the summer months. Growth-style stocks were the performance leaders after spending more than six years as an also-ran to their value counterparts. Investor confidence was tested at first by stresses that emerged in early 2007 with subprime mortgage lenders. This ill wind turned out to be just a preview of the major storm that hit during the summer. The subprime-induced turmoil spread more broadly throughout the credit markets, precipitating fears of a more severe housing downturn with spillover effects on consumer spending and the broader economy. As liquidity dried up in the private mortgage markets and credit tightened in other sectors, the equity market slumped and many financial and housing-related stocks took a severe tumble. We continue to believe that the steep housing recession and tight credit conditions will lead to a softening U.S. economy that could slow sharply before it eventually bottoms out. Consumer spending is likely to weaken considerably as many individuals painfully adjust to a period of no more housing appreciation, higher payments as their adjustable mortgages reset, and reduced availability of credit. The housing "piggybank" is no longer open for business. In times like this (which seem to occur with uncomfortable regularity), it can be tempting to fixate on how bad things can get. As long-term value investors, we resist the urge to retreat, but instead search for opportunities in stocks that have been unduly punished by excessive pessimism, short-term thinking or emotional overreaction. Periods of disruption and stress usually open up pockets of opportunity for the disciplined value investor who is patient and not faint of heart. It continues to be a challenging environment to find purchase candidates that meet our stringent dual investment criteria: stocks that possess cheap valuations where we also can foresee fundamentals improving from sub-trend levels. However, the summer turmoil did open up select opportunities for new investments, particularly for the Schneider Small Cap Value Fund. There were no wholesale changes during the summer in the Funds' strategy or positioning. Years of experience in active value investing ensure that we will be disciplined and faithful to the investment approach that has contributed to our long-term success. We appreciate your support and continued confidence in our firm and our time-proven investment process. /s/ Arnold C. Schneider III ------------------------------------------ Arnold C. Schneider III, CFA Portfolio Manager Schneider Capital Management 1 THE SCHNEIDER FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2007 (UNAUDITED) SCHNEIDER VALUE FUND - INVESTMENT REVIEW The Value Fund produced favorable results during the fiscal year ended August 31, 2007, returning 14.88% versus 12.86% for the Russell 1000 Value Index. We are particularly pleased that the Fund's longer-term performance has exceeded the benchmark (see table on page 3). Several large holdings continued their performance leadership and made an outsized contribution to returns. Long-time investment Reliant Energy soared 90% during the fiscal year. Attention was focused on the upside potential from improving margins in the company's key wholesale power markets and greater financial flexibility from its stronger balance sheet. Truck and engine manufacturer Navistar International motored to a 144% return during the period. Investors gained confidence that the company would benefit from the next upswing in the truck cycle and that the firm could come within reach of its ambitious 2009 financial goals. Weakness in a few mortgage and housing-related names had a negative impact on performance. The Fund continues to maintain a position in these stressed sectors since we believe they offer long-term value and promising return potential for the patient investor. We purchased Freddie Mac and increased our investment in Fannie Mae during the year. We believe these firms represent strong franchises that should be net beneficiaries from the turbulence in the credit markets. As mortgage originators continue to tighten underwriting standards, Fannie's and Freddie's credit guarantees and portfolio investing businesses stand to benefit from the transition of the mortgage market in favor of more traditional products. The Fund's positioning is not substantially changed from a year ago, with both offensive and defensive plays in the mix. Investments outside the financial sector in areas such as transportation, technology and coal mining have the potential to deliver profit growth barring a recession. Many depressed financials are classic value stocks that offer inexpensive valuations, very low investor expectations, and the prospect for an earnings recovery. - ------------------------ THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO MOST RECENT MONTH-END, PLEASE CALL 1-888-520-3277. The Funds are actively managed on a daily basis, and the securities mentioned herein may not be representative of current or future portfolio composition. For more specific information about Fund holdings, please refer to the Portfolio of Investments section in this report. Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Unmanaged indices are not available for direct investment and do not incur expenses or sales charges. 2 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2007 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Schneider Value Fund vs. Russell 1000(R) Value Index [GRAPH OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Schneider Value Fund Russell 1000(R) Value Index -------------------- --------------------------- 9/30/02 $10,000 $10,000 10/31/02 10,660 10,620 11/30/02 11,950 11,289 12/31/02 11,237 10,798 1/31/03 10,636 10,537 2/28/03 10,566 10,256 3/31/03 10,796 10,273 4/30/03 11,638 11,178 5/31/03 13,042 11,899 6/30/03 13,252 12,048 7/31/03 13,984 12,228 8/31/03 14,846 12,418 9/30/03 14,495 12,297 10/31/03 15,628 13,049 11/30/03 16,430 13,226 12/31/03 17,738 14,042 1/31/04 18,397 14,289 2/29/04 18,929 14,595 3/31/04 18,950 14,467 4/30/04 18,438 14,114 5/31/04 19,044 14,258 6/30/04 19,775 14,594 7/31/04 19,023 14,389 8/31/04 19,034 14,594 9/30/04 19,431 14,820 10/31/04 19,713 15,066 11/30/04 21,290 15,828 12/31/04 22,123 16,358 1/31/05 21,305 16,067 2/28/05 21,769 16,599 3/31/05 21,647 16,372 4/30/05 20,354 16,079 5/31/05 21,481 16,466 6/30/05 22,067 16,646 7/31/05 22,897 17,127 8/31/05 22,720 17,053 9/30/05 22,742 17,292 10/31/05 21,913 16,852 11/30/05 22,576 17,404 12/31/05 23,102 17,510 1/31/06 23,495 18,189 2/28/06 23,900 18,300 3/31/06 24,530 18,547 4/30/06 25,542 19,018 5/31/06 24,971 18,537 6/30/06 25,054 18,656 7/31/06 24,435 19,109 8/31/06 25,185 19,428 9/30/06 26,006 19,815 10/31/06 26,887 20,463 11/30/06 28,160 20,929 12/31/06 28,494 21,400 1/31/07 29,094 21,674 2/28/07 28,969 21,336 3/31/07 29,332 21,667 4/30/07 31,070 22,468 5/31/07 32,996 23,279 6/30/07 32,346 22,735 7/31/07 30,157 21,684 8/31/07 28,932 21,927 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(R) Value Index is unmanaged, does not incur sales charges and/or expenses and is not available for investment. - -------------------------------------------------------------------------------- Total Returns For the Period Ended August 31, 2007 AVERAGE ANNUAL --------------- ONE SINCE YEAR INCEPTION* ------ ------------ SCHNEIDER VALUE 14.88% 24.11% RUSSELL (1000)(R) VALUE INDEX 12.86% 17.30% * Inception date: 9/30/02 - -------------------------------------------------------------------------------- THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. SCHNEIDER CAPITAL MANAGEMENT CONTRACTUALLY AGREED TO WAIVE A PORTION OF ITS ADVISORY FEE AND 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 WAIVER OR REIMBURSEMENT OF FEES AND EXPENSES IN EXCESS OF EXPENSE LIMITATIONS. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE FUND HAS EXPERIENCED RELATIVELY HIGH PERFORMANCE WHICH MAY NOT BE REPEATED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-520-3277. THE FUND'S GROSS ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 1.27%. 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 $23.13 per share on August 31, 2007, adjusted for dividends and distributions totaling $4.50 per share paid from net investment income and realized gains. Portfolio composition is subject to change. 3 THE SCHNEIDER FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2007 (UNAUDITED) SCHNEIDER SMALL CAP VALUE FUND - INVESTMENT REVIEW The Small Cap Value Fund delivered sub-par performance for the fiscal year ended August 31, 2007, returning 0.72% versus 6.65% for the Russell 2000 Value Index. Since inception, the Fund has produced excellent long-term results relative to the benchmark (see table on page 5). Despite this temporary setback, we continue to confidently apply our rigorous investment approach to the very best of our abilities and with our full energy. The Fund owned a diverse group of industrial and consumer stocks that contributed favorably to performance during the year. Unfortunately, our successes were overwhelmed by the startling decline in two of the Fund's holdings in the financial sector: American Home Mortgage Investment Corp. and Luminent Mortgage Capital Inc. Both positions were liquidated prior to the end of the fiscal year. During July, the turmoil that was originally confined to subprime suddenly engulfed the entire private secondary mortgage market. This panicky environment choked off access to funding and disrupted the operations of a number of solid businesses that were not involved in subprime lending or investment activities, including American Home Mortgage and Luminent. The Fund holds a diverse mix of stocks that we believe offer long-term value. Investments in cyclical sectors such as transportation and semiconductors hold the potential for margin improvement and some top-line growth so long as we avoid a recession. Many depressed financials are classic deep value stocks that offer inexpensive valuations, very low investor expectations, and could shine in a weak economic climate that requires the Fed to continue to lower short-term rates. - --------------- THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. FOR PERFORMANCE DATA CURRENT TO MOST RECENT MONTH-END, PLEASE CALL 1-888-520-3277. The Funds are actively managed on a daily basis, and the securities mentioned herein may not be representative of current or future portfolio composition. For more specific information about Fund holdings, please refer to the Portfolio of Investments section in this report. Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Unmanaged indices are not available for direct investment and do not incur expenses or sales charges. 4 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONCLUDED) AUGUST 31, 2007 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Schneider Small Cap Value Fund vs. Russell 2000(R) Value Index [GRAPH OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Schneider Small Cap Value Fund Russell 2000(R) Value Index ------------------------------ --------------------------- 09/02/98 $10,000 $10,000 09/30/98 10,000 10,363 10/31/98 11,930 10,670 11/30/98 12,410 10,959 12/31/98 12,471 11,303 01/31/99 13,786 11,046 02/28/99 12,531 10,292 03/31/99 13,007 10,207 04/30/99 15,222 11,139 05/31/99 16,233 11,481 06/30/99 18,044 11,897 07/31/99 18,731 11,615 08/31/99 18,246 11,190 09/30/99 17,518 10,966 10/31/99 16,759 10,747 11/30/99 17,457 10,803 12/31/99 18,341 11,134 01/31/00 17,833 10,843 02/29/00 18,069 11,506 03/31/00 19,392 11,560 04/30/00 19,392 11,628 05/31/00 19,770 11,451 06/30/00 19,841 11,786 07/31/00 19,734 12,178 08/31/00 20,750 12,723 09/30/00 20,845 12,651 10/31/00 20,490 12,606 11/30/00 19,416 12,349 12/31/00 21,495 13,676 01/31/01 24,178 14,053 02/28/01 23,127 14,034 03/31/01 22,034 13,808 04/30/01 23,326 14,448 05/31/01 24,547 14,820 06/30/01 25,101 15,416 07/31/01 24,874 15,070 08/31/01 24,888 15,018 09/30/01 20,856 13,360 10/31/01 21,864 13,709 11/30/01 23,951 14,694 12/31/01 25,657 15,594 01/31/02 25,477 15,801 02/28/02 25,432 15,897 03/31/02 28,415 17,088 04/30/02 29,389 17,689 05/31/02 29,089 17,104 06/30/02 27,785 16,725 07/31/02 22,825 14,240 08/31/02 22,210 14,177 9/30/02 19,767 13,164 10/31/02 19,887 13,362 11/30/02 23,484 14,429 12/31/02 21,848 13,812 1/31/03 20,912 13,423 2/28/03 20,293 12,972 3/31/03 20,127 13,111 4/30/03 23,011 14,356 5/31/03 26,665 15,822 6/30/03 27,314 16,090 7/31/03 30,469 16,892 8/31/03 34,003 17,534 9/30/03 33,202 17,333 10/31/03 38,366 18,746 11/30/03 42,292 19,466 12/31/03 45,017 20,170 1/31/04 46,405 20,867 2/29/04 47,518 21,271 3/31/04 47,743 21,565 4/30/04 46,114 20,450 5/31/04 46,388 20,697 6/30/04 48,985 21,748 7/31/04 47,340 20,748 8/31/04 46,921 20,952 9/30/04 48,469 21,781 10/31/04 48,582 22,119 11/30/04 54,082 24,081 12/31/04 57,277 24,657 1/31/05 54,010 23,702 2/28/05 56,088 24,174 3/31/05 54,851 23,676 4/30/05 50,420 22,454 5/31/05 54,010 23,824 6/30/05 56,980 24,877 7/31/05 62,104 26,293 8/31/05 61,732 25,688 9/30/05 62,128 25,644 10/31/05 60,223 25,001 11/30/05 62,079 26,016 12/31/05 62,904 25,815 1/31/06 66,116 27,950 2/28/06 67,752 27,947 3/31/06 71,933 29,300 4/30/06 72,418 29,379 5/31/06 68,812 28,163 6/30/06 68,176 28,509 7/31/06 65,328 28,113 8/31/06 66,540 28,954 9/30/06 68,509 29,237 10/31/06 71,449 30,725 11/30/06 75,660 31,601 12/31/06 76,162 31,876 1/31/07 78,905 32,354 2/28/07 79,116 31,956 3/31/07 80,909 32,343 4/30/07 82,456 32,679 5/31/07 86,359 33,879 6/30/07 82,913 33,089 7/31/07 71,415 30,273 8/31/07 67,020 30,879 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(R) Value Index is unmanaged, does not incur sales charges and/or expenses and is not available for investment. - -------------------------------------------------------------------------------- Total Returns For the Period Ended August 31, 2007 AVERAGE ANNUAL ---------------------- SINCE ONE YEAR FIVE YEARS INCEPTION* -------- ---------- ---------- SCHNEIDER SMALL CAP VALUE 0.72% 24.72% 23.55% RUSSELL 2000(R) VALUE INDEX 6.65% 16.85% 13.35% * Inception date: 9/2/98 - -------------------------------------------------------------------------------- THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER. SCHNEIDER CAPITAL MANAGEMENT CONTRACTUALLY AGREED TO WAIVE A PORTION OF ITS ADVISORY FEE AND 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 WAIVER OR REIMBURSEMENT OF FEES AND EXPENSES IN EXCESS OF EXPENSE LIMITATIONS. RETURNS SHOWN INCLUDE THE REINVESTMENT OF ALL DIVIDENDS AND OTHER DISTRIBUTIONS AND DO NOT REFLECT TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. THE FUND HAS EXPERIENCED RELATIVELY HIGH PERFORMANCE WHICH MAY NOT BE REPEATED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-520-3277. THE FUND'S GROSS ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 1.56%. 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 $19.06 per share on August 31, 2007, adjusted for dividends and distributions totaling $28.41 per share paid from net investment income and realized gains. Small company stocks are generally riskier than large company stocks due to greater volatility and less liquidity. Portfolio composition is subject to change. 5 SCHNEIDER CAPITAL MANAGEMENT FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Fund(s), you incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management fees and other Fund 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 six-month period from March 1, 2007 through August 31, 2007, 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 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) (UNAUDITED)
SCHNEIDER VALUE FUND --------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2007 AUGUST 31, 2007 DURING PERIOD* ------------------------- ---------------------- ---------------- Actual $1,000.00 $ 998.70 $4.28 Hypothetical (5% return before expenses) 1,000.00 1,020.87 4.34 SCHNEIDER SMALL CAP VALUE FUND --------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2007 AUGUST 31, 2007 DURING PERIOD* ------------------------- ---------------------- ---------------- Actual $1,000.00 $ 847.10 $5.12 Hypothetical (5% return before expenses) 1,000.00 1,019.59 5.62
* Expenses are equal to an annualized expense ratio of 0.85% for the Schneider Value Fund and 1.10% for the Schneider Small Cap 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 (184), then divided by 365 to reflect the one-half year period. The Fund's ending account values on the first line in each table are based on the actual six-month total return for each Fund of -0.13% for the Schneider Value Fund and -15.29% for the Schneider Small Cap Value Fund. 7 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 % OF NET ASSETS VALUE -------- ------------ Domestic Common Stocks: Thrifts & Mortgage Finance ............... 13.9% $ 50,798,076 Oil, Gas & Consumable Fuels .............. 11.5 42,048,313 Machinery ................................ 7.8 28,470,613 Insurance ................................ 7.1 25,929,071 Real Estate Investment Trusts ............ 6.1 22,207,421 Electric Utilities ....................... 4.8 17,388,891 Media .................................... 4.2 15,505,339 Diversified Financial Services ........... 4.2 15,203,184 Computers & Peripherals .................. 3.9 14,101,072 Household Durables ....................... 3.6 13,094,945 Electronic Equipment & Instruments ............................ 3.5 12,948,251 Aerospace & Defense ...................... 3.2 11,584,581 Health Care Providers & Service .......... 2.3 8,400,594 Semiconductors ........................... 1.4 5,303,441 Health Care Equipment & Supplies ............................... 1.3 4,639,944 IT Services .............................. 1.0 3,753,102 Food Products ............................ 1.0 3,686,005 Road & Rail .............................. 1.0 3,671,550 Wireless Telecommunication Services ............................... 1.0 3,479,390 Hotels Restaurants & Leisure.. ........... 0.9 3,136,592 Communication Equipment .................. 0.8 2,990,404 Chemicals ................................ 0.7 2,700,820 Auto Components .......................... 0.6 2,144,468 Specialty Retail ......................... 0.3 976,932 Temporary Investment ........................ 10.2 37,312,478 Exchange Traded Fund ........................ 2.5 8,909,790 Canadian Common Stocks ...................... 2.0 7,393,874 Preferred Stocks ............................ 0.1 186,030 Liabilities In Excess Of Other Assets ....... (0.9) (3,172,387) ------ ------------ NET ASSETS .................................. 100.0% $364,792,784 ====== ============ The accompanying notes are an integral part of the financial statements. 8 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 % OF NET ASSETS VALUE -------- ------------ Domestic Common Stocks: Semiconductors ........................... 8.0% $ 8,130,489 Thrifts & Mortgage Finance ............... 6.9 6,995,475 Real Estate Investment Trusts. ........... 6.2 6,294,437 Aerospace & Defense ...................... 5.7 5,763,247 Machinery ................................ 5.7 5,716,710 Commercial Banks ......................... 5.2 5,229,776 Commercial Services & Supplies ........... 4.4 4,395,378 Insurance ................................ 4.3 4,348,180 Household Durables ....................... 3.5 3,584,981 Real Estate Management & Development ............................ 3.2 3,231,295 Software ................................. 3.0 3,015,825 Oil, Gas & Consumable Fuels .............. 2.9 2,884,250 Internet Software & Services.. ........... 2.8 2,853,378 Automobiles .............................. 2.8 2,837,008 Electronic Equipment & Instruments ............................ 2.5 2,545,278 Health Care Equipment & Supplies ............................... 2.3 2,289,972 Auto Components .......................... 1.9 1,958,297 Distributors ............................. 1.9 1,919,762 Specialty Retail ......................... 1.8 1,799,139 Airlines ................................. 1.6 1,569,406 Metals & Mining .......................... 1.5 1,474,316 Electric Utilities ....................... 1.4 1,433,662 Biotechnology ............................ 1.4 1,392,927 Marine ................................... 1.3 1,331,491 Diversified Consumer Services. ........... 1.1 1,155,381 Road & Rail .............................. 1.0 1,049,339 Leisure Equipment & Products.. ........... 1.0 1,049,048 Pharmaceuticals .......................... 1.0 1,021,536 Textiles, Apparel & Luxury Goods ......... 0.9 920,033 Transportation Infrastructure. ........... 0.8 758,084 Health Care Providers & Service .......... 0.6 570,629 Building Products ........................ 0.4 445,136 Media .................................... 0.3 308,424 IT Services .............................. 0.3 298,562 % OF NET ASSETS VALUE -------- ------------ Hotels Restaurants & Leisure.. ........... 0.2% $ 209,664 Paper & Forest Products .................. 0.2 197,341 Construction & Engineering ............... 0.1 90,742 Computers & Peripherals .................. 0.1 57,255 Food Products ............................ 0.0 34,231 Temporary Investment ........................ 7.3 7,404,782 Exchange Traded Fund ........................ 2.2 2,225,637 Mexican Common Stocks: Media .................................... 0.0 7,413 Wireless Telecommunication Services ............................... 0.0 7 Other Assets In Excess Of Liabilities ....... 0.3 254,076 ------ ------------ NET ASSETS .................................. 100.0% $101,051,999 ====== ============ The accompanying notes are an integral part of the financial statements. 9 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 SHARES VALUE -------- ------------ DOMESTIC COMMON STOCKS -- 86.1% AEROSPACE & DEFENSE -- 3.2% Boeing Co. (The) ................................. 64,575 $ 6,244,403 Goodrich Corp. ................................... 84,550 5,340,178 ------------ 11,584,581 ------------ AUTO COMPONENTS -- 0.6% Visteon Corp.* ................................... 398,600 2,144,468 ------------ CHEMICALS -- 0.7% Cytec Industries, Inc. ........................... 40,675 2,700,820 ------------ COMMUNICATION EQUIPMENT -- 0.8% Motorola, Inc. ................................... 176,425 2,990,404 ------------ COMPUTERS & PERIPHERALS -- 3.9% Dell, Inc.* ...................................... 499,153 14,101,072 ------------ DIVERSIFIED FINANCIAL SERVICES -- 4.2% Citigroup, Inc. .................................. 324,300 15,203,184 ------------ ELECTRIC UTILITIES -- 4.8% Reliant Energy, Inc.* ............................ 681,650 17,388,891 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS -- 3.5% AU Optronics Corp. - ADR ......................... 719,701 10,572,412 Celestica, Inc.* ................................. 397,963 2,375,839 ------------ 12,948,251 ------------ FOOD PRODUCTS -- 1.0% Smithfield Foods, Inc.* .......................... 19,650 643,145 Tyson Foods, Inc. ................................ 141,200 3,042,860 ------------ 3,686,005 ------------ HEALTH CARE EQUIPMENT & SUPPLIES -- 1.3% Boston Scientific Corp.* ......................... 227,325 2,916,580 Covidien, Ltd.* .................................. 43,268 1,723,364 ------------ 4,639,944 ------------ HEALTH CARE PROVIDERS & SERVICE -- 2.3% Omnicare, Inc. ................................... 257,450 8,400,594 ------------ HOTELS RESTAURANTS & LEISURE -- 0.9% Carnival Corp. ................................... 68,800 3,136,592 ------------ SHARES VALUE -------- ------------ HOUSEHOLD DURABLES -- 3.6% Centex Corp. ..................................... 278,555 $ 8,053,025 Pulte Homes, Inc. ................................ 303,000 5,041,920 ------------ 13,094,945 ------------ INSURANCE -- 7.1% First American Corp. ............................. 154,975 6,482,604 Genworth Financial, Inc., Class A. ............... 288,750 8,367,975 MBIA, Inc. ....................................... 82,475 4,948,500 RenaissanceRe Holdings, Ltd. ..................... 71,475 4,094,088 Unum Group ....................................... 83,200 2,035,904 ------------ 25,929,071 ------------ IT SERVICES -- 1.0% BearingPoint, Inc.* .............................. 639,370 3,753,102 ------------ MACHINERY -- 7.8% AGCO Corp.* ...................................... 178,385 7,706,232 Navistar International Corp.* .................... 370,925 20,764,381 ------------ 28,470,613 ------------ MEDIA -- 4.2% Liberty Media Holding Corp. - Capital, Series A* ..................................... 64,631 7,044,132 XM Satellite Radio Holdings, Inc.* ............... 678,525 8,461,207 ------------ 15,505,339 ------------ OIL, GAS & CONSUMABLE FUELS -- 11.5% Arch Coal, Inc. .................................. 487,050 14,363,104 Cameco Corp. ..................................... 115,925 4,681,052 CONSOL Energy, Inc. .............................. 452,900 18,061,652 Massey Energy Co. ................................ 238,193 4,942,505 ------------ 42,048,313 ------------ REAL ESTATE INVESTMENT TRUSTS -- 6.1% Annaly Capital Management, Inc. .................. 1,457,788 20,540,233 iStar Financial, Inc. ............................ 37,800 1,383,480 Redwood Trust, Inc. .............................. 7,600 283,708 ------------ 22,207,421 ------------ ROAD & RAIL -- 1.0% CSX Corp. ........................................ 89,550 3,671,550 ------------ The accompanying notes are an integral part of the financial statements. 10 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 SHARES VALUE -------- ------------ SEMICONDUCTORS -- 1.4% International Rectifier Corp.* ................... 154,125 $ 5,303,441 ------------ SPECIALTY RETAIL -- 0.3% Chico's Fas, Inc.* ............................... 2,800 44,744 Staples, Inc. .................................... 39,250 932,188 ------------ 976,932 ------------ THRIFTS & MORTGAGE FINANCE -- 13.9% Countrywide Financial Corp. ...................... 648,700 12,876,695 Fannie Mae ....................................... 332,625 21,823,526 Freddie Mac ...................................... 174,150 10,729,382 Radian Group, Inc. ............................... 281,125 4,959,045 Washington Mutual, Inc. .......................... 11,150 409,428 ------------ 50,798,076 ------------ WIRELESS TELECOMMUNICATION SERVICES -- 1.0% Sprint Nextel Corp. .............................. 183,900 3,479,390 ------------ TOTAL DOMESTIC COMMON STOCKS (Cost $309,563,813) ........................ 314,162,999 ------------ CANADIAN COMMON STOCKS -- 2.0% AEROSPACE & DEFENSE -- 2.0% Bombardier, Inc., Class B* ....................... 1,261,550 7,393,874 ------------ TOTAL CANADIAN COMMON STOCK (Cost $4,297,425) .......................... 7,393,874 ------------ PREFERRED STOCKS -- 0.1% AUTOMOBILES -- 0.1% General Motors Corp., Series B 5.25%, 03/06/32 ............................... 10 186,030 ------------ TOTAL PREFERRED STOCKS (Cost $183,607) ............................ 186,030 ------------ SHARES VALUE -------- ------------ EXCHANGE TRADED FUND -- 2.5% FINANCE -- 2.5% iShares Russell 1000 Value Index Fund .......................................... 106,500 $ 8,909,790 ------------ TOTAL EXCHANGE TRADED FUND (Cost $8,723,861) .......................... 8,909,790 ------------ TEMPORARY INVESTMENT -- 10.2% PNC Bank Money Market Account 4.46%, 09/04/07 ............................... 37,312,478 37,312,478 ------------ TOTAL TEMPORARY INVESTMENT (Cost $37,312,478) ......................... 37,312,478 ------------ TOTAL INVESTMENTS -- 100.9% (Cost $360,081,184) ........................ 367,965,171 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.9)% .............................. (3,172,387) ------------ NET ASSETS -- 100.0% ............................. $364,792,784 ============ - ------------- * Non-income producing. ADR -- American Depository Receipt. The accompanying notes are an integral part of the financial statements. 11 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 SHARES VALUE -------- ------------ DOMESTIC COMMON STOCKS -- 90.2% AEROSPACE & DEFENSE -- 5.7% AAR Corp.* ....................................... 111,205 $ 3,491,837 Curtiss-Wright Corp. ............................. 27,375 1,248,300 Triumph Group, Inc. .............................. 13,975 1,023,110 ------------ 5,763,247 ------------ AIRLINES -- 1.6% AirTran Holdings, Inc.* .......................... 149,325 1,569,406 ------------ AUTO COMPONENTS -- 1.9% American Axle & Manufacturing Holdings, Inc. ................................ 83,975 1,958,297 ------------ AUTOMOBILES -- 2.8% Fleetwood Enterprises, Inc.* ..................... 304,400 2,837,008 ------------ BIOTECHNOLOGY -- 1.4% Angiotech Pharmaceuticals, Inc.*.. ............... 2,100 12,348 Human Genome Sciences, Inc.* ..................... 149,900 1,380,579 ------------ 1,392,927 ------------ BUILDING PRODUCTS -- 0.4% Griffon Corp.* ................................... 28,425 445,136 ------------ COMMERCIAL BANKS -- 5.2% First BanCorp .................................... 374,475 3,763,474 W. Holding Co., Inc. ............................. 626,625 1,466,302 ------------ 5,229,776 ------------ COMMERCIAL SERVICES & SUPPLIES -- 4.4% Administaff, Inc. ................................ 24,975 861,637 Hudson Highland Group, Inc.* ..................... 252,050 3,533,741 ------------ 4,395,378 ------------ COMPUTERS & PERIPHERALS -- 0.1% Xyratex Ltd.* .................................... 2,750 57,255 ------------ CONSTRUCTION & ENGINEERING -- 0.1% Integrated Electrical Services, Inc.* ............ 3,884 90,742 ------------ DISTRIBUTORS -- 1.9% Building Materials Holding Corp. ................. 122,525 1,813,370 Source Interlink Companies, Inc.*. ............... 25,575 106,392 ------------ 1,919,762 ------------ SHARES VALUE -------- ------------ DIVERSIFIED CONSUMER SERVICES -- 1.1% Corinthian Colleges, Inc.* ....................... 82,175 $ 1,155,381 ------------ ELECTRIC UTILITIES -- 1.4% Reliant Energy, Inc.* ............................ 56,200 1,433,662 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS -- 2.5% Celestica, Inc.* ................................. 225,100 1,343,847 Insight Enterprises, Inc.* ....................... 43,175 1,024,111 Mercury Computer Systems, Inc.* .................. 15,500 177,320 ------------ 2,545,278 ------------ FOOD PRODUCTS -- 0.0% Interstate Bakeries Corp.* ....................... 30,293 34,231 ------------ HEALTH CARE EQUIPMENT & SUPPLIES -- 2.3% American Medical Systems Holdings, Inc* ................................ 95,400 1,755,360 Orthofix International NV* ....................... 11,175 534,612 ------------ 2,289,972 ------------ HEALTH CARE PROVIDERS & SERVICE -- 0.6% Matria Healthcare, Inc.* ......................... 19,575 498,379 Pharmerica Corp.* ................................ 4,075 72,250 ------------ 570,629 ------------ HOTELS RESTAURANTS & LEISURE -- 0.2% Triarc Companies, Inc., Class A .................. 13,650 209,664 ------------ HOUSEHOLD DURABLES -- 3.5% Furniture Brands International, Inc. ............. 10,225 116,361 KB Home .......................................... 114,325 3,468,620 ------------ 3,584,981 ------------ INSURANCE -- 4.3% Landamerica Financial Group, Inc.. ............... 21,175 1,172,883 ProAssurance Corp.* .............................. 40,606 2,135,064 Ram Holdings Ltd.* ............................... 111,374 1,040,233 ------------ 4,348,180 ------------ INTERNET SOFTWARE & SERVICES -- 2.8% Internet Capital Group, Inc.* .................... 181,050 2,056,728 Openwave Systems, Inc. ........................... 176,250 796,650 ------------ 2,853,378 ------------ The accompanying notes are an integral part of the financial statements. 12 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2007 SHARES VALUE -------- ------------ IT SERVICES -- 0.3% Ness Technologies, Inc.* ......................... 26,825 $ 298,562 ------------ LEISURE EQUIPMENT & PRODUCTS -- 1.0% MarineMax, Inc.* ................................. 57,200 1,049,048 ------------ MACHINERY -- 5.7% AGCO Corp.* ...................................... 23,825 1,029,240 Navistar International Corp.* .................... 81,525 4,563,769 Wabash National Corp. ............................ 9,450 123,701 ------------ 5,716,710 ------------ MARINE -- 1.3% Alexander & Baldwin, Inc. ........................ 25,650 1,331,491 ------------ MEDIA -- 0.3% Scholastic Corp.* ................................ 9,050 308,424 ------------ METALS & MINING -- 1.5% Golden Star Resources Ltd.* ...................... 477,125 1,474,316 ------------ OIL, GAS & CONSUMABLE FUELS -- 2.9% Massey Energy Co. ................................ 139,000 2,884,250 ------------ PAPER & FOREST PRODUCTS -- 0.2% Neenah Paper, Inc. ............................... 3,125 108,406 Norbord, Inc. .................................... 12,250 88,935 ------------ 197,341 ------------ PHARMACEUTICALS -- 1.0% Salix Pharmaceuticals Ltd.* ...................... 88,675 1,021,536 ------------ REAL ESTATE INVESTMENT TRUSTS -- 6.2% Anworth Mortgage Asset Corp. ..................... 838,025 4,508,574 Arbor Realty Trust, Inc. ......................... 14,975 299,800 iStar Financial, Inc. ............................ 15,725 575,535 Maguire Properties, Inc. ......................... 24,150 628,141 U-Store-It Trust ................................. 20,825 282,387 ------------ 6,294,437 ------------ REAL ESTATE MANAGEMENT & DEVELOPMENT -- 3.2% MI Developments, Inc., Class A ................... 59,950 1,894,420 Thomas Properties Group, Inc. .................... 104,525 1,336,875 ------------ 3,231,295 ------------ SHARES VALUE -------- ------------ ROAD & RAIL -- 1.0% Genesee & Wyoming, Inc.* ......................... 38,325 $ 1,049,339 ------------ SEMICONDUCTORS -- 8.0% Advanced Energy Industries, Inc.*. ............... 150 2,435 Alliance Semiconductor Corp. ..................... 207,475 477,193 ASM International N.V ............................ 106,675 2,907,960 Axcelis Technologies, Inc.* ...................... 170,875 804,821 BE Semiconductor Industries N.V.*. ............... 352,268 2,233,062 Qimonda AG* ...................................... 15,925 212,758 Silicon Storage Technology, Inc.*. ............... 330,600 1,031,472 ZiLOG, Inc.* ..................................... 122,550 460,788 ------------ 8,130,489 ------------ SOFTWARE -- 3.0% Take-Two Interactive Software, Inc.* ............. 188,725 3,015,825 ------------ SPECIALTY RETAIL -- 1.8% AC Moore Arts & Crafts, Inc.* .................... 36,150 675,643 Christopher & Banks Corp. ........................ 29,225 353,038 Haverty Furniture Companies, Inc.. ............... 9,775 104,788 Sonic Automotive, Inc., Class A .................. 2,250 59,850 Stein Mart, Inc. ................................. 69,000 605,820 ------------ 1,799,139 ------------ TEXTILES, APPAREL & LUXURY GOODS -- 0.9% Barry (R.G.) Corp.* .............................. 100,550 920,033 ------------ THRIFTS & MORTGAGE FINANCE -- 6.9% First Niagara Financial Group, Inc. .............. 93,175 1,316,563 FirstFed Financial Corp.* ........................ 49,850 2,504,962 Flagstar Bancorp, Inc. ........................... 35,000 430,500 PMI Group, Inc. (The) ............................ 61,700 1,954,656 Provident Financial Services, Inc. ............... 7,300 122,640 Washington Federal, Inc. ......................... 25,100 666,154 ------------ 6,995,475 ------------ TRANSPORTATION INFRASTRUCTURE -- 0.8% Aegean Marine Petroleum Network, Inc. ................................. 34,225 758,084 ------------ TOTAL DOMESTIC COMMON STOCKS (Cost $88,685,424) ......................... 91,160,084 ------------ The accompanying notes are an integral part of the financial statements. 13 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 SHARES VALUE -------- ------------ MEXICAN COMMON STOCKS -- 0.0% MEDIA -- 0.0% TV Azteca, S.A. de C.V ........................... 12,400 $ 7,413 ------------ WIRELESS TELECOMMUNICATION SERVICES -- 0.0% Grupo Iusacell SA de CV* ......................... 1 7 ------------ TOTAL MEXICAN COMMON STOCKS (Cost $5,129) .............................. 7,420 ------------ EXCHANGE TRADED FUND -- 2.2% FINANCE -- 2.2% iShares Russell 2000 Value Index Fund .......................................... 29,025 2,225,637 ------------ TOTAL EXCHANGE TRADED FUND (Cost $2,218,698) .......................... 2,225,637 ------------ TEMPORARY INVESTMENT -- 7.3% PNC Bank Money Market Account 4.46%, 09/04/07 ............................... 7,405 7,404,782 ------------ TOTAL TEMPORARY INVESTMENT (Cost $7,404,782) .......................... 7,404,782 ------------ TOTAL INVESTMENTS -- 99.7% (Cost $98,314,033) ............................ 100,797,923 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.3% ........................... 254,076 ------------ NET ASSETS -- 100.0% ............................. $101,051,999 ============ - ------------- * Non-income producing. The accompanying notes are an integral part of the financial statements. 14 THE SCHNEIDER FUNDS STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 2007
SCHNEIDER SCHNEIDER VALUE FUND SMALL CAP VALUE FUND -------------- -------------------- ASSETS Investment securities at value (cost -- $360,081,184 and $98,314,033, respectively) ................................................ $367,965,171 $100,797,923 Receivable for investments sold .............................................. 226,192 596,397 Receivable for capital shares sold ........................................... 509,670 10,000 Dividends and interest receivable ............................................ 309,273 70,775 Prepaid expenses and other assets ............................................ 49,261 18,138 ------------ ------------ Total Assets .............................................................. 369,059,567 101,493,233 ------------ ------------ LIABILITIES Payable for investments purchased ............................................ 2,705,520 304,647 Payable to the Investment Adviser ............................................ 205,775 55,410 Payable for capital shares redeemed .......................................... 1,229,110 -- Accrued expenses payable and other liabilities ............................... 126,378 81,177 ------------ ------------ Total Liabilities ......................................................... 4,266,783 441,234 ------------ ------------ NET ASSETS Capital stock, $0.001 par value .............................................. $ 15,770 $ 5,303 Additional paid-in capital ................................................... 344,386,961 100,261,195 Undistributed net investment income .......................................... 1,903,773 1,550,169 Accumulated net realized gain (loss) from investments and foreign exchange transactions .............................................................. 10,602,293 (3,249,003) Net unrealized appreciation on foreign exchange transactions ................. -- 445 Net unrealized appreciation on investments ................................... 7,883,987 2,483,890 ------------ ------------ Net assets applicable to shares outstanding .................................. $364,792,784 $101,051,999 ============ ============ Shares outstanding ............................................................. 15,769,491 5,302,682 ============ ============ Net asset value, offering and redemption price per share ....................... $ 23.13 $ 19.06 ============ ============
The accompanying notes are an integral part of the financial statements. 15 THE SCHNEIDER FUNDS STATEMENTS OF OPERATIONS
SCHNEIDER SCHNEIDER VALUE FUND SMALL CAP VALUE FUND --------------- -------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2007 --------------- --------------- INVESTMENT INCOME Dividends* ................................................................... $ 4,646,038 $ 3,543,369 Interest ..................................................................... 3,153 10,816 ----------- ----------- Total investment income ................................................... 4,649,191 3,554,185 ----------- ----------- EXPENSES Advisory fees ................................................................ 2,005,831 1,200,714 Administration services fees ................................................. 429,821 180,107 Administration and accounting fees ........................................... 400,184 182,886 Transfer agent fees .......................................................... 79,001 39,001 Custodian fees ............................................................... 78,816 45,991 Directors' and officer's fees ................................................ 72,380 43,409 Professional fees ............................................................ 63,000 45,911 Registration and filing fees ................................................. 46,159 21,064 Printing and shareholder reporting fees ...................................... 36,600 31,498 Other expenses ............................................................... 9,265 8,478 ----------- ----------- Total expenses before waivers ............................................. 3,221,057 1,799,059 Less: waivers ................................................................ (785,405) (478,273) ----------- ----------- Net expenses after waivers ................................................... 2,435,652 1,320,786 ----------- ----------- Net investment income .......................................................... 2,213,539 2,233,399 ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS: Net realized gain/(loss) from: Investments ............................................................... 14,261,911 519,595 Foreign currency transactions ............................................. 559 (3,233) Net change in unrealized appreciation (depreciation) on: Investments ............................................................... (1,724,233) (2,038,501) Foreign currency transactions ............................................. (66) 14 ----------- ----------- Net realized and unrealized gain/(loss) from investments and foreign currency transactions ..................................................... 12,538,171 (1,522,125) ----------- ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $14,751,710 $ 711,274 =========== ===========
- ------------------ *Net of foreign withholding taxes of $11,528 and $30,376, for the Value Fund and Small Cap Value Fund, respectively. The accompanying notes are an integral part of the financial statements. 16 THE SCHNEIDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS
SCHNEIDER VALUE FUND ---------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- INCREASE IN NET ASSETS RESULTING FROM OPERATIONS Net investment income........................................................ $ 2,213,539 $ 556,972 Net realized gain from investments and foreign currency transactions......... 14,262,470 7,473,955 Net change in unrealized appreciation/(depreciation) on investments and foreign currency transactions.............................................. (1,724,299) 559,672 ------------ ------------ Net increase in net assets resulting from operations ........................ 14,751,710 8,590,599 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ....................................................... (736,868) (252,120) Net realized capital gains .................................................. (9,518,612) (4,199,642) ------------ ------------ Total dividends and distributions to shareholders ......................... (10,255,480) (4,451,762) ------------ ------------ INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (SEE NOTE 4) .... 221,008,583 74,002,970 ------------ ------------ Total increase in net assets .............................................. 225,504,813 78,141,807 NET ASSETS Beginning of year ........................................................... 139,287,971 61,146,164 ------------ ------------ End of year* ................................................................ $364,792,784 $139,287,971 ============ ============
- -------------- * Includes undistributed net investment income of $1,903,773 and $464,908 for the fiscal years ended August 31, 2007 and 2006, respectively. The accompanying notes are an integral part of the financial statements. 17 THE SCHNEIDER FUNDS STATEMENTS OF CHANGES IN NET ASSETS
SCHNEIDER SMALL CAP VALUE FUND ---------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS Net investment income ....................................................... $ 2,233,399 $ 245,826 Net realized gain from investments and foreign currency transactions, if any. 516,362 14,842,122 Net change in unrealized appreciation/(depreciation) on investments and foreign currency transactions, if any ..................................... (2,038,487) (9,646,598) ------------ ------------ Net increase in net assets resulting from operations ........................ 711,274 5,441,350 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ....................................................... (925,644) -- Net realized capital gains .................................................. (15,428,129) (9,923,966) ------------ ------------ Total dividends and distributions to shareholders ......................... (16,353,773) (9,923,966) ------------ ------------ INCREASE (DECREASE) IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS (SEE NOTE 4) ................................................................ 11,602,727 54,411,324 ------------ ------------ Total increase/(decrease) in net assets ................................... (4,039,772) 49,928,708 NET ASSETS Beginning of year ........................................................... 105,091,771 55,163,063 ------------ ------------ End of year* ................................................................ $101,051,999 $105,091,771 ============ ============
- -------------- * Includes undistributed net investment income of $1,550,169 and $245,647 for the fiscal years ended August 31, 2007 and 2006, respectively. The accompanying notes are an integral part of the financial statements. 18 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 respective periods. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31, FOR THE PERIOD ------------------------------------------------------- SEPTEMBER 30, 2002* 2007 2006 2005 2004 THROUGH AUGUST 31, 2003 ---------- ---------- ---------- ---------- ------------------------- PER SHARE OPERATING PERFORMANCE** Net asset value, beginning of period....... $ 21.16 $ 20.55 $ 18.22 $ 14.81 $ 10.00 Net investment income...................... 0.14 0.10 0.07 0.04 0.07 Net realized and unrealized gain from investments and foreign currency transactions............................ 2.99 1.99 3.40 4.05 4.77 ------- ------- ------- ------- ------- Net increase in net assets resulting from operations.............................. 3.13 2.09 3.47 4.09 4.84 ------- ------- ------- ------- ------- Dividends and distributions to shareholders from: Net investment income...................... (0.08) (0.08) (0.05) (0.06) (0.03) Net realized capital gains................. (1.08) (1.40) (1.09) (0.62) 0.00 ------- ------- ------- ------- ------- Total dividends and distributions to shareholders............................ (1.16) (1.48) (1.14) (0.68) (0.03) ------- ------- ------- ------- ------- Redemption fees (Note 4)+.................. -- -- -- -- -- ------- ------- ------- ------- ------- Net asset value, end of period............. $ 23.13 $ 21.16 $ 20.55 $ 18.22 $ 14.81 ======= ======= ======= ======= ======= Total investment return(1)................. 14.88% 10.85% 19.37% 28.21% 48.46% ======= ======= ======= ======= ======= RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted).. $364,793 $139,288 $61,146 $38,406 $11,788 Ratio of expenses to average net assets(2). 0.85% 0.85% 0.85% 0.85% 0.85%(3) Ratio of expenses to average net assets without waivers and expense reimbursements.......................... 1.12% 1.27% 1.38% 1.96% 4.01%(3) Ratio of net investment income to average net assets(2)........................... 0.77% 0.69% 0.41% 0.35% 0.72%(3) Portfolio turnover rate.................... 131.75% 104.92% 76.66% 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. + Amount is less than $0.01 per share. (1) Total investment return is calculated by 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) Reflects waivers and reimbursements. (3) Annualized. The accompanying notes are an integral part of the financial statements. 19 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 respective years. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
FOR THE YEARS ENDED AUGUST 31, ---------------------------------------------------------------------- 2007 2006 2005 2004 2003 ---------- ---------- ---------- ---------- ---------- PER SHARE OPERATING PERFORMANCE* Net asset value, beginning of year................... $ 21.96 $ 24.94 $ 29.09 $ 22.52 $ 14.82 Net investment income/(loss)......................... 0.43 0.05 (0.10) (0.13) 0.10 Net realized and unrealized gain on investments and foreign currency transactions................. 0.15 1.66 8.01 8.50 7.71 ------- ------- ------- ------- ------- Net increase in net assets resulting from operations................................... 0.58 1.71 7.91 8.37 7.81 ------- ------- ------- ------- ------- Dividends and distributions to shareholders from: Net investment income................................ (0.20) -- -- (0.11) (0.03) Net realized capital gains........................... (3.28) (4.69) (12.06) (1.69) (0.08) ------- ------- ------- ------- ------- Total dividends and distributions to shareholders.... (3.48) (4.69) (12.06) (1.80) (0.11) ------- ------- ------- ------- ------- Redemption fees (Note 4)+............................ -- -- -- -- -- ------- ------- ------- ------- ------- Net asset value, end of year......................... $ 19.06 $ 21.96 $ 24.94 $ 29.09 $ 22.52 ======= ======= ======= ======= ======= Total investment return(1)........................... 0.72% 7.79% 31.57% 37.99% 53.10% ======= ======= ======= ======= ======= RATIO/SUPPLEMENTAL DATA Net assets, end of year (000's omitted).............. $101,052 $105,092 $55,163 $48,845 $48,920 Ratio of expenses to average net assets(2)........... 1.10% 1.10% 1.10% 1.10% 1.10% Ratio of expenses to average net assets without waivers and expense reimbursements................ 1.50% 1.56% 1.71% 1.74% 1.85% Ratio of net investment income to average net assets(2)..................................... 1.81% 0.29% (0.41)% (0.49)% 0.53% Portfolio turnover rate.............................. 75.21% 91.45% 68.87% 110.69% 85.33%
- ------------------ * Calculated based on shares outstanding on the first and last day of the respective year, except for dividends and distributions, if any, which are based on actual shares outstanding on the dates of distributions. + Amount is less than $0.01 per share. (1) Total investment return is calculated by assuming a purchase of shares on the first day and a sale of shares on the last day of each year reported and includes reinvestments of dividends and distributions, if any. (2) Reflects waivers and reimbursements. The accompanying notes are an integral part of the financial statements. 20 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Schneider Value Fund (the "Value Fund") and the Schneider Small Cap Value Fund (the "Small Cap 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 Institutional Class shares. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen 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." PORTFOLIO VALUATION -- Each Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York Stock Exchange ("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 the National Association of Securities Dealers Automatic Quotation System (NASDAQ) market system where they are primarily traded. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed Income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed Income securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Foreign securities are valued based on prices from the primary market in which they are traded, and are translated from the local currency into U.S. dollars using current exchange rates. Investments in other open-end investment companies are valued based on the NAV of the investment companies (which may use Fair Value Pricing as discussed in their prospectuses). If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. 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. 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. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Each fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in 21 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 proportion to net assets). Expenses incurred for all of the RBB fund 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 and other foreign 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. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income and distributions from net realized capital gains, if any, are declared, recorded on ex-date and paid at least annually to shareholders. Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from generally accepted accounting principles. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is each 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 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. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Schneider Capital Management Company ("SCM" or the "Adviser") serves as each Fund's investment adviser. For its advisory services, SCM is entitled to receive 0.70% of the Value Fund's average daily net assets and 1.00% of the Small Cap Value Fund's average daily net assets, computed daily and payable monthly. The Adviser contractually agreed to limit the Value Fund's and the Small Cap Value Fund's total operating expenses for the current fiscal year to the extent that such expenses exceed 1.10% and 0.85%, respectively, of the Fund's average daily net assets. As necessary, this limitation is effected in waivers of advisory fees and reimbursements of other Fund expenses. For the year ended August 31, 2007, investment advisory fees and waivers of expenses were as follows: GROSS ADVISORY FEES WAIVERS NET ADVISORY FEES ------------------- ----------- ----------------- Schneider Value Fund $2,005,831 $(447,913) $1,557,918 Schneider Small Cap Value Fund 1,200,714 (315,180) 885,534 22 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 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"), 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 Funds. 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 voluntarily agreed to waive a portion of its administration and accounting services fees for the Funds. For the year ended August 31, 2007, PFPC's administration and accounting services fees and waivers of the Funds' expenses were as follows: GROSS ADMINISTRATION NET ADMINISTRATION AND ACCOUNTING AND ACCOUNTING SERVICES FEES WAIVERS SERVICES FEES -------------------- --------- ------------------ Schneider Value Fund $400,184 $ -- $400,184 Schneider Small Cap Value Fund 182,886 (7,000) 175,886 Included in the administration and accounting services fees and expenses, shown above, are fees for providing regulatory administration services to RBB. For providing these services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio of the Company in proportion to its net assets of the RBB Funds. In addition, PFPC serves as the Funds' transfer and dividend disbursing agent. For providing transfer agent 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. For the year ended August 31, 2007, transfer agency fees for the Funds were as follows: TRANSFER AGENT FEES -------------- Schneider Value Fund $79,001 Schneider Small Cap Value Fund 39,001 For providing custodian services, PFPC Trust Company, a wholly-owned subsidiary of PFPC Worldwide, Inc. and an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., is entitled to receive a monthly fee equal to an annual rate of 0.015% of each Fund's average daily gross assets, subject to a minimum monthly fee of $1,000 per Fund, excluding transaction changes and out-of-pocket expenses. For the year ended August 31, 2007, custodial fees for the Funds were as follows: CUSTODIAN FEES ------------ Schneider Value Fund $78,816 Schneider Small Cap Value Fund 45,991 23 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 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 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 voluntarily agreed to waive a portion of its administrative services fees for the Funds. For the year ended August 31, 2007, administrative services fees and related waivers for the Funds were as follows: GROSS ADMINISTRATIVE NET ADMINISTRATIVE SERVICES FEES WAIVERS SERVICES FEES -------------- ----------- ------------------ Schneider Value Fund $429,821 $(337,492) $92,329 Schneider Small Cap Value Fund 180,107 (156,093) 24,014 As of August 31, 2007, the Value Fund and Small Cap Value Fund owed PFPC and affiliates $80,306 and $27,163, respectively, for their services. 3. INVESTMENT IN SECURITIES For the year ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: PURCHASES SALES -------------- ------------- Schneider Value Fund $523,798,756 $338,703,600 Schneider Small Cap Value Fund 82,262,223 85,779,273 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, 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:
SCHNEIDER VALUE FUND --------------------------------------------------------------------------------- FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR ENDED --------------------------------- --------------------------------- AUGUST 31, 2007 AUGUST 31, 2006 --------------------------------- --------------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------- ---------- ------------- Sales............................... 11,605,311 $278,680,701 4,443,203 $ 91,030,986 Reinvestments....................... 425,249 9,755,495 207,467 4,014,476 Redemption Fees*.................... -- 128,850 -- 14,610 Repurchases......................... (2,845,025) (67,556,463) (1,041,833) (21,057,102) ---------- ------------ ---------- ------------ Net increase........................ 9,185,535 $221,008,583 3,608,837 $ 74,002,970 ========== ============ ========== ============
24 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007
SCHNEIDER SMALL CAP VALUE FUND --------------------------------------------------------------------------------- FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR ENDED --------------------------------- --------------------------------- AUGUST 31, 2007 AUGUST 31, 2006 --------------------------------- --------------------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------- ---------- ------------- Sales............................... 383,516 $ 8,837,271 2,429,768 $ 52,132,162 Reinvestments....................... 734,073 15,907,358 465,188 9,727,086 Redemption Fees*.................... -- 25,324 -- 20,792 Repurchases......................... (599,605) (13,167,226) (322,165) (7,468,716) ---------- ------------ --------- ------------ Net increase/(decrease)............. 517,984 $ 11,602,727 2,572,791 $ 54,411,324 ========== ============ ========= ============
* There is a 1.00% redemption fee on shares redeemed which have been held less than 90 days in the Schneider Value Fund. 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. The redemption fees are retained by the Funds for the benefit of the remaining shareholders and recorded as paid-in capital. As of August 31, 2007, the following shareholders held 10% or more of the outstanding shares of the Fund. These shareholders may be omnibus accounts which are comprised of many individual shareholders. Schneider Value Fund (1 shareholder) 10% Schneider Small Cap Value Fund (2 shareholders) 31% 5. FEDERAL INCOME TAX INFORMATION At August 31, 2007, 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 Value Fund $364,797,045 $39,743,880 $(36,575,754) $3,168,126 Schneider Small Cap Value Fund 100,551,998 13,052,472 (12,806,547) 245,925
The following permanent differences as of August 31, 2007, primarily attributable to nontaxable distributions and foreign currency transactions, were reclassified to the following accounts: UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED INCOME (LOSS) GAIN/(LOSS) ---------------- -------------- Schneider Value Fund $(37,806) $37,806 Schneider Small Cap Value Fund (3,233) 3,233 25 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 At August 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS --------------- --------------- Schneider Value Fund $11,581,781 $5,640,146 Schneider Small Cap Value Fund 1,553,402 -- At August 31, 2007, 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, 2007, there were no post-October losses incurred in the Schneider Value Fund. The Schneider Small Cap Value Fund incurred post-October capital and currency losses of $1,011,038 and $3,233, 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 INCOME LONG-TERM GAINS TOTAL ----------------- ----------------- ------------- Schneider Value Fund 2007 $3,136,316 $ 7,119,164 $10,255,480 2006 1,814,478 2,637,284 4,451,762 Schneider Small Cap Value Fund 2007 $5,629,426 $10,724,347 $16,353,773 2006 1,391,355 8,532,611 9,923,966
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal tax purposes. 26 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2007 6. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Funds' tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. The Adviser has recently begun to evaluate the application of FIN 48 to the Funds, and is not in a position at this time to estimate the significance of its impact, if any, on the Funds' financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the impact, if any, of the SFAS on the Funds' financial statements. 27 THE SCHNEIDER FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF DIRECTORS AND SHAREHOLDERS 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 "Funds") at August 31, 2007, the results of each of their operations for the year then ended, the changes in each of their net assets for each of 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 Funds' 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 26, 2007 28 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 TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Corporation; Comcast Corporation Vice Chairman, Comcast AMDOCS Limited (service 1500 Market Street, Corporation (cable provider to 35th Floor television and telecommunications Philadelphia, PA 19102 communications); Director, companies) DOB: 7/16/33 NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director 2006 to present Consultant, financial 16 Kalmar Pooled Investment 103 Bellevue Parkway services organizations Trust (registered Wilmington, DE 19809 from 1997 to present. investment company); WT DOB: 03/7/43 Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice 16 None Fox Chase Cancer Center President, Fox Chase 333 Cottman Avenue Cancer Center (biomedical Philadelphia, PA 19111 research and medical care). DOB: 12/06/35 - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 29 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group 16 None 106 Pierrepont Street Capital Partners, L.P. Brooklyn, NY 11201 Director 1991 to present (an investment partnership) DOB: 5/21/48 from 2000 to 2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director 2006 to present Dean and Professor of Law, 16 WT Mutual Fund Villanova University Villanova University School (registered investment School of Law of Law since July 1997. company); NYSE 299 North Spring Mill Road Regulation, Inc.; Villanova, PA 19085 Financial Industry DOB: 4/28/51 Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, 16 Moyco Technologies, Inc. Moyco Technologies, Inc. Director and President, 200 Commerce Drive Moyco Technologies, Inc. Montgomeryville, PA 18936 (manufacturer of precision DOB: 3/24/34 coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director 2006 to present Member, New York State 16 Reich and Tang Group 300 East 57th Street Assembly (1981-2004); Founding (asset management); The New York, NY 10022 Partner, Straniere Law Firm Sparx Japan Funds Group DOB: 3/28/41 (1980 to date); Partner, (registered investment Kanter-Davidoff (law firm) company) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 30 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior 16 Kensington Funds Oppenheimer & Company, Inc. Vice President and prior (registered investment 200 Park Avenue thereto, Executive Vice company) New York, NY 10166 President of Oppenheimer DOB: 4/16/38 & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 16 Cornerstone Bank 103 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc., 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 31 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public Accountant; N/A N/A 103 Bellevue Parkway and 1988 to present Vice Chairman of the Board, Wilmington, DE 19809 Treasurer Fox Chase Cancer Center; DOB: 6/29/24 Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 President, Vigilant Compliance N/A N/A Vigilant Compliance Services Compliance Services since 2004; Senior 186 Dundee Drive, Officer Legal Counsel, PFPC Inc. from Suite 700 2002 to 2004; Chief Legal Williamstown, NJ 08094 Counsel, Corviant Corporation DOB: 12/25/62 (Investment Adviser, Broker- Dealer and Service Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
32 THE SCHNEIDER FUNDS 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, 2007, the following dividends and distributions per share were paid by each of the Funds:
ORDINARY INCOME -------------------------------------------- NET INVESTMENT INCOME SHORT-TERM GAINS LONG-TERM GAINS --------------------- ---------------- --------------- Schneider Value Fund $0.08 $0.27 $0.81 Schneider Small Cap Value Fund 0.20 1.00 2.28
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. The percentage of total ordinary income dividends qualifying for the 15% dividend income tax rate is 36% for the Schneider Value Fund and 18% for the Schneider Small Cap Value Fund. The percentage of total ordinary income dividends qualifying for the corporate dividends received deduction is 38% for the Schneider Value Fund and 17% for the Schneider Small Cap Value Fund. These amounts were reported to shareholders as income in 2006. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. 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 2008. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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) 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 ("SEC") website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES The Company will file a complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q will be available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS As required by the 1940 Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the 1940 Act (the "Independent Directors"), considered the renewal of the investment advisory agreement between SCM and the Company (the "Advisory Agreement") on behalf of the Funds at a meeting of the Board held on May 24, 2007. At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Funds; (ii) descriptions of the experience and qualifications of the Adviser's personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Funds; (ix) the extent to which economies of scale are relevant to the Funds; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Funds' management fees and total expense ratios to those of their respective Lipper peer group and comparing the performance of each Fund to the performance of its Lipper peer group; and (xi) a report comparing the performance of each Fund to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. 34 THE SCHNEIDER FUNDS OTHER INFORMATION (CONCLUDED) (UNAUDITED) The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors considered each Fund's gross and net advisory fees and actual total expense ratios in comparison to those of each Fund's Lipper peer group median as well as each Fund's performance in comparison to the performance of the Fund's Lipper performance universe median. The Directors also reviewed the advisory fees in comparison to the fees SCM charges for managing assets for other clients. The Directors began with an evaluation of the Small Cap Value Fund, considering that the contractual management fee was higher than the Lipper peer group median while the actual management fee and actual total expenses were lower than the Lipper peer group median. The Directors noted that the Fund had outperformed its Lipper peer median group for the one, two, three, four and five-year periods ended March 31, 2007. The Directors also noted that the Small Cap Value Fund was then open only to existing shareholders. The Directors reviewed the advisory fees charged by Schneider Capital to manage other clients' assets in a similar strategy as that of the Small Cap Value Fund and found the fees charged to the Small Cap Value Fund after waivers ranked very favorably compared to fees charged to separate accounts with an asset size and investment objective similar to that of the Fund. The Directors then noted that Schneider Capital agreed to waive its advisory fee and reimburse expenses of the Small Cap Value Fund through December 31, 2007 to limit the Fund's total annual operating expenses to 1.10%. Next, the Directors evaluated the Value Fund, considering that the contractual management fee was slightly lower than the Lipper peer group median while the actual management fee and actual total expenses after waivers were lower than the Lipper peer group median. The Value Fund had outperformed the Lipper group median for the one, two, three and four year periods ended March 31, 2007. The Directors reviewed the advisory fees charged by Schneider Capital to manage other clients' assets in a similar strategy as that of the Value Fund and found the fees charged to the Fund to be lower (after waivers) than fees charged to separate accounts with an asset size and investment objective similar to that of the Fund. The Directors then noted that Schneider Capital agreed to waive its advisory fee and reimburse expenses of the Value Fund through December 31, 2007 to limit the Fund's total annual operating expenses to 0.85%. The Directors, and separately, the Independent Directors, then determined that the nature, extent and quality of services provided by SCM in advising the Funds was satisfactory; the profits earned by SCM seemed reasonable; and the benefits derived by SCM from managing the Funds, including its use of soft dollars and its method for selecting brokers, seemed reasonable. The Directors discussed and considered any economies of scale realized by each Fund as a result of asset growth. Based on all of the information presented to the Board and its consideration of relevant factors, the Board concluded that the advisory fee structure was reasonable and determined that the Adviser's Advisory Agreement be continued for another one-year period ending August 16, 2008. 35 THE SCHNEIDER FUNDS PRIVACY NOTICE THE SCHNEIDER FUNDS of The RBB Fund, Inc. (the "Funds") are 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 Funds. 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 Funds 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 Funds consider 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. 36 [THIS PAGE INTENTIONALLY LEFT BLANK.] [THIS PAGE INTENTIONALLY LEFT BLANK.] [THIS PAGE INTENTIONALLY LEFT BLANK.] INVESTMENT ADVISER Schneider Capital Management 460 E. Swedesford Road Suite 1080 Wayne, PA 19087 ADMINISTRATOR PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 101 Sabin Street Pawtucket, RI 02860 PRINCIPAL UNDERWRITER 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 ================================================================================ BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND OF THE RBB FUND, INC. ANNUAL REPORT AUGUST 31, 2007 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution unless preceded or accompanied by a current prospectus for the Fund. 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. 1 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND ANNUAL REPORT (UNAUDITED) - -------------------------------------------------------------------------------- Fellow Shareholder: For the fiscal year ended August 31, 2007, the Fund's Investor shares advanced +10.15% (net of fees), the Institutional shares gained +10.29%, and the unmanaged Russell 2000(R) Index of small cap stocks returned +11.37%. The Fund fell about one percentage point behind its benchmark for the period due to poor performance during the volatile month of August 2007 (discussed further below). The Fund outperformed its benchmark for all multi-year periods ending August 31, 2007, and is ahead of benchmark since inception nearly eight years ago. The Fund's returns since inception (Investor and Institutional Classes), 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 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. The U.S. equity market advanced for most of the fiscal year, save for a sharp but brief downturn in late February through early March and a difficult stretch in the summer, most notably from the middle of July through the middle of August. Kicking off the fiscal year, the Fund's benchmark Russell 2000(R) posted positive results in each month from September through January. Benchmark returns remained positive for most of February but then dropped sharply on February 27th, as a plunge in the Chinese market caused fears of a global economic slowdown. Concerns were further exacerbated by increasing trouble in the U.S. subprime mortgage market. Market volatility spiked in late-February then declined as market participants shook off their concerns. Despite ongoing mortgage-related fears, U.S. equities resumed their advance in March, April and May, against a backdrop of strong first quarter earnings announcements and robust M&A activity. Rising long-term interest rates pressured U.S. market performance in June and early July, and markets tumbled in the second half of July on fears of a global credit and liquidity crunch. Market results remained volatile into August as a liquidity crisis began to unfold. The desire for liquidity in the equity markets could be seen in rapid share turnover, as the median holding period for Russell 2000(R) stocks went from five to three months in a matter of days. This liquidity crisis, which severely hurt Fund performance, occurred entirely within the first seven trading days of August. Russell 2000(R) results were positive during this seven day period, completely masking the significant turmoil in certain segments of the market. Conditions started to stabilize on August 10th and improved further on August 17th when the Federal Reserve stepped in to ease conditions in the credit markets. For the fiscal year, small cap stocks, as measured by the Russell 2000(R) Index, advanced +11.37%, underperforming large cap stocks, as measured by the Russell 1000(R) Index, which earned +15.27%. This marked the first time in the last eight fiscal years that large caps have outperformed small caps according to Russell benchmarks. The market environment for the latest fiscal year favored growth over value, as the Russell 2000(R) Growth Index beat the Russell 2000(R) Value Index in eight out of twelve months and by nearly 10 percentage points for the fiscal period (up +16.35% versus +6.64%). Small cap basic industry and industrial stocks produced particularly robust results, and small cap technology and consumer growth stocks also outperformed the benchmark. Small cap financial and energy stocks generally lagged the overall small cap market for the fiscal period. Finally, the anti-momentum environment that we described in last year's letter persisted through November of 2006 and then shifted in December with conditions much more favorable for managers with earnings momentum exposure through most of the rest of the fiscal year. At the same time, investors appeared less concerned about relative valuation, according to our models, than at any other time since the 1999/early-2000 technology-driven equity market bubble. 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(R) INDEX (UNAUDITED) ================================================================================ [CHART OMITTED - EDGAR REPRESENTATION OF DATA FOLLOWS] - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2007 -------------------------------------------------- GROWTH ONE FIVE SINCE OF $10,000 YEAR YEARS INCEPTION(3) ---------- ---- ----- ----------- BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND -- INSTITUTIONAL CLASS $34,039 10.29% 17.23% 16.73% RUSSELL 2000(R) INDEX $20,471 11.37% 16.59% 9.47% - -------------------------------------------------------------------------------- BOGLE INSTITUTIONAL SHARES RUSSELL 2000(R) INDEX -------------------------- ---------------------- 9/30/99 10,000 10,000 10/31/99 10,325 10,041 11/30/99 11,350 10,640 12/31/99 13,016 11,844 1/31/00 12,583 11,654 2/29/00 14,825 13,578 3/31/00 15,100 12,683 4/30/00 14,691 11,919 5/31/00 14,258 11,225 6/30/00 15,933 12,204 7/31/00 15,758 11,811 8/31/00 17,425 12,712 9/30/00 17,116 12,338 10/31/00 17,091 11,788 11/30/00 15,221 10,578 12/31/00 16,506 11,486 1/31/01 16,851 12,084 2/28/01 15,850 11,291 3/31/01 15,074 10,739 4/30/01 16,644 11,579 5/31/01 17,196 11,863 6/30/01 17,549 12,273 7/31/01 17,385 11,609 8/31/01 16,834 11,233 9/30/01 15,186 9,721 10/31/01 15,954 10,290 11/30/01 16,601 11,087 12/31/01 17,368 11,772 1/31/02 17,670 11,649 2/28/02 17,282 11,330 3/31/02 18,515 12,240 4/30/02 18,903 12,351 5/31/02 18,144 11,804 6/30/02 17,523 11,218 7/31/02 15,178 9,524 8/31/02 15,376 9,500 9/30/02 14,212 8,818 10/31/02 14,358 9,101 11/30/02 14,902 9,912 12/31/02 14,315 9,360 1/31/03 14,212 9,101 2/28/03 13,824 8,826 3/31/03 13,858 8,940 4/30/03 15,135 9,788 5/31/03 16,696 10,838 6/30/03 17,239 11,034 7/31/03 18,670 11,725 8/31/03 19,585 12,262 9/30/03 19,395 12,036 10/31/03 21,396 13,046 11/30/03 22,465 13,510 12/31/03 22,732 13,784 1/31/04 24,224 14,382 2/29/04 24,224 14,511 3/31/04 23,991 14,647 4/30/04 22,534 13,900 5/31/04 22,706 14,121 6/30/04 23,707 14,716 7/31/04 22,275 13,725 8/31/04 21,551 13,654 9/30/04 22,913 14,295 10/31/04 22,739 14,577 11/30/04 24,494 15,841 12/31/04 25,199 16,310 1/31/05 24,341 15,630 2/28/05 25,304 15,894 3/31/05 24,532 15,439 4/30/05 23,378 14,555 5/31/05 24,827 15,508 6/30/05 25,628 16,106 7/31/05 27,440 17,126 8/31/05 27,440 16,809 9/30/05 28,079 16,861 10/31/05 27,834 16,338 11/30/05 29,603 17,131 12/31/05 29,581 17,052 1/31/06 32,640 18,581 2/28/06 32,762 18,530 3/31/06 34,209 19,429 4/30/06 35,265 19,426 5/31/06 32,429 18,335 6/30/06 32,073 18,453 7/31/06 30,315 17,852 8/31/06 30,860 18,381 9/30/06 31,326 18,533 10/31/06 32,870 19,601 11/30/06 33,590 20,116 12/31/06 34,158 20,183 1/31/07 34,834 20,520 2/28/07 34,461 20,358 3/31/07 34,916 20,575 4/30/07 35,733 20,946 5/31/07 37,088 21,805 6/30/07 37,310 21,486 7/31/07 34,766 20,016 8/31/07 34,039 20,471 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 1-877-264-5346. 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. THE PERFORMANCE QUOTED REFLECTS FEE WAIVERS IN EFFECT AND WOULD HAVE BEEN LESS IN THEIR ABSENCE. THE FUND'S ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS, IS 1.43% FOR THE INSTITUTIONAL CLASS PRIOR TO FEE WAIVERS. - -------------- (1) The chart and table assume a hypothetical $10,000 initial investment in the Fund made on October 1, 1999 (inception) and reflect 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. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (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. (3) For the period October 1, 1999 (commencement of operations) through August 31, 2007. 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(R) INDEX (UNAUDITED) ================================================================================ [CHART OMITTED - EDGAR REPRESENTATION OF DATA FOLLOWS] - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2007 -------------------------------------------------- GROWTH ONE FIVE SINCE OF $10,000 YEAR YEARS INCEPTION(3) ---------- ---- ----- ----------- BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND -- INVESTOR CLASS $33,816 10.15% 17.11% 16.64% RUSSELL 2000(R) INDEX $20,471 11.37% 16.59% 9.47% - -------------------------------------------------------------------------------- BOGLE INVESTOR SHARES RUSSELL 2000(R) INDEX --------------------- --------------------- 9/30/99 10,000 10,000 10/31/99 10,325 10,041 11/30/99 11,350 10,640 12/31/99 13,008 11,844 1/31/00 12,583 11,654 2/29/00 14,825 13,578 3/31/00 15,100 12,683 4/30/00 14,691 11,919 5/31/00 14,250 11,225 6/30/00 15,925 12,204 7/31/00 15,750 11,811 8/31/00 17,408 12,712 9/30/00 17,100 12,338 10/31/00 17,075 11,788 11/30/00 15,213 10,578 12/31/00 16,497 11,486 1/31/01 16,842 12,084 2/28/01 15,833 11,291 3/31/01 15,057 10,739 4/30/01 16,627 11,579 5/31/01 17,179 11,863 6/30/01 17,524 12,273 7/31/01 17,369 11,609 8/31/01 16,808 11,233 9/30/01 15,169 9,721 10/31/01 15,937 10,290 11/30/01 16,575 11,087 12/31/01 17,334 11,772 1/31/02 17,644 11,649 2/28/02 17,248 11,330 3/31/02 18,498 12,240 4/30/02 18,878 12,351 5/31/02 18,119 11,804 6/30/02 17,498 11,218 7/31/02 15,161 9,524 8/31/02 15,350 9,500 9/30/02 14,186 8,818 10/31/02 14,333 9,101 11/30/02 14,876 9,912 12/31/02 14,290 9,360 1/31/03 14,186 9,101 2/28/03 13,798 8,826 3/31/03 13,833 8,940 4/30/03 15,109 9,788 5/31/03 16,661 10,838 6/30/03 17,196 11,034 7/31/03 18,628 11,725 8/31/03 19,533 12,262 9/30/03 19,343 12,036 10/31/03 21,344 13,046 11/30/03 22,405 13,510 12/31/03 22,672 13,784 1/31/04 24,156 14,382 2/29/04 24,156 14,511 3/31/04 23,923 14,647 4/30/04 22,465 13,900 5/31/04 22,638 14,121 6/30/04 23,630 14,716 7/31/04 22,207 13,725 8/31/04 21,482 13,654 9/30/04 22,836 14,295 10/31/04 22,662 14,577 11/30/04 24,398 15,841 12/31/04 25,113 16,310 1/31/05 24,236 15,630 2/28/05 25,209 15,894 3/31/05 24,436 15,439 4/30/05 23,282 14,555 5/31/05 24,722 15,508 6/30/05 25,524 16,106 7/31/05 27,326 17,126 8/31/05 27,326 16,809 9/30/05 27,946 16,861 10/31/05 27,709 16,338 11/30/05 29,457 17,131 12/31/05 29,446 17,052 1/31/06 32,485 18,581 2/28/06 32,607 18,530 3/31/06 34,044 19,429 4/30/06 35,080 19,426 5/31/06 32,262 18,335 6/30/06 31,895 18,453 7/31/06 30,157 17,852 8/31/06 30,692 18,381 9/30/06 31,149 18,533 10/31/06 32,685 19,601 11/30/06 33,407 20,116 12/31/06 33,949 20,183 1/31/07 34,628 20,520 2/28/07 34,254 20,358 3/31/07 34,713 20,575 4/30/07 35,518 20,946 5/31/07 36,864 21,805 6/30/07 37,085 21,486 7/31/07 34,549 20,016 8/31/07 33,816 20,471 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 1-877-264-5346. 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. THE PERFORMANCE QUOTED REFLECTS FEE WAIVERS IN EFFECT AND WOULD HAVE BEEN LESS IN THEIR ABSENCE. THE FUND'S ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS, IS 1.53% FOR THE INVESTOR CLASS PRIOR TO FEE WAIVERS. - -------------- (1) The chart and table assume a hypothetical $10,000 initial investment in the Fund made on October 1, 1999 (inception) and reflect 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. The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. (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. (3) For the period October 1, 1999 (commencement of operations) through August 31, 2007. 4 PERFORMANCE ATTRIBUTION. For the fiscal year, the Fund's Investor Class of shares lagged behind the benchmark Russell 2000(R) by -1.22%, net of all fees, and the Institutional Class of shares underperformed by -1.08%, net of all fees. The Fund's fiscal year performance relative to its benchmark turned positive in December of last year, and the Fund maintained its relative lead until the end of July. Then, extreme market-relative losses in the first seven trading days of August more than wiped out the Fund's fiscal-year-to-date performance advantage. During this period, our investment models suffered amid very large liquidations at other managers, many of which were highly leveraged, with similar exposures. The Fund recovered about two-thirds of the early-month drawdown to finish the fiscal year just behind the benchmark, net of fees. For the fiscal year overall, our composite investment model failed to add value, and relative valuation model results were notably negative. Recall that our composite investment model is comprised of fundamentally-based, quantitatively implemented investment signals that evaluate financial quality, earnings improvement, and relative valuation. Both the earnings improvement and financial quality models produced positive returns for the fiscal year. As is usually the case, monthly gains and losses were mostly attributed to stock selection and model performance, rather than to any sector or style biases. Stock selection was strongest in financial and energy stocks and was most negative in the basic industry and utility sectors. The Fund's sector exposure and growth orientation added modestly to the year's results. As of the end of the fiscal year, the Fund remained well diversified, holding 169 stocks, with the largest holding representing just 1.4% of portfolio assets. This diversification limits the impact any single stock can have on total Fund performance. Still, stock-specific examples of investment performance can be illustrative, and a few follow. One of our top performing stocks for the fiscal year was Dade Behring Holdings Inc., which makes instruments and other products used in clinical laboratories. The stock entered our portfolio in mid-2003 because of its attractive earnings improvement and relative valuation rankings. As we entered this most recent fiscal year, its earnings score had deteriorated but its favorable financial quality score suggested to us that earnings could strengthen further. After first quarter earnings were announced, the stock's earnings score improved, while its financial quality and relative valuation continued to be attractive. In July 2007, Dade agreed to be purchased by Siemens AG. In the technology sector, top performers included Ceragon Networks Ltd., an Israeli wireless technology provider. This stock was purchased for the Fund in May 2007, late in the fiscal year, but still made a significant contribution to Fund performance. According to our signals, the company continues to demonstrate conservative accounting coupled with an ability to grow earnings. An example of an underperforming investment in the fiscal year was Interstate Hotels & Resorts, one of the largest independent hotel management companies. We established this position last year based on the stock's attractive earnings and relative valuation scores. Despite recent difficulties, as of the fiscal year end the stock continues to look attractive relative to its peers. - ------------------- Please see p. 11 for information regarding specific portfolio allocations. Portfolio holdings are subject to change at any time. 5 FUND CHARACTERISTICS. Since we seek to add value through stock selection rather than through predictions of broad market or sector movements, we strive to remain fully invested with sector exposures that look similar to the benchmark Russell 2000(R). We also seek to maintain Fund characteristics in line with the benchmark, as shown in the table to the right. As of the end of August, the Fund had a small bias toward companies with somewhat higher long-term earnings growth rates. The Fund's median price-to-earnings and price-to-sales ratios were below benchmark, reflecting the influence of our relative valuation model. The Fund's median market capitalization remained modestly below the benchmark. The Fund also continued to have below-benchmark exposure at the small end of the capitalization range, with 10% of the Fund invested in stocks with capitalization below $357 million, while the Russell 2000 bottom decile was below $407 million. The Fund's fiscal-year period active risk (the volatility of fund performance relative to benchmark), at 8.9%, was slightly higher than the Fund's long-term average of 6.5%, due to the severe volatility in August, discussed above. 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 underperformed our benchmark for the fiscal year by approximately one percentage point, unfortunately due entirely to losses in August. While our experience in August has not led to immediate changes to the investment process, we will continue to focus on innovation and incorporate into the investment process any new investment signals we believe will add value. We now have the benefit of data from an extreme liquidity crisis that we can analyze in an attempt to reduce our exposure to a similar liquidity crisis in the future, should one occur. Our early research suggests that we could not have completely escaped the drawdown while having maintained the level of value added we have achieved over the history of the firm. On client service we remain at a grade of B. There is always room for improvement in this area, particularly in your day-to-day contact with shareholder services. Although shareholder inquiries and transactions are outsourced to PFPC, Inc., we encourage you to let us know if we can assist in this area or if you have any feedback on your experience. We are committed to answering your questions promptly and addressing problems quickly. PROGRESS AT BOGLE INVESTMENT MANAGEMENT. During the latest fiscal year our staff expanded to thirteen full-time employees, with five professionals dedicated to portfolio management and research, and eight focused on client service, operations and compliance. At the end of August 2007, assets in the Fund were $333 million. The Fund remains closed to new investors. - -------------------------------------------------------------------------------- FUNDAMENTAL CHARACTERISTICS AUGUST 31, 2007 RUSSELL 2000(R) MEDIAN BOGLX INDEX - -------- ------- -------- Market Cap. (mil.) $989 $1,162 Estimated Long-Term Earnings Growth Rate 17.0% 15.0% Price/Historical Earnings 18.6x 21.5x Price/Forward Earnings 16.2x 17.5x Price/Sales 1.6x 1.9x RISK STATISTICS* -- FISCAL YEAR PERIOD - -------------------------------------- Annualized Standard Dev. 17.7% 16.8% Annualized Active Risk 8.9% Beta with Russell 2000(R) 0.92 Cash 1.3% *STANDARD DEVIATION IS A STATISTICAL MEASURE OF THE RANGE OF PERFORMANCE. BETA IS A MEASURE OF A PORTFOLIO'S SENSITIVITY TO MARKET MOVEMENTS. - -------------------------------------------------------------------------------- 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. As always, thank you for your ongoing support. Please let us know if there is any way we can improve your investment experience with us. Respectfully, Bogle Investment Management, L.P. Management Office: 781-283-5000 Shareholder Services Toll Free: 1-877-BOGLEIM (264-5346) - ---------------- 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 1-877-264-5346. 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. THE PERFORMANCE QUOTED REFLECTS FEE WAIVERS IN EFFECT AND WOULD HAVE BEEN LESS IN THEIR ABSENCE. THE FUND'S ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS, IS 1.53% FOR THE INVESTOR CLASS AND 1.43% FOR THE INSTITUTIONAL CLASS PRIOR TO FEE WAIVERS. ALL FIGURES SHOWN REPRESENT TOTAL RETURN, WHICH IS BASED ON NET CHANGE IN NAV WITH REINVESTMENT OF ALL DISTRIBUTIONS. FIGURES FOR PERIODS GREATER THAN ONE YEAR ARE ANNUALIZED. THE RUSSELL 2000(R) INDEX IS AN UNMANAGED INDEX OF SMALL-CAP STOCKS. UNLIKE A MUTUAL FUND, THE PERFORMANCE OF AN INDEX IS NOT AFFECTED BY TRANSACTION COSTS, MANAGEMENT FEES, TAXES OR OTHER EXPENSES. A DIRECT INVESTMENT IN AN 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 GROWTH FUND FUND EXPENSE EXAMPLES (UNAUDITED) 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 Fund 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 six-month period from March 1, 2007 through August 31, 2007, 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 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 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.
INSTITUTIONAL CLASS ------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------------- -------------------- ---------------------- Actual $1,000.00 $ 987.50 $6.26 Hypothetical (5% return before expenses) 1,000.00 1,018.82 6.38
8 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND EXPENSE EXAMPLES (CONCLUDED) (UNAUDITED)
INVESTOR CLASS ------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ------------------------- -------------------- ---------------------- Actual $1,000.00 $ 987.00 $6.76 Hypothetical (5% return before expenses) 1,000.00 1,018.31 6.89
- ------------------ *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 (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Fund's ending account values on the first line in each table are based on the actual six-month total return for each class of (1.25)% for the Institutional Class and (1.30)% for the Investor Class. 9 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 % OF NET SECURITY TYPE & SECTOR CLASSIFICATION ASSETS VALUE - -------------------------------------------------------------------------------- COMMON STOCKS: Technology 23.0% $ 76,751,992 Industrial 19.9 66,237,349 Consumer Growth 19.6 65,379,554 Financial 16.1 53,744,645 Consumer Cyclical 10.4 34,548,769 Energy 5.0 16,619,423 Basic Industry 1.7 5,473,373 Utility 0.9 2,955,648 EXCHANGE TRADED FUND 2.8 9,293,680 SHORT-TERM INVESTMENTS 2.7 9,064,064 LIABILITIES IN EXCESS OF OTHER ASSETS (2.1) (6,901,647) ----- ------------- NET ASSETS 100.0% $ 333,166,850 ===== ============= - ---------------- Portfolio holdings are subject to change at any time. The accompanying notes are an integral part of the financial statements. 10 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 NUMBER OF SHARES VALUE --------- ------------- COMMON STOCKS--96.6% BASIC INDUSTRY--1.7% Brush Engineered Materials, Inc.* ............ 16,200 $ 782,460 Cabot Corp. .................................. 19,000 766,460 Methanex Corp. ............................... 92,100 2,076,855 Spartech Corp. ............................... 85,300 1,847,598 ------------ 5,473,373 ------------ CONSUMER CYCLICAL--10.4% Ameristar Casinos, Inc. ...................... 35,200 1,017,632 Brown Shoe Co., Inc. ......................... 106,600 2,434,744 Columbia Sportswear Co. ...................... 23,200 1,390,144 Cooper Tire & Rubber Co. ..................... 118,700 2,901,028 Eddie Bauer Holdings, Inc.* .................. 41,100 320,580 Gmarket, Inc. - ADR* ......................... 33,400 661,654 Interstate Hotels & Resorts, Inc.* ........... 379,700 1,480,830 J. Crew Group, Inc.* ......................... 61,700 3,073,277 Jack in the Box, Inc.* ....................... 45,600 2,837,232 Jakks Pacific, Inc.* ......................... 71,600 1,608,852 Lions Gate Entertainment Corp.* .............. 139,200 1,322,400 Longs Drug Stores Corp. ...................... 43,300 2,283,209 Midwest Air Group, Inc.* ..................... 62,600 1,015,998 Netflix, Inc.* ............................... 52,900 926,808 Northwest Airlines Corp.* .................... 115,500 2,145,990 PC Connection, Inc.* ......................... 163,600 2,103,896 PC Mall, Inc.* ............................... 154,600 1,896,942 Ryder System, Inc. ........................... 41,700 2,283,075 Town Sports International Holdings, Inc.* ........................... 101,300 1,829,478 Universal Electronics, Inc.* ................. 35,000 1,015,000 ------------ 34,548,769 ------------ CONSUMER GROWTH--19.6% AMERIGROUP Corp.* ............................ 66,300 2,099,721 Apria Healthcare Group, Inc.* ................ 74,900 1,994,587 Aspreva Pharmaceuticals Corp.* ............... 78,500 1,518,975 NUMBER OF SHARES VALUE --------- ------------- CONSUMER GROWTH--(CONTINUED) Axcan Pharma, Inc.* .......................... 122,500 $ 2,337,300 Bradley Pharmaceuticals, Inc.* ............... 51,400 1,005,384 Capella Education Co.* ....................... 18,100 912,421 Centene Corp.* ............................... 106,700 2,156,407 Chemed Corp. ................................. 44,700 2,773,188 Cholestech Corp.* ............................ 50,200 1,038,638 Conmed Corp.* ................................ 78,200 2,271,710 Cynosure, Inc., Class A* ..................... 80,800 2,535,504 Dade Behring Holdings, Inc. .................. 63,100 4,764,681 Elizabeth Arden, Inc.* ....................... 108,700 2,674,020 Emergency Medical Services Corp., Class A* ... 68,400 1,919,304 Greatbatch, Inc.* ............................ 72,400 2,172,000 Healthspring, Inc.* .......................... 125,200 2,339,988 Herbalife Ltd.* .............................. 62,400 2,648,880 Imperial Sugar Co. ........................... 78,500 2,256,875 Kinetic Concepts, Inc.* ...................... 20,500 1,232,255 Medcath Corp.* ............................... 82,000 2,406,700 Medtox Scientific, Inc.* ..................... 118,600 2,228,494 Nash Finch Co. ............................... 57,700 2,164,327 NBTY, Inc.* .................................. 65,700 2,411,190 Pall Corp. ................................... 53,900 2,055,207 PerkinElmer, Inc. ............................ 74,300 2,036,563 Spartan Stores, Inc. ......................... 91,000 2,315,040 West Pharmaceutical Services, Inc. ........... 49,700 1,990,485 Wimm Bill Dann Foods OJSC - ADR .............. 33,800 3,459,768 Winn-Dixie Stores, Inc.* ..................... 83,000 1,737,190 Zoll Medical Corp.* .......................... 83,200 1,922,752 ------------ 65,379,554 ------------ ENERGY--5.0% Advanced Energy Industries, Inc.* ............ 75,800 1,230,234 Core Laboratories N.V.* ...................... 17,000 1,905,700 Dawson Geophysical Co.* ...................... 33,400 2,266,524 Delek US Holdings, Inc. ...................... 87,100 2,388,282 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, 2007 NUMBER OF SHARES VALUE --------- ------------- ENERGY--(CONTINUED) NATCO Group, Inc., Class A* .................. 53,100 $ 2,651,814 Tesoro Corp. ................................. 50,600 2,496,098 USEC, Inc.* .................................. 109,700 1,468,883 W-H Energy Services, Inc.* ................... 34,800 2,211,888 ------------ 16,619,423 ------------ FINANCIAL--16.1% Allied World Assurance Holdings Ltd. ......... 51,300 2,463,426 Amerisafe, Inc.* ............................. 155,900 2,564,555 Amtrust Financial Services, Inc. ............. 172,500 2,823,825 Arch Capital Group Ltd.* ..................... 41,500 2,980,945 Argo Group International Holdings Ltd.* ...... 11,578 472,151 Assured Guaranty Ltd. ........................ 79,300 2,067,351 Calamos Asset Management, Inc., Class A ...... 110,000 2,554,200 Cowen Group, Inc.* ........................... 90,200 1,152,756 Endurance Specialty Holdings, Ltd. ........... 60,500 2,412,135 Evercore Partners, Inc., Class A ............. 84,500 1,770,275 EZCORP, Inc., Class A* ....................... 153,700 1,870,529 Interactive Brokers Group, Inc., Class A* .... 80,700 2,159,532 Interactive Data Corp. ....................... 103,500 2,829,690 Labranche & Co., Inc.* ....................... 198,000 1,245,420 Max Capital Group Ltd. ....................... 86,500 2,375,290 Meadowbrook Insurance Group, Inc.* ........... 218,400 1,928,472 Nelnet, Inc., Class A ........................ 19,100 337,306 Odyssey Re Holdings Corp. .................... 55,900 2,024,698 Penson Worldwide, Inc.* ...................... 92,800 1,456,960 Phoenix Cos, Inc., (The) ..................... 166,500 2,306,025 Platinum Underwriters Holdings Ltd. .......... 63,000 2,184,840 Reinsurance Group of America, Inc. ........... 47,800 2,596,018 NUMBER OF SHARES VALUE --------- ------------- FINANCIAL--(CONTINUED) RLI Corp. .................................... 28,000 $ 1,684,200 Safety Insurance Group, Inc. ................. 19,500 665,730 SeaBright Insurance Holdings, Inc.* .......... 114,200 1,967,666 Security Capital Assurance Ltd. .............. 113,600 2,309,488 Selective Insurance Group, Inc. .............. 30,900 651,990 United America Indemnity Ltd., Class A* ...... 87,300 1,889,172 ------------ 53,744,645 ------------ INDUSTRIAL--19.9% Accuride Corp.* .............................. 100,000 1,297,000 Acuity Brands, Inc. .......................... 40,800 2,143,632 American Railcar Industries, Inc. ............ 76,400 2,004,736 ASE Test Ltd.* ............................... 176,500 2,076,522 AZZ, Inc.* .................................. 78,000 2,215,200 CDI Corp. .................................... 65,800 1,881,880 Con-way, Inc. ................................ 47,500 2,302,800 Consolidated Graphics, Inc.* ................. 37,200 2,465,616 Cubic Corp. .................................. 71,400 2,822,442 Diamond Management & Technology Consultants, Inc. .......................... 113,500 1,142,945 Encore Wire Corp. ............................ 89,200 2,319,200 EnerSys* ..................................... 66,500 1,200,990 Gardner Denver, Inc.* ........................ 65,100 2,598,141 General Cable Corp. .......................... 30,200 1,757,036 Genesis Lease Ltd. - ADR ..................... 87,800 2,064,178 Global Industries Ltd.* ...................... 101,900 2,463,942 GrafTech International Ltd.* ................. 137,100 2,301,909 H&E Equipment Services, Inc.* ................ 56,200 1,155,472 Horizon Lines, Inc., Class A ................. 79,100 2,231,411 Hudson Highland Group, Inc.* ................. 54,700 766,894 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, 2007 NUMBER OF SHARES VALUE --------- ------------- INDUSTRIAL--(CONTINUED) Huron Consulting Group, Inc.* ................ 12,600 $ 832,230 ICF International, Inc.* ..................... 105,000 2,586,150 Intevac, Inc.* ............................... 74,899 1,223,850 Labor Ready, Inc.* ........................... 108,700 2,269,656 Mueller Industries, Inc. ..................... 67,900 2,352,056 Pacer International, Inc. .................... 24,100 521,042 Perini Corp.* ................................ 18,100 1,024,460 Robbins & Myers, Inc. ........................ 60,000 3,250,800 Rollins, Inc. ................................ 37,600 998,656 Source Interlink Cos, Inc.* .................. 188,600 784,576 Steelcase, Inc., Class A ..................... 97,500 1,719,900 Sun Hydraulics Corp. ......................... 74,400 2,060,136 TeleTech Holdings, Inc.* ..................... 69,500 2,032,875 Thomas & Betts Corp.* ........................ 44,400 2,459,316 TransDigm Group, Inc.* ....................... 51,000 2,073,150 Viad Corp. ................................... 23,400 836,550 ------------ 66,237,349 ------------ TECHNOLOGY--23.0% Alvarion Ltd.* ............................... 60,700 714,439 Amkor Technology, Inc.* ...................... 193,000 2,223,360 Analogic Corp. ............................... 29,600 2,044,176 Ariba, Inc.* ................................. 89,800 790,240 ASM International N.V.* ...................... 85,100 2,319,826 Aspen Technology, Inc.* ...................... 208,500 2,735,520 Avici Systems, Inc.* ......................... 207,400 2,005,558 BigBand Networks, Inc.* ...................... 77,900 786,790 C-COR, Inc.* ................................. 179,000 2,060,290 Ceragon Networks Ltd.* ....................... 214,200 3,609,270 Chordiant Software, Inc.* .................... 156,700 2,341,098 COMSYS IT Partners, Inc.* .................... 105,900 2,013,159 Credence Systems Corp.* ...................... 444,744 1,307,547 ECI Telecom Ltd.* ............................ 117,200 1,095,820 Gigamedia Ltd.* .............................. 186,900 2,459,604 Global Sources Ltd.* ......................... 111,280 2,145,479 Greenfield Online, Inc.* ..................... 150,500 2,173,220 InfoSpace, Inc.* ............................. 11,500 161,115 Interwoven, Inc.* ............................ 164,100 2,138,223 NUMBER OF SHARES VALUE --------- ------------- TECHNOLOGY--(CONTINUED) Magma Design Automation, Inc.* ............... 59,100 $ 812,034 Move, Inc.* .................................. 623,070 1,869,210 Novell, Inc.* ................................ 213,500 1,588,440 Omnicell, Inc.* .............................. 89,100 2,150,874 Quidel Corp.* ................................ 137,000 2,326,260 RF Micro Devices, Inc.* ...................... 330,300 1,965,285 S1 Corp.* .................................... 298,200 2,325,960 Shanda Interactive Entertainment Ltd. - ADR* . 99,800 2,980,028 Shutterfly, Inc. ............................. 96,000 2,684,160 Sierra Wireless, Inc.* ....................... 89,000 2,035,430 Silicon Motion Technology Corp. - ADR* ....... 86,500 1,868,400 SonicWALL, Inc.* ............................. 230,200 1,975,116 Spansion, Inc., Class A* ..................... 109,000 991,900 SPSS, Inc.* .................................. 57,400 2,339,050 Synchronoss Technologies, Inc.* .............. 91,600 3,182,184 Taleo Corp., Class A ......................... 21,400 493,270 ValueClick, Inc.* ............................ 51,200 1,026,048 Veeco Instruments, Inc.* ..................... 44,700 786,720 Verigy Ltd.* ................................. 113,000 2,985,460 Vignette Corp.* .............................. 117,600 2,294,376 Vocus, Inc.* ................................. 39,200 980,000 Zoran Corp.* ................................. 113,900 1,967,053 ------------ 76,751,992 ------------ UTILITY--0.9% Rural Cellular Corp., Class A* ............... 68,800 2,955,648 ------------ TOTAL COMMON STOCKS(Cost $297,428,378) ... 321,710,753 ------------ 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, 2007 NUMBER OF SHARES VALUE --------- ------------- EXCHANGE TRADED FUND--2.8% iShares Russell 2000 Index Fund .......... 118,000 $ 9,293,680 ------------ TOTAL EXCHANGE TRADED FUNDS (Cost $9,236,111) .................... 9,293,680 ------------ SHORT TERM INVESTMENTS--2.7% Columbia Prime Reserves Fund 5.24% 09/04/07 ......................... 9,064,064 9,064,064 ------------ TOTAL SHORT TERM INVESTMENTS (Cost $9,064,064) .................... 9,064,064 ------------ TOTAL INVESTMENTS--102.1% (Cost $315,728,553) ....................... 340,068,497 LIABILITIES IN EXCESS OF OTHER ASSETS--(2.1)% ..................... (6,901,647) ------------ NET ASSETS--100.0% .......................... $333,166,850 ============ - ---------------- * Non-income producing. ADR -- American 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, 2007 ASSETS Investments, at value (cost -- $315,728,553) ................ $340,068,497 Receivable for investments sold ............................. 8,617,474 Receivable for capital shares sold .......................... 64,147 Dividends receivable ........................................ 190,285 Prepaid expenses and other assets ........................... 29,722 ------------ Total assets .............................................. 348,970,125 ------------ LIABILITIES Payable for investments purchased ........................... 15,068,444 Payable for capital shares redeemed ......................... 314,827 Payable to the Adviser ...................................... 286,029 Accrued expenses and other liabilities ...................... 133,975 ------------ Total liabilities ......................................... 15,803,275 ------------ NET ASSETS Capital stock, $0.001 par value ............................. 13,589 Paid-in capital ............................................. 269,932,419 Accumulated net realized gain from investments .............. 38,880,898 Net unrealized appreciation on investments .................. 24,339,944 ------------ Net assets ................................................ $333,166,850 ============ INSTITUTIONAL CLASS Net assets .................................................. $197,415,120 ------------ Shares outstanding .......................................... 8,021,592 ------------ Net asset value, offering and redemption price per share .... $ 24.61 ============ INVESTOR CLASS Net assets .................................................. $135,751,730 ------------ Shares outstanding .......................................... 5,567,230 ------------ Net asset value, offering and redemption price per share .... $ 24.38 ============ 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, 2007 ----------------- INVESTMENT INCOME Dividends (Net of foreign withholding taxes of $9,916) ... $3,391,269 ----------- Total investment income .................................. 3,391,269 ----------- EXPENSES Advisory fees ............................................ 3,567,388 Administrative service fees .............................. 535,108 Administration and accounting fees ....................... 488,126 Shareholder servicing fees ............................... 152,286 Transfer agent fees ...................................... 135,273 Custodian fees ........................................... 107,022 Directors' and officers' fees ............................ 91,899 Professional fees ........................................ 79,285 Printing and shareholder reporting fees .................. 46,784 Registration and filing fees ............................. 36,718 Other expenses ........................................... 27,887 ----------- Total expenses before waivers .......................... 5,267,776 Less: waivers .......................................... (656,255) ----------- Net expenses ........................................... 4,611,521 ----------- Net investment loss ...................................... (1,220,252) ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS Net realized gain from investments. ...................... 40,649,625 Net change in unrealized appreciation on investments ..... (4,334,599) ----------- Net realized and unrealized gain from investments. ....... 36,315,026 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $35,094,774 =========== 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, 2007 AUGUST 31, 2006 ----------------- ---------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS Net investment loss ................................................ $ (1,220,252) $ (2,060,076) Net realized gain from investments ................................. 40,649,625 71,973,578 Net change in unrealized appreciation on investments ............... (4,334,599) (31,952,428) ------------ ------------- Net increase in net assets resulting from operations ............... 35,094,774 37,961,074 ------------ ------------- LESS DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized capital gains--Institutional shares ................... (39,206,310) (24,436,958) Net realized capital gains--Investor shares ........................ (30,588,836) (18,402,660) ------------ ------------- Total distributions to shareholders .............................. (69,795,146) (42,839,618) ------------ ------------- INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS(1) ..... 30,476,008 30,856,922 ------------ ------------- Total increase (decrease) in net assets ............................ (4,224,364) 25,978,378 ------------ ------------- NET ASSETS Beginning of year .................................................. 337,391,214 311,412,836 ------------ ------------- End of year ........................................................ $333,166,850 $ 337,391,214 ============ =============
- --------------- (1) See Note 4 in the Notes to Financial Statements. 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 years. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
INSTITUTIONAL CLASS ------------------------------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED 8/31/07 8/31/06 8/31/05 8/31/04 8/31/03 ------------- ----------- ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year .............. $ 27.74 $ 28.78 $ 24.99 $ 22.71 $ 17.83 ------- -------- ------- ------- ------- Net investment loss ............................. (0.08)* (0.16)* (0.22) (0.16)* (0.11)* Net realized and unrealized gain from investments .............................. 2.74 3.08 6.49 2.44 4.99 ------- -------- ------- ------- ------- Net increase in net assets resulting from operations ............................... 2.66 2.92 6.27 2.28 4.88 ------- -------- ------- ------- ------- Distributions to shareholders from: Net realized capital gains ...................... (5.79) (3.96) (2.48) -- -- ------- -------- ------- ------- ------- Net asset value, end of year .................... $ 24.61 $ 27.74 $ 28.78 $ 24.99 $ 22.71 ======= ======== ======= ======= ======= Total investment return(1) ...................... 10.29% 12.46% 27.34% 10.04% 27.37% ======= ======== ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) ......... $197,415 $189,920 $177,359 $175,642 $132,845 Ratio of expenses to average net assets with waivers and reimbursements .................... 1.25% 1.25% 1.25% 1.25% 1.25% Ratio of expenses to average net assets without waivers and reimbursements ........... 1.43% 1.43% 1.46% 1.44% 1.50% Ratio of net investment loss to average net assets .................................... (0.30)% (0.55)% (0.73)% (0.61)% (0.60)% Portfolio turnover rate ......................... 142.45% 126.64% 129.18% 129.18% 122.39%
- ------------------- * Calculated based on average shares outstanding for the year. (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. 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 years. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
INVESTOR CLASS ------------------------------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED 8/31/07 8/31/06 8/31/05 8/31/04 8/31/03 ------------- ----------- ------------ ------------ ------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year .............. $ 27.56 $ 28.65 $ 24.91 $ 22.65 $ 17.80 ------- -------- ------- ------- ------- Net investment loss ............................. (0.10)* (0.18)* (0.23) (0.18)* (0.12)* Net realized and unrealized gain from investments .............................. 2.71 3.05 6.45 2.44 4.97 ------- -------- ------- ------- ------- Net increase in net assets resulting from operations ............................... 2.61 2.87 6.22 2.26 4.85 ------- -------- ------- ------- ------- Distributions to shareholders from: Net realized capital gains ...................... (5.79) (3.96) (2.48) -- -- ------- -------- ------- ------- ------- Net asset value, end of year .................... $ 24.38 $ 27.56 $ 28.65 $ 24.91 $ 22.65 ======= ======== ======= ======= ======= Total investment return(1) ...................... 10.15% 12.33% 27.22% 9.98% 27.25% ======= ======== ======= ======= ======= RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) ......... $135,752 $147,471 $134,054 $124,031 $112,508 Ratio of expenses to average net assets with waivers and reimbursements .................... 1.35% 1.35% 1.35% 1.35% 1.35% Ratio of expenses to average net assets without waivers and reimbursements ............ 1.53% 1.53% 1.56% 1.54% 1.60% Ratio of net investment loss to average net assets .................................... (0.40)% (0.65)% (0.83)% (0.70)% (0.69)% Portfolio turnover rate ......................... 142.45% 126.64% 129.18% 129.18% 122.39%
- ----------------- * Calculated based on average shares outstanding for the year. (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. 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" or the "Company") 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 sixteen 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 one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen 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." PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York Stock Exchange ("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 the National Association of Securities Dealers Automatic Quotation System (NASDAQ) market system where they are primarily traded. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed income securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Investments in other open-end investment companies are valued based on the NAV of those investment companies (which may use fair value pricing as discussed in their prospectuses). If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. 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. 20 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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 fund 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 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 dividends 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. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. 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 Bogle Investment Management, L.P. (the "Adviser" or "Bogle") serves as the Fund's investment adviser. 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 contractually 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. The contractual fee waiver does not provide for recoupment of fees that were waived or expenses that were 21 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) reimbursed. For the year ended August 31, 2007, investment advisory fees and waivers of the Fund were as follows: GROSS NET ADVISORY FEES WAIVERS ADVISORY FEES -------------- ------------ -------------- $3,567,388 $(147,902) $3,419,486 The Fund will not pay the Adviser at a later time for any amounts waived or any amounts assumed. In addition to serving as the Fund's investment adviser, Bogle 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, subject to a minimum of $6,250 per month. The Fund also pays a monthly multiple class fee of $1,875 per additional class. In addition, PFPC serves as the Fund's transfer and dividend disbursing agent. PFPC voluntarily agreed to waive a portion of its administration and accounting services fees for the Fund. For the year ended August 31, 2007, administration and accounting services fees and waivers of the Fund were as follows: GROSS ADMINISTRATION NET ADMINISTRATION AND ACCOUNTING AND ACCOUNTING SERVICES FEES WAIVERS SERVICES FEES -------------- ------------ ------------------- $488,126 $(44,592) $443,534 Included in the administration and accounting services fees and expenses, shown above, are fees for providing regulatory administration services to RBB. For providing these services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to its net assets of the RBB Funds. In addition, PFPC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agent services, PFPC is entitled to receive a monthly fee subject to a minimum monthly fee of $6,000 plus out of pocket expenses.For the year ended August 31, 2007, PFPC transfer agency fees were $135,273. 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. 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 subject to a minimum monthly fee of $1,500. 22 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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, 2007, administrative services fees and waivers of the Fund were as follows: GROSS ADMINISTRATIVE NET ADMINISTRATIVE SERVICES FEES WAIVERS SERVICES FEES --------------------- ------------ ------------------- $535,108 $(463,761) $71,347 The Fund will not pay PFPC or PFPC's affiliates at a later time for any amounts waived or any amounts assumed. As of August 31, 2007, the Fund owed PFPC and its affiliates $59,094 for their services. 3. INVESTMENT IN SECURITIES For the year ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments) of the Fund were as follows: INVESTMENT SECURITIES ----------------------------------------------- PURCHASES SALES --------------- --------------- $500,603,367 $541,219,429 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, 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, 2007 AUGUST 31, 2006 ----------------------------- -------------------------------- SHARES VALUE SHARES VALUE ------------- -------------- ------------- -------------- Sales ................... 1,423,321 $ 35,662,955 942,943 $ 27,031,546 Reinvestments ........... 1,580,281 37,610,697 990,224 23,507,922 Redemptions ............. (1,827,260) (45,832,743) (1,249,516) (35,240,729) ----------- ------------ ---------- ------------ Net Increase ............ 1,176,342 $ 27,440,909 683,651 $ 15,298,739 =========== ============ ========== ============
23 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED)
INVESTOR CLASS ------------------------------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2007 AUGUST 31, 2006 ----------------------------- -------------------------------- SHARES VALUE SHARES VALUE ------------- -------------- ------------- -------------- Sales ................... 464,077 $ 11,597,939 524,556 $ 14,633,758 Reinvestments ........... 1,229,987 29,027,689 737,505 17,412,498 Redemptions ............. (1,477,245) (37,590,529) (591,148) (16,488,073) ----------- ------------ ---------- ------------ Net Increase ............ 216,819 $ 3,035,099 670,913 $ 15,558,183 =========== ============ ========== ============
5. FEDERAL INCOME TAX INFORMATION At August 31, 2007, 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 -------------- -------------- --------------- ----------------- $318,233,690 $44,710,138 $(22,875,331) $21,834,807
The following permanent differences as of August 31, 2007, attributable to the net investment loss were reclassified to the following accounts: INCREASE DECREASE ACCUMULATED ACCUMULATED NET INVESTMENT NET REALIZED LOSS GAIN ---------------- ---------------- $1,220,252 $(1,220,252) As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM INCOME GAINS ---------------- ---------------- $2,094,136 $39,291,899 At August 31, 2007, the Fund had no capital loss carryforwards available to offset future capital gains. 24 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) 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, 2007, 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 -------------- ---------------- ---------------- 2007 $22,923,470 $46,871,676 $69,795,146 2006 11,157,448 31,682,170 42,839,618 Distributions from net investment income and short-term capital gains are treated as ordinary income for federal tax purposes. 6. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. Management has recently begun to evaluate the application of FIN 48 to the Fund, and is not in a position at this time to estimate the significance of its impact, if any, on the Fund's financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the impact, if any, of the SFAS on the Fund's financial statements. 25 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders 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, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, 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, 2007 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 26, 2007 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, 2007, the following dividends and distributions per share were paid by the Fund: ORDINARY INCOME -------------------------------- NET INVESTMENT SHORT-TERM LONG-TERM INCOME GAINS GAINS -------------- --------------- ------------ Institutional Class $ -- $1.90 $3.89 Investor Class -- 1.90 3.89 Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. 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 2008. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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. The percentage of ordinary income dividends qualifying for the 15% dividend income tax rate is 9%. The percentage of ordinary income dividends qualifying for the corporate dividends received deduction is 10%. 27 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND OTHER INFORMATION (UNAUDITED) 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 ("SEC") website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES The Company will file its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q will be available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENT As required by the Investment Company Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the Investment Company Act (the "Independent Directors"), considered the renewal of the investment advisory agreement between Bogle and the Company (the "Advisory Agreement") on behalf of the Fund at a meeting of the Board held on May 24, 2007. At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Fund; (ii) descriptions of the experience and qualifications of the Adviser's personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Fund; (ix) the extent to which economies of scale are relevant to the Fund; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's 28 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND OTHER INFORMATION (CONTINUED) (UNAUDITED) advisory fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to the performance of its Lipper peer group; and (xi) a report comparing the performance of the Fund to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors considered that the Fund's advisory fees ranked below the Lipper peer group median; however, considering the Fund is closed to new investors at a low level of assets and the level of service that the Adviser provides to its clients, the advisory fee is reasonable in light of the Fund's return objectives. The Directors also considered that while the Fund's actual total expense ratio (including waivers) ranked below the median Lipper peer group, the Adviser has agreed to waive its advisory fee and reimburse expenses to limit annual operating expenses of the Institutional class and Investor class of the Fund to 1.25% and 1.35%, respectively. The Directors noted that the Fund's performance for the three and five year periods ended March 31, 2007 remain above the median performance for the peer group, although the one-year performance figures for both classes were below the peer group median. The Directors concluded that long term performance has been satisfactory, and that the relative performance of both classes has been improving since the end of 2006. The Directors then determined that the nature, extent and quality of services provided by the Adviser in advising the Fund was satisfactory; the profits earned by the Adviser over the long term seemed reasonable; and the benefits derived by the Adviser from managing the Fund, including its use of soft dollars and the process it uses to select brokers, seemed reasonable. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately, the Independent Directors, concluded that the advisory fee was reasonable and determined that the Adviser's Advisory Agreement be continued for another one-year period ending August 16, 2008. 29 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 Directors and is available without charge, upon request, by calling (888) 520-3277.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Corporation; Comcast Corporation Vice Chairman, Comcast AMDOCS Limited 1500 Market Street, Corporation (cable (service provider to 35th Floor television and telecommunications Philadelphia, PA 19102 communications); companies) DOB: 7/16/33 Director, NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial 16 Kalmar Pooled 103 Bellevue Parkway services organizations Investment Trust; WT Wilmington, DE 19809 from 1997 to present. Mutual Fund; DOB: 3/7/43 Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens) - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice 16 None Fox Chase Cancer Center President, Fox Chase 333 Cottman Avenue Cancer Center Philadelphia, PA 19111 (biomedical research DOB: 12/6/35 and medical care). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 30 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONTINUED)(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli 16 None 106 Pierrepont Street Group Capital Brooklyn, NY 11201 Director 1991 to present Partners, L.P. (an DOB: 5/21/48 investment partnership) from 2000 to 2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor 16 WT Mutual Fund Villanova University of Law, Villanova (registered School of Law University School of investment 299 North Spring Mill Road Law since July 1997. com-pany); NYSE Villanova, PA 19085 Regulation, Inc.; DOB: 4/28/51 Financial Industry Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, 16 Moyco Moyco Technologies, Inc. Chairman, Director Technologies, 200 Commerce Drive and President, Moyco Inc. Montgomeryville, PA 18936 Technologies, Inc. DOB: 3/24/34 (manufacturer of precision coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York 16 Reich and Tang Group 300 East 57th Street State Assembly (asset management); New York, NY 10022 (1981-2004); The Sparx Japan DOB: 3/28/41 Founding Partner, Funds Group Straniere Law Firm (registered (1980 to date); investment company) Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 31 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior 16 Kensington Funds Oppenheimer & Company, Inc. Vice President and prior (registered 200 Park Avenue thereto, Executive Vice investment company) New York, NY 10166 President of Oppenheimer DOB: 4/16/38 & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. 16 Cornerstone Bank 103 Bellevue Parkway from January 1987 to Wilmington, DE 19809 April 2002, Chairman and DOB: 9/25/38 Chief 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc., 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 32 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public Accountant; N/A N/A 103 Bellevue Parkway and 1988 to present Vice Chairman of the Board, Wilmington, DE 19809 Treasurer Fox Chase Cancer Center; DOB: 6/29/24 Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, Chief Since 2004 President, Vigilant N/A N/A CPA Vigilant Compliance Compliance Compliance Services since Services 186 Dundee Officer 2004; Senior Legal Drive, Suite 700 Counsel, PFPC Inc. from Williamstown, NJ 08094 2002 to 2004; Chief Legal DOB: 12/25/62 Counsel, Corviant Corporation (Investment Adviser, Broker-Dealer and Service Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
33 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] INVESTMENT ADVISER Bogle Investment Management, L.P. 2310 Washington Street Suite 310 Newton Lower Falls, MA 02462 ADMINISTRATOR PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 101 Sabin Street Pawtucket, RI 02860 PRINCIPAL UNDERWRITER 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 [GRAPHICS OMITTED] HILLIARD LYONS SENBANC FUND SENBANC OF THE RBB FUND, INC. ANNUAL REPORT AUGUST 31, 2007 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution unless preceded or accompanied by a current prospectus for the Fund. Shares of Senbanc Fund are distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA 19406. YEAR ENDED AUGUST 31, 2007 TO: SHAREHOLDERS OF SENBANC FUND When mortgage lenders are in competition for borrowers and capital is inexpensive, traditional pricing mechanisms break down. To gain an advantage beyond the cost of capital, lending institutions exercise two options successively: Lower capital contributions by borrowers and less stringent credit requirements for borrowers. Borrowers take advantage of these lower thresholds by locking in larger, longer term mortgages at low fixed rates, and by speculating that an extraordinary supply of capital in pursuit of a finite supply of housing might increaseproperty prices. Long term fixed rate mortgages at historically low rates carry the risk of lower margins to the lender if interest rates rise. Loans to borrowers with minimal capital commitment and less than stellar credit ratings are priced at a higher, limited maturity variable interest rate calculated to defray some of the lender's risk. As the volume of loan originations grew, bankers recognized the imbalance in their loan portfolios. Mortgages were bundled and securitized and sold into a secondary market at a discount representing the market's approximate valuation of the inherent risk, but mortgage servicing contracts in addition to origination fees provided a source of non-capital intensive fee income back to the banks. There was a period when banks created wholly-owned mortgage companies, but for the more astute bankers these entities were unwound or sold off when profitability waned, and before property prices began to stall. Senbanc Fund's ten largest holdings represent 68.9% of its total portfolio. Money center and large regional banks represent 85.7% of this group. Quality and consistency of earnings and profitability is the mainstay of our investment process. Only one bank in the Fund's portfolio was a direct sub-prime mortgage lender when that business turned sour, and that bank stock represents less than two thirds of one percent of the Senbanc portfolio. Recent earnings results for the majority of banks in the portfolio indicate that sub-prime lending has not impacted values proportionate to stock price declines that we have seen in these banks and, indeed, in the banking industry as a whole in the past year. Anecdotally, we would be challenged to construct a portfolio of bank stocks to be held over the past three years that could produce a similar combination of increased value and downside risk. With these qualities, a price/earnings ratio at a 31% discount to the Nasdaq Bank Index and a dividend yield fifty percent higher, we are positioned to benefit from any change of the perception that bank stocks may have in the public markets. The decline in your fund's assets from redemptions persisted through the June quarter. We are mindful of our responsibility to shareholders, and have in place a process that meets our obligation to redemptions without disturbing the balance of portfolio holdings. Very truly yours, /s/ A. F. Morel -------------- Alan F. Morel Portfolio Manager Senbanc Fund 1 SENBANC FUND GROWTH OF $10,000 VS. THE NASDAQ BANK INDEX AND THE S&P 500(R) INDEX - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURNS (AS OF 08/31/07) (Unaudited) 1 Year 5 Years Since Inception* ------- ------- ---------------- Senbanc Fund (N.A.V.) (7.47)% 7.44% 9.66% Senbanc Fund (Load) (9.55)% 6.96% 9.36% Nasdaq Bank Index** (5.10)% 7.57% 8.62% S&P 500(R) Index** 15.13 % 12.00% 2.31% - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA USED IN PRINTED GRAPHIC AS FOLLOWS: Senbanc Fund Senbanc Fund Nasdaq Bank S&P 500(R) (NAV) (Load) Index Index ------------ ------------ ----------- ---------- 7/8/99 $10,000 $10,000 $10,0003 $10,000 7/31/99 9,930 9,707 9,695 9,524 8/31/99 9,750 9,531 9,303 9,476 9/30/99 9,480 9,267 9,040 9,216 10/31/99 9,880 9,658 9,693 9,800 11/30/99 9,730 9,511 9,520 9,999 12/31/99 9,207 9,001 9,150 10,588 1/31/00 9,147 8,941 8,599 10,056 2/29/00 8,855 8,655 7,864 9,866 3/31/00 8,976 8,774 8,339 10,831 4/30/00 8,915 8,715 8,147 10,505 5/31/00 9,197 8,991 8,511 10,290 6/30/00 8,781 8,583 8,213 10,544 7/31/00 9,045 8,842 8,549 10,379 8/31/00 9,728 9,509 9,212 11,024 9/30/00 9,993 9,768 9,822 10,442 10/31/00 10,023 9,798 9,693 10,398 11/30/00 10,156 9,927 9,759 9,579 12/31/00 10,723 10,482 10,773 9,625 1/31/01 11,353 11,098 10,878 9,967 2/28/01 11,260 11,007 10,668 9,058 3/31/01 11,229 10,977 10,522 8,484 4/30/01 11,539 11,279 10,791 9,143 5/31/01 12,251 11,975 11,278 9,204 6/30/01 12,436 12,157 11,836 8,981 7/31/01 12,663 12,379 12,231 8,892 8/31/01 12,633 12,349 11,796 8,336 9/30/01 12,168 11,895 11,628 7,662 10/31/01 12,013 11,743 11,213 7,808 11/30/01 12,302 12,026 11,693 8,407 12/31/01 12,938 12,647 12,125 8,481 1/31/02 13,129 12,834 12,417 8,357 2/28/02 13,466 13,163 12,648 8,196 3/31/02 14,353 14,030 13,357 8,504 4/30/02 15,027 14,689 13,885 7,989 5/31/02 15,150 14,810 13,806 7,930 6/30/02 15,128 14,788 13,811 7,365 7/31/02 14,331 14,008 13,256 6,791 8/31/02 14,813 14,480 13,629 6,836 9/30/02 14,229 13,909 12,699 6,093 10/31/02 14,499 14,173 12,954 6,629 11/30/02 14,926 14,590 13,010 7,020 12/31/02 15,499 15,151 12,967 6,607 1/31/03 15,782 15,427 12,917 6,434 2/28/03 16,124 15,762 12,932 6,337 3/31/03 16,101 15,739 12,739 6,399 4/30/03 17,103 16,719 13,501 6,926 5/31/03 17,516 17,122 14,458 7,291 6/30/03 17,528 17,134 14,460 7,384 7/31/03 18,353 17,941 15,038 7,514 8/31/03 18,471 18,056 15,330 7,661 9/30/03 18,578 18,160 15,336 7,580 10/31/03 19,450 19,013 16,496 8,009 11/30/03 19,969 19,521 16,987 8,079 12/31/03 20,555 20,093 17,252 8,502 1/31/04 20,743 20,276 17,469 8,659 2/29/04 21,492 21,009 17,752 8,779 3/31/04 21,554 21,070 17,651 8,646 4/30/04 20,393 19,935 16,753 8,511 5/31/04 20,855 20,386 17,195 8,627 6/30/04 20,655 20,191 17,521 8,795 7/31/04 20,580 20,118 17,184 8,504 8/31/04 20,955 20,484 17,717 8,538 9/30/04 21,342 20,862 18,018 8,630 10/31/04 21,929 21,436 18,609 8,762 11/30/04 22,391 21,888 19,574 9,117 12/31/04 22,994 22,477 19,610 9,427 1/31/05 22,401 21,897 18,794 9,197 2/28/05 22,104 21,607 18,522 9,390 3/31/05 21,511 21,028 18,190 9,224 4/30/05 21,039 20,567 17,623 9,049 5/31/05 21,417 20,935 18,242 9,336 6/30/05 21,740 21,252 18,772 9,349 7/31/05 22,428 21,923 19,677 9,697 8/31/05 21,929 21,436 19,240 9,609 9/30/05 21,309 20,830 18,775 9,687 10/31/05 21,471 20,988 19,158 9,525 11/30/05 22,212 21,713 19,625 9,885 12/31/05 22,048 21,552 19,231 9,888 1/31/05 22,560 22,053 19,665 10,150 2/28/06 22,933 22,418 19,878 10,178 3/31/06 23,016 22,499 20,365 10,305 4/30/06 23,542 23,013 20,460 10,443 5/31/06 22,712 22,201 20,156 10,142 6/30/06 22,463 21,958 20,212 10,156 7/31/06 22,947 22,431 20,481 10,219 8/31/06 22,919 22,404 20,683 10,462 9/29/06 23,348 22,823 20,843 10,732 10/31/06 23,653 23,121 21,215 11,082 11/30/06 23,431 22,905 21,384 11,293 12/29/06 24,108 23,566 21,884 11,451 1/31/07 24,238 23,693 21,585 11,624 2/28/07 23,661 23,129 21,327 11,396 3/30/07 23,415 22,889 21,029 11,524 4/30/07 23,242 22,719 20,664 12,034 5/31/07 23,459 22,931 21,069 12,454 6/29/07 22,564 22,056 20,433 12,247 7/31/07 21,163 20,687 18,840 11,868 8/31/07 21,207 20,730 19,628 12,046 THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-800-444-1854 OR VISIT OUR WEB SITE AT WWW.HILLIARD.COM. THE SENBANC FUND (LOAD AND N.A.V.) RETURNS ASSUME REINVESTMENT OF ALL DISTRIBUTIONS. THE SENBANC FUND (LOAD) RETURN REFLECTS THE MAXIMUM SALES CHARGE OF 2.25%. AN EXPENSE LIMITATION WAS IN PLACE FOR THE FUND FROM JULY 8, 1999 (INCEPTION) THROUGH FEBRUARY 28, 2003. PERFORMANCE WOULD HAVE BEEN LOWER ABSENT THE EXPENSE LIMITATION. THE FUND'S GROSS ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 1.38%. THE PERFORMANCE IN THE ABOVE TABLE AND GRAPH DO NOT REFLECT THE DEDUCTION OF TAXES A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR REDEMPTION OF FUND SHARES. * The Fund commenced operations on July 8, 1999 as a series (the "Predecessor Fund") of Hilliard Lyons Research Trust. After the close of business on August 31, 2005, the Predecessor Fund was reorganized as a new series of The RBBFund, Inc. (the "Reorganization"). The performance shown for periods prior to September 1, 2005 represents the performance of the Predecessor Fund. ** The Nasdaq Bank Index is an unmanaged index of unlisted banks. The S&P 500(R) Index is an unmanaged stock market index. The index returns assume reinvestment of all dividends but, unlike the Fund, do not include any expenses associated with operating a mutual fund. *** As a result of the Reorganization, the Fund changed its fiscal year end from June 30 to August 31. The Fund may have invested in stocks that experienced significant gains; there is no guarantee that these gains will continue. As a non-diversified fund, a greater percentage of the Fund's portfolio may be invested in one company's securities than the portfolio of a diversified fund. As a result, the Fund may experience greater volatility in investment performance. PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 (UNAUDITED) % of Industry Classification Net Assets ----------------------- ---------- Savings, Credit & Other Financial Institutions ........ 98.5% State & National Banks ................................ 1.4 ----- 99.9 Other Assets in Excess of Liabilities ................. 0.1 ----- Net Assets ............................................ 100.0% ===== Portfolio holdings are subject to change at any time. 2 SENBANC FUND FUND EXPENSE EXAMPLES (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This example is 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. The example is based on an investment of $1,000 invested at the beginning of the six-month period from March 1, 2007 to August 31, 2007, and held for the entire period. ACTUAL EXPENSES The first line of the table below 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 table below 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 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 the 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 the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table 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.
Beginning Account Ending Account Value Value Expenses Paid 3/01/07 8/31/07 During Period* ----------------- -------------- -------------- Actual ..................................... $1,000.00 $ 896.30 $7.31 Hypothetical (5% return before expenses) ... 1,000.00 1,017.40 7.81 - ---------- * Expenses are equal to the Fund's annualized expense ratio of 1.53% multiplied by the average account value over the period, multiplied by the number of days (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Fund's ending account value is based on the actual six-month total return of (10.37%).
3 SENBANC FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2007 COMMON STOCK -- 99.9% - -------------------------------------------------------------------------------- FAIR SHARES DESCRIPTION VALUE - ------ ----------- ----- SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS -- 98.5% ------------------------------------------------------------ 26,900 Associated Banc-Corp ....................... $ 758,849 176,400 Bank of America Corp. ...................... 8,939,952 46,224 C&F Financial Corp. ........................ 1,976,538 23,200 Camden National Corp. ...................... 844,480 86,000 Capital Bank Corp. ......................... 1,290,000 40,400 Central Pacific Financial Corp. ............ 1,285,528 22,700 Citigroup, Inc. ............................ 1,064,176 12,300 Citizens Banking Corp. ..................... 216,849 37,000 City Holding Co. ........................... 1,368,260 35,700 Comerica, Inc. ............................. 1,991,346 19,400 Community Bankshares, Inc. ................. 285,180 109,900 Corus Bankshares, Inc. ..................... 1,468,264 42,600 Financial Institutions, Inc. ............... 832,404 40,500 First United Corp. ......................... 826,605 139,900 Fremont General Corp. ...................... 629,550 294,000 JPMorgan Chase & Co. ....................... 13,088,881 360,400 KeyCorp .................................... 12,001,320 65,197 MainSource Financial Group, Inc. ........... 1,143,555 176,744 National Bankshares, Inc. .................. 3,518,973 246,300 National City Corp. ........................ 6,627,933 266,577 Northrim BanCorp, Inc. ..................... 6,832,369 361,314 PAB Bankshares, Inc. ....................... 6,055,623 172,900 Pacific Premier Bancorp, Inc.* ............. 1,824,095 33,006 Penns Woods Bancorp, Inc. .................. 1,077,646 12,000 Peoples Financial Corp. .................... 246,840 9,900 Pinnacle Financial Partners, Inc.* ......... 283,140 50,194 Premier Financial Bancorp .................. 703,218 186,800 Regions Financial Corp. .................... 5,846,840 246,000 U.S. Bancorp ............................... 7,958,100 11,700 Umpqua Holdings Corp. ...................... 253,890 102,900 UnionBanCal Corp. .......................... 6,048,462 21,395 United Security Bancshares, Inc. ........... 513,480 238,942 Wachovia Corp. ............................. 11,703,379 ------------ 109,505,725 ------------ See Notes to Financial Statements. 4 SENBANC FUND SCHEDULE OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 COMMON STOCK (CONTINUED) - -------------------------------------------------------------------------------- FAIR SHARES DESCRIPTION VALUE - ------ ----------- ----- STATE & NATIONAL BANKS -- 1.4% ------------------------------------------------------------ 25,500 Huntington Bancshares, Inc. ................ $ 438,855 31,884 Rurban Financial Corp. ..................... 404,927 18,600 Taylor Capital Group, Inc. ................. 556,884 5,000 Virginia Financial Group, Inc. ............. 100,950 ------------ 1,501,616 ------------ TOTAL COMMON STOCK (COST $106,136,767) ... 111,007,341 ------------ TOTAL INVESTMENTS -- 99.9% (COST $106,136,767) ................... 111,007,341 OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1% ................... 111,760 ------------ NET ASSETS -- 100% ....................... $111,119,101 ============ - ---------- The percentage shown for each investment category is the value of that category as a percentage of the total net assets of the Fund. *Non-income producing security. See Notes to Financial Statements. 5 SENBANC FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS: Investments in securities, at fair value (Cost $106,136,767) .......................................... $111,007,341 Receivable for: Dividends .................................................... 303,696 Investments sold ............................................. 934,052 Capital shares sold .......................................... 23,695 Prepaid expenses ................................................ 22,728 ------------ Total Assets ............................................ 112,291,512 ------------ LIABILITIES: Payables for: Capital shares redeemed ...................................... 910,184 Distribution fees ............................................ 88,584 Advisory fees ................................................ 58,169 Professional fees ............................................ 41,916 Administration and accounting fees ........................... 19,888 Transfer agent fees .......................................... 17,347 Directors' and officers' fees ................................ 9,634 Custodian fees ............................................... 2,856 Accrued expenses and other liabilities .......................... 23,833 ------------ Total Liabilities ....................................... 1,172,411 ------------ NET ASSETS ...................................................... $111,119,101 ============ NET ASSETS CONSISTED OF: Paid-in capital ................................................. $ 99,564,463 Undistributed net investment income ............................. 2,957,822 Accumulated net realized gain on investments .................... 3,726,242 Net unrealized appreciation of investments ...................... 4,870,574 ------------ NET ASSETS ...................................................... $111,119,101 ============ NET ASSET VALUE AND REDEMPTION PRICE PER SHARE ($111,119,101/7,563,434 outstanding shares of common stock, $0.001 par value, 50,000,000 shares authorized) $ 14.69 ============ Maximum offering price per share (100/97.75 of $14.69) .......... $ 15.03 ============ See Notes to Financial Statements. 6 SENBANC FUND STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED AUGUST 31, 2007 --------------- INVESTMENT INCOME: Dividends (Net of foreign withholding taxes of $18,619) $ 5,120,038 Interest income ....................................... 295,169 ------------ Total income ..................................... 5,415,207 ------------ EXPENSES: Advisory fees ......................................... 966,147 Distribution fees ..................................... 901,524 Administration and accounting fees .................... 193,519 Transfer agent fees ................................... 183,940 Professional fees ..................................... 54,770 Printing and shareholder reporting fees ............... 47,315 Directors' and officers' fees ......................... 42,581 Custodian fees ........................................ 30,277 Registration and filing fees .......................... 21,916 Other expenses ........................................ 15,396 ------------ Total expenses ................................... 2,457,385 ------------ NET INVESTMENT INCOME ...................................... 2,957,822 ------------ REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS: Net realized gain from investments .................... 4,114,280 Net change in unrealized appreciation on investments .. (15,512,591) ------------ Net realized and unrealized loss from investments ..... (11,398,311) ------------ Net decrease in net assets resulting from operations .. $ (8,440,489) ============= See Notes to Financial Statements. 7 SENBANC FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE FISCAL YEAR FISCAL YEAR ENDED ENDED AUGUST 31, 2007 AUGUST 31, 2006 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS: OPERATIONS: Net investment income ..................................................... $ 2,957,822 $ 3,190,506 Net realized gain from investments ........................................ 4,114,280 4,304,498 Net change in unrealized appreciation on investments ...................... (15,512,591) 1,529,299 ------------ ------------ Net increase (decrease) in net assets resulting from operations ...... (8,440,489) 9,024,303 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income ..................................................... (3,190,506) (1,518,443) Net realized capital gain ................................................. (4,336,731) (4,067,335) ------------ ------------ Total dividends and distributions .................................... (7,527,237) (5,585,778) ------------ ------------ CAPITAL SHARE TRANSACTIONS (NOTE 4): Proceeds from shares sold ................................................. 4,578,577 10,542,359 Reinvestment of distributions ............................................. 6,961,407 5,203,018 Shares redeemed ........................................................... (70,045,843) (63,841,566) ------------ ------------ Net decrease in net assets derived from capital share transactions ... (58,505,859) (48,096,189) ------------ ------------ TOTAL DECREASE IN NET ASSETS ................................................... (74,473,585) (44,657,664) NET ASSETS: Beginning of year ......................................................... 185,592,686 230,250,350 ------------ ------------ End of year ............................................................... $111,119,101 $185,592,686 ============ ============ Undistributed net investment income, end of year .......................... $ 2,957,822 $ 3,190,506 ============ ============
See Notes to Financial Statements. 8 SENBANC FUND FINANCIAL HIGHLIGHTS
FOR THE FOR THE FOR THE PERIOD FISCAL YEAR FISCAL YEAR JULY 1, 2005 FOR THE FISCAL YEARS ENDED ENDED ENDED THROUGH ----------------------------------- AUGUST 31, AUGUST 31, AUGUST 31, JUNE 30, JUNE 30, JUNE 30, 2007 2006 2005* 2005 2004 2003 ----------- ----------- --------------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value: Beginning of period ........................ $ 16.57 $ 16.27 $ 16.13 $ 16.54 $ 14.86 $ 13.47 -------- -------- -------- -------- -------- -------- Net investment income/(loss) .................. 0.41 0.29 0.03 0.15 0.04 (0.01) Net realized and unrealized gain (loss) on investments ............................. (1.56) 0.44 0.11 0.78 2.59 2.05 -------- -------- -------- -------- -------- -------- Total from investment operations .............. (1.15) 0.73 0.14 0.93 2.63 2.04 -------- -------- -------- -------- -------- -------- Less distributions from: Net investment income ......................... (0.31) (0.12) -- (0.10) (0.02) (0.01) Net realized gain on investments .............. (0.42) (0.31) -- (1.24) (0.93) (0.64) -------- -------- -------- -------- -------- -------- Total distributions ........................... (0.73) (0.43) -- (1.34) (0.95) (0.65) -------- -------- -------- -------- -------- -------- Net asset value: End of period .............................. $ 14.69 $ 16.57 $ 16.27 $ 16.13 $ 16.54 $ 14.86 ======== ======== ======== ======== ======== ======== Total investment return (excludes sales charge) (7.47)% 4.52% 0.87%** 5.25% 17.84% 15.87% RATIOS/SUPPLEMENTAL DATA Net assets, end of period(000's omitted) ...... $111,119 $185,593 $230,250 $231,651 $217,494 $104,837 Ratio of operating expenses to average net assets ................................. 1.53% 1.38% 1.43%*** 1.40% 1.25% 1.64% Ratio of net investment income/(loss) to average net assets ......................... 1.84% 1.53% 0.93%*** 0.91% 0.29% (0.13)% Portfolio turnover rate ....................... 9.74% 7.47% 0.94% 19.90% 51.01% 60.14% - ---------------- * As a result of a reorganization that was effective August 31, 2005, the Fund changed its fiscal year end from June 30 to August 31. ** Not annualized. *** Annualized.
See Notes to Financial Statements. 9 SENBANC FUND NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Senbanc Fund (the "Fund"). As of the date hereof, the Fund offers one class of shares and is a non-diversified fund. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen 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." The Fund commenced operations on July 8, 1999, as a separate portfolio (the "Predecessor Fund") of the Hilliard Lyons Research Trust. After the close of business on August 31, 2005, all of the assets and liabilities of the Predecessor Fund were transferred to the Fund, a newly created portfolio of the Company, that is continuing the business, including carrying forward the financial and performance history, of the Predecessor Fund. PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York StockExchange ("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 the National Association of Securities Dealers Automatic Quotation System (NASDAQ) market system where they are primarily traded. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed income securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Investments in other open-end investment companies are valued based on the NAV of the investment companies (which may use fair value pricing as discussed in their prospectuses). If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Board of Directors. Relying on prices supplied by pricing services or dealers or using Fair Valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. 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. 10 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 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. 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 fund 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 dividends 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. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. 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 Hilliard Lyons Research Advisors (the "Adviser"), a division of J.J.B. Hilliard, W.L. Lyons, Inc. and an indirect wholly-owned subsidiary of the PNC Financial Services Group, Inc., provides management and investment advisory services to the Fund pursuant to an investment advisory agreement with the Company. For its services, the Adviser is paid a monthly fee at the annual rate of 0.60% of the Fund's average daily net assets. For the year ended August 31, 2007, investment advisory fees were $966,147. As of August 31, 2007, the Fund owed the Adviser $58,169. PFPC Inc. ("PFPC"), a wholly-owned subsidiary of PFPC Worldwide Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., and an affiliate of the Adviser 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 0.095% of the Fund's first $250 million of average daily net assets; 0.080% of the next $250 million of average daily net assets; 0.060% of the next $250 million of average daily net assets; and 0.040% of the average daily net assets in excess of $750 million, subject to a minimum of $7,500 per month. For the year ended August 31, 2007, PFPC's administration and accounting fees were $193,519. 11 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 Included in the administration and accounting fees shown above are fees for providing regulatory administration services to RBB. For providing those services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to the Fund in proportion to its net assets of the RBB Funds. In addition, PFPC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agent services, PFPC is entitled to receive a monthly fee, subject to a minimum monthly fee of $3,000, plus out of pocket expenses. For the year ended August 31, 2007, PFPC's transfer agency fees were $183,940. 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. and an affiliate of the Adviser. As compensation for such custodial services, PFPC Trust Company is entitled to receive a monthly fee equal to an annual rate of 0.015% of the first $100 million of the Fund's average gross assets; 0.01% of the next $400 million of average gross assets; and 0.008% of average gross assets over $500 million, subject to a minimum monthly fee of $1,500. For the year ended August 31, 2007, PFPC Trust Company's fees were $30,277. PFPC Distributors, Inc. ("PFPC Distributors"), a wholly-owned subsidiary of PFPC Worldwide, Inc., an indirect wholly-owned subsidiary of The PNC Financial Services Group, Inc., and an affiliate of the Adviser, provides certain administrative services to the Fund. The Board of Directors has adopted a distribution plan pursuant to Rule 12b-1 under the Investment Company Act, to allow the Fund to reimburse PFPC Distributors for certain expenses incurred in connection with distribution activities. The Directors have authorized a payment of up to 0.60% of the Fund's average net assets annually to reimburse PFPC Distributors for such expenses. For the year ended August 31, 2007, PFPC Distributors earned $10,118 in underwriting fees and $80,969 for commissions on sales of the Fund's shares. As of August 31, 2007, the Fund owed PFPC and its affiliates $40,091. 3. INVESTMENT IN SECURITIES For the year ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: Investment Securities Purchases Sales ----------- ----------- $15,017,316 $70,212,524 12 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, the Fund has 50,000,000 shares of $0.001 par value common stock authorized. Transactions in capital shares were as follows:
For the Fiscal Year For the Fiscal Year Ended Ended August 31, 2007 August 31, 2006 ---------------------------- ---------------------------- Shares Value Shares Value ---------- ------------ ---------- ------------ Sales 277,877 $ 4,578,577 645,428 $ 10,542,359 Reinvestments 418,102 6,961,407 322,958 5,203,018 Redemptions (4,332,989) (70,045,843) (3,916,426) (63,841,566) ---------- ------------ ---------- ------------ Net Decrease (3,637,010) $(58,505,859) (2,948,040) $(48,096,189) ========== ============ ========== ============
5. FEDERAL INCOME TAX INFORMATION At August 31, 2007, federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Fund were as follows: Cost of investments for tax purposes ................ $106,136,767 ------------ Gross tax unrealized appreciation ................... $ 11,458,611 Gross tax unrealized depreciation ................... (6,588,037) ------------ Net tax unrealized appreciation on investments ...... $ 4,870,574 ============ As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income ...................... $ 3,402,300 Undistributed long-term capital gain ............... 3,281,764 ------------ Total distributable earnings ....................... $ 6,684,064 ============ At August 31, 2007, 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, 2007, 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. Dividends paid from short-term capital gains are treated as ordinary income dividends for federal tax purposes. 13 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 The tax character of dividends and distributions paid were as follows: For the Years Ended August 31, 2007 August 31, 2006 --------------- --------------- Distributions paid from: Ordinary income .......... $ 3,190,506 $ 3,227,512 Long-term capital gains .. 4,336,731 2,358,266 ----------- ----------- $ 7,527,237 $ 5,585,778 =========== =========== 6. INDUSTRY CONCENTRATION RISK Since the Fund's investments are concentrated in the banking industry, they are subject to risks in addition to those that apply to the general equity market. Events may occur that significantly affect the entire banking industry; therefore, the Fund's share value may at times increase or decrease at a faster rate than the share value of a mutual fund with investments in many industries. 7. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management has evaluated the impact of FIN 48 and has determined it will have no impact on the Fund's financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Although still in the process of evaluating the impact, if any, upon adoption of the standard, management believes there will be no material impact other than enhanced disclosures. 14 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2007 8. SUBSEQUENT EVENT At a meeting of the Board of Directors of the Company held on September 6, 2007, the Adviser, in response to the Directors' request to explore alternatives to increase the Fund's assets, proposed a restructuring of the Fund. The proposed restructuring involves the following changes: (1) changing the Fund from a non-diversified fund to a diversified fund; (2) changing the Fund's fundamental investment restriction that requires the Fund to concentrate its investments in the banking industry so that the Fund may pursue the diversified strategy; and (3) changing the name of the Fund to AQA Fund (AQA stands for Automated Quantitative Analysis). The change in the Fund's fundamental investment restriction on industry concentration will be submitted to Fund shareholders for approval at a meeting to be held on or about December 17, 2007. The change of the Fund to a diversified fund and the change in the name of the Fund do not require shareholder approval. If shareholders of the Fund approve the change in the Fund's fundamental investment restriction on industry concentration, the restructuring of the Fund will commence on or about January 1, 2008. The Adviser plans to reduce the Fund's concentration in issuers in the banking industry over a period of six to nine months. Although the Adviser will attempt to effect the restructuring of the Fund in a manner that minimizes the tax impact to shareholders, it is possible that shareholders will experience an increase in the Fund's taxable distributions. 15 SENBANC FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Senbanc Fund and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the schedule of investments of Senbanc Fund, one of the portfolios constituting The RBB Fund, Inc. (the "Fund"), as of August 31, 2007, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Senbanc Fund of The RBB Fund, Inc. as of August 31, 2007, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the respective periods presented, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 21, 2007 16 SENBANC FUND SUPPLEMENTAL INFORMATION (UNAUDITED) AUGUST 31, 2007 SHAREHOLDER TAX INFORMATION 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 the Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2007, the following dividends and distributions per share were paid by the Fund: ORDINARY INCOME --------------------------- Net Investment Short-Term Long-Term Income Gains Gains ---------- ---------- --------- $0.31 $0.00 $0.42 Dividends paid from short-term capital gains are treated as ordinary income dividends for federal tax purposes. The percentage of total ordinary income dividends paid qualifying for the corporate dividend received deduction for the Fund is 100%. The percentage of total ordinary income dividends paid qualifying for the 15% tax rate for the Fund is 100%. These amounts were reported to shareholders as income in 2006. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax return, will be made in conjunction with Form 1099-DIV and will be mailed in January 2008. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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 advisors with respect to the tax consequences of their investments in the Fund. 17 SENBANC FUND OTHER INFORMATION (UNAUDITED) AUGUST 31, 2007 PROXY VOTING A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 is available without charge, upon request by calling 800-444-1854, at www.hilliard.com and on the SEC's website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES The Fund files its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q are available on the SEC's website at http://www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. Information on the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENT HILLIARD LYONS RESEARCH ADVISORS As required by the Investment Company Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the Investment Company Act (the "Independent Directors"), considered the renewal of the investment advisory agreement between the Adviser and the Company (the "Advisory Agreement") on behalf of the Fund at a meeting of the Board held on May 25, 2007. At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Fund; (ii) descriptions of the experience and qualifications of the Adviser's personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Fund; (ix) the extent to which economies of scale are relevant to the Fund; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to the performance of its Lipper peer group; and (xi) a report comparing the performance of the Fund to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. 18 SENBANC FUND OTHER INFORMATION (CONCLUDED) (UNAUDITED) AUGUST 31, 2007 The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors next considered that the contractual management fees and the actual management fees for the Fund were lower than the median of the Lipper peer group. The Directors noted that the Adviser does not manage any other product in a similar strategy as that of the Fund. The Directors examined the total expense ratio, including Rule 12b-1 fees and shareholder servicing fees, of the Fund, noting the Fund's expense ratio was lower than the median of its peers. The Directors then noted that the Adviser agreed to voluntarily waive its advisory fee and reimburse expenses of the Fund to limit the Fund's total annual operating expenses to 1.75%, further noting that the Fund has not had to waive its advisory fee or reimburse expenses in the past several years because total annual operating expenses have been below 1.75%. Next, the Directors evaluated the performance of the Fund. The Fund's performance was below the median performance of its Lipper peers for the one, two, three and four year periods ended March 31, 2007, but exceeded the median of its Lipper peer group for the five-year period ended March 31, 2007. The Fund lagged its benchmark, the Nasdaq Bank Index, for the one and three-year periods but exceeded its benchmark for the five-year period ended March 31, 2007. The Directors considered and assessed the reasons for the lagging performance of the Fund relative to its peer group and benchmark. The Directors then determined that the nature, extent and quality of the services provided by the Adviser in advising the Fund was satisfactory; the profits earned by the Adviser seemed reasonable; and the benefits derived by the Adviser from managing the Fund seemed reasonable. The Directors discussed and considered any economies of scale realized by the Fund as a result of asset growth. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately the Independent Directors, concluded that the advisory fee structure was reasonable and determined that the Adviser's Advisory Agreement be continued for another one-year period ending August 16, 2008. 19 SENBANC FUND PRIVACY NOTICE (UNAUDITED) The SENBANC 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 (800) 444-1854. 20 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 POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR* - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 16 Comcast Corporation; Comcast Corporation Chairman, Comcast Corporation AMDOCS Limited 1500 Market Street, (cable television and (service provider to 35th Floor communications); Director, NDS telecommunications Philadelphia, PA 19102 Group PLC (provider of systems and companies) DOB: 7/16/33 applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial services 16 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to present. Investment Trust Wilmington, DE 19809 (registered DOB: 03/7/43 investment company); WT Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, Fox 16 None Fox Chase Cancer Center Chase Cancer Center (biomedical 333 Cottman Avenue research and medical care). Philadelphia, PA 19111 DOB: 12/06/35 - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. 1 Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed.
21 FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR* - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 16 None 106 Pierrepont Street Partners, L.P. (an investment Brooklyn, NY 11201 Director 1991 to present partnership) from 2000 to 2006. DOB: 5/21/48 - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor of Law, 16 WT Mutual Fund Villanova University Villanova University School of Law (registered School of Law since July 1997. investment company); 299 North Spring Mill Road NYSE Regulation, Villanova, PA 19085 Inc.; Financial DOB: 4/28/51 Industry Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 16 Moyco Technologies, Moyco Technologies, Inc. President, Moyco Technologies, Inc. Inc. 200 Commerce Drive (manufacturer of precision coated Montgomeryville, PA 18936 and industrial abrasives). Since DOB: 3/24/34 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York State Assembly 16 Reich and Tang Group 300 East 57th Street (1981-2004); Founding Partner, (asset management); New York, NY 10022 Straniere Law Firm (1980 to date); The Sparx Japan DOB: 3/28/41 Partner, Kanter-Davidoff (law firm) Funds Group (2006 to date). (registered investment company) - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. 1 Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed.
22 FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR* - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 16 Kensington Funds Oppenheimer & Company, Inc. President and prior thereto, (registered 200 Park Avenue Executive Vice President of investment company) New York, NY 10166 Oppenheimer & Co., Inc., formerly DOB: 4/16/38 Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from January 16 Cornerstone Bank 103 Bellevue Parkway 1987 to April 2002, Chairman and Wilmington, DE 19809 Chief Executive Officer of PFPC DOB: 9/25/38 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. 1 Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011 unless otherwise extended by a vote of the disinterested Directors or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 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; the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc.; 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer.
23 FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present Certified Public Accountant; Vice N/A N/A 103 Bellevue Parkway and and Chairman of the Board, Fox Chase Wilmington, DE 19809 Treasurer 1988 to present Cancer Center; Trustee Emeritus, DOB: 6/29/24 Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Chief Since 2004 President, Vigilant Compliance N/A N/A Esquire, CPA Compliance Services since 2004; Senior Legal Vigilant Compliance Services Officer Counsel, PFPC Inc. from 2002 to 186 Dundee Drive, Suite 700 2004; Chief Legal Counsel, Corviant Williamstown, NJ 08094 Corporation (Investment Adviser, DOB: 12/25/62 Broker-Dealer and Service Provider to Investment Advisers and Separate Accountant Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
24 [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] [THIS PAGE INTENTIONALLY LEFT BLANK] INVESTMENT ADVISER Hilliard, Lyons Research Advisors 500 West Jefferson Street Louisville, KY 40202 ADMINISTRATOR PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PFPC Inc. 101 Sabin Street Pawtucket, RI 02866 UNDERWRITER PFPC Distributors, Inc. 760 Moore Road King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Boulevard Suite 200 Philadelphia, PA 19153 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 1700 Market Street Philadelphia, PA 19103 LEGAL COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103 [GRAPHIC OMITTED] BEAR STEARNS BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. ANNUAL REPORT August 31, 2007 This report is submitted for the general information of the shareholders of the Portfolio. It is not authorized for distribution unless preceded or accompanied by a current prospectus for the Portfolio. BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO ANNUAL REPORT FOR THE PERIOD ENDED AUGUST 31, 2007 - -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to present the annual report for the Bear Stearns CUFS(R) Managed Leverage Program ("MLP") Mortgage Portfolio (the "Portfolio"), a series of The RBB Fund, Inc., covering the period from December 19, 2006 through August 31, 2007. Portfolio performance information, market commentary and our outlook for the period ended August 31, 2007 follows. We encourage you to carefully review the enclosed information to stay informed. PORTFOLIO PERFORMANCE AND MARKET REVIEW: From inception in December 2006 through the end of August, the Mortgage Portfolio generated a total return of 3.10%. The Portfolio's primary benchmark, the Lehman Brothers 1-3 Month Treasury Bill Indexes returned 3.58% during the same period. Despite a benign start to the year, 2007 will no doubt be remembered as the year that easy access to credit for U.S. consumers came to a sharp end. After years of aggressive lending and rising home prices, by mid-year the U.S. mortgage market began to feel the impact of a rapid rise in delinquencies and growing credit concerns, particularly amongst subprime borrowers. The fixed income market's response to the negative data, which included growing concerns over inflated home prices and a softening economy, triggered re-pricing of risk across all sectors as well as a flight to U.S. Treasury securities. Two-year Treasury yields dropped by more than 100 basis points during the summer, while ten-year Treasury yields dropped 80 basis points. In conjunction with the end of the credit cycle, volatility in all segments of the fixed-income markets returned. Dislocations in global credit markets deepened toward the end of the summer as credit concerns and forced liquidations continued to plague fixed income markets. As liquidity concerns spread from hedge funds and structured investment vehicles to banks and mortgage lenders, the Federal Open Market Committee proactively defended short-term borrowing rates by cutting the discount rate and injecting funds into the banking system. Spreads appeared to have settled down as the summer ended, but not enough to overcome meaningful underperformance in the mortgage sector. By the end of August, the mortgage market had suffered through a three-month period of underperformance that rivaled the worst of any periods of historical performance for the sector. During those months, agency mortgage securities underperformed duration-matched Treasuries by 1.64%, rivaling performance seen during the refinancing-driven supply overhang in the summer of 2003 that resulted from record low mortgage rates. Non-agency mortgage securities suffered more, as forced selling and risk aversion by market makers and clients alike shut down both new issuance and secondary trading of lower credit mortgage securities. Other credit markets followed suit, with corporate bonds, commercial mortgages and asset-backed securities all underperforming in the flight to quality. PORTFOLIO OVERVIEW: Throughout the period, credit quality in the Portfolio has remained high. The vast majority of trading has been in AAA rated securities. While these securities have suffered along with all mortgage-related securities, the risk of credit impairment for these holdings remains low. The impact of rising liquidity risk and associated spread widening for much of the Portfolio's holdings were tempered somewhat by hedging strategies, including both options and interest-rate swaps. The Portfolio's allocation to interest-only securities benefited performance as the same forces that caused spread widening in the mortgage sector also led to a significant drop in prepayment risk. The Portfolio continues to hold a meaningful position in interest-only securities, to express the view that mortgage prepayment speeds will be slow during the foreseeable future. To take advantage of recent market dislocations, additions were made to the Portfolio's holdings of agency and non-agency hybrid adjustable-rate mortgage securities. These securities traded at historically cheap levels and offered opportunities both for attractive yields as well as capital appreciation. Prime jumbo pass-through securities have also cheapened to what we believe to be very attractive levels despite overall strong performance and strong credit protection, therefore the allocation to these securities has increased. 1 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO ANNUAL REPORT FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) We are available to assist in-person Monday through Friday during normal business hours by calling 1-800-519-CUFS. General online information about the CUFS(R) MLP Mortgage Portfolio is available at www.bsamonline.com. Click under the Additional Products and Services navigation bar to reach the CUFS(R) MLP Mortgage Portfolio section of the website. Thank you for entrusting your credit union's capital to the Bear Stearns CUFS MLP Mortgage Portfolio. We remain focused on achieving the Portfolio's long-term investment goals. CUFS(R): HELPING CREDIT UNIONS DO WELL SO THAT THEY CAN DO GOOD Sincerely, Wade Charles Barnett Andrew Headley, CFA Senior Managing Director, CUFS(R) Portfolio Manager Bear Stearns & Co., Inc. Bear Stearns Asset Management 2 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FUND EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Portfolio expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio 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, 2007 through August 31, 2007, 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 Portfolio's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio'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 Portfolio 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. 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 any transactional costs were included, your costs would have been higher.
--------------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 1, 2007 AUGUST 31, 2007 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $1,017.40 $3.05 Hypothetical (5% return before expenses) 1,000.00 1,022.14 3.06 - ---------- * Expenses are equal to the Portfolio's annualized expense ratio of 0.60%, which includes waived fees or reimbursed expenses, multiplied by the number of days (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Portfolio's ending account value on the first line is based on the actual six-month total return of 1.74%.
3 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO MANAGEMENT COMMENTARY (UNAUDITED) PERFORMANCE The Portfolio's total return from inception on December 19, 2006 through August 31, 2007 was 3.10%, net of all fees and expenses. The Portfolio's benchmark, the Lehman Brothers 1-3 Month U.S. Treasury Bill Index2, returned 3.58% for the same period. COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO VS. LEHMAN BROTHERS U.S. TREASURY BILLS INDEX Lehman Bros U.S. Treasury Bear Stearns CUFS(R) Bills Index(2) MLP Mortgage Portfolio(1) -------------- ------------------------- 12/19/06 $10,000 $10,000 12/06/07 10,017 10,038 01/07/07 10,058 10,089 02/07/07 10,096 10,134 03/07/07 10,142 10,178 04/07/07 10,185 10,226 05/07/07 10,228 10,276 06/07/07 10,270 10,295 07/07/07 10,309 10,293 08/07/07 10,360 10,310 The chart assumes a hypothetical $10,000 initial investment in the Portfolio made on December 19, 2006 (commencement of operations) and reflects Portfolio expenses. Investors should note that the Portfolio is an actively managed mutual fund while the Lehman Brothers is unmanaged, does not incur expenses and is not available for investment. - -------------------------------------------------------------------------------- FOR PERIOD DECEMBER 19, 2007* TO AUGUST 31, 2007 AVERAGE ANNUAL TOTAL RETURN SINCE INCEPTION --------- Bear Stearns CUFS(R) MLP Mortgage Portfolio 3.10% Lehman Brothers U.S. Treasury Bills Index 3.58% - -------------------------------------------------------------------------------- PERFORMANCE QUOTED IS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE RETURNS QUOTED ABOVE. CALL CUFS(R) AT 1-800-519-CUFS (2837) FOR RETURNS CURRENT TO THE MOST RECENT MONTH-END. THE PORTFOLIO'S GROSS ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 0.60%. THE PERFORMANCE DATA REFLECTS FEE WAIVERS AND EXPENSE REIMBURSEMENTS. THE RETURNS COULD HAVE BEEN LOWER IF THESE WAIVERS AND EXPENSE REIMBURSEMENTS WERE NOT IN EFFECT. PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE. - ---------- * Commencement of operations. (1) Net of fees and expenses. (2) The Lehman Brothers U.S. Treasury Bills 1-3 Month Index is the 1-3 Month component of the Lehman Brothers U.S. Treasury Bills Index. The Lehman Brothers Treasury Bill Index includes U.S. Treasury bills with a remaining maturity from 1 up to (but not including) 12 months. It excludes zero coupon strips. Source: Lehman Live. 4 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007
% OF NET SECURITY TYPE CLASSIFICATION ASSETS VALUE - ------------------------------------------------------------------------------------------------------------- COLLATERALIZED MORTGAGE OBLIGATIONS 52.7% $ 84,975,456 GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS 37.6 60,676,596 MORTGAGE DERIVATIVES 14.8 23,826,323 SHORT TERM OBLIGATIONS 5.0 7,989,762 OPTIONS PURCHASED 0.1 203,125 SECURITIES SOLD SHORT: FEDERAL NATIONAL MORTGAGE ASSOCIATION (20.3) (32,809,358) OTHER ASSETS IN EXCESS OF LIABILITIES 10.1 16,415,646 ----- ------------ NET ASSETS 100.0% $161,277,550 ===== ============
- ---------------- Portfolio holdings are subject to change at any time. 5 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 MOODY'S/ PAR FAIR S&P(B) (000'S) VALUE ------- ------- ------------ GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS--37.6% FEDERAL HOME LOAN MORTGAGE CORPORATION--14.6% 5.941% 08/01/36 (a) ............. Aaa/AAA $ 7,899 $ 7,955,440 5.969% 09/01/36 (a) ............. Aaa/AAA 3,822 3,854,939 6.500% 10/01/36 ................. Aaa/AAA 2,046 2,078,111 5.887% 11/01/36 (a) ............. Aaa/AAA 3,729 3,751,334 6.500% 11/01/36 ................. Aaa/AAA 903 917,291 5.828% 08/01/37 (a) ............. Aaa/AAA 5,000 5,019,097 ------------ 23,576,212 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--23.0% 6.073% 10/01/36 (a) ............. Aaa/AAA 3,541 3,584,011 6.101% 10/01/36 (a) ............. Aaa/AAA 1,836 1,860,317 5.500% 12/01/36 ................. Aaa/AAA 14,576 14,243,002 5.865% 12/01/36 (a) ............. Aaa/AAA 1,895 1,910,257 5.557% 09/01/37 (a) ............. Aaa/AAA 3,000 3,003,427 5.000% 09/13/37 TBA ............. Aaa/AAA 10,000 9,503,120 6.000% 09/14/37 TBA ............. Aaa/AAA 3,000 2,996,250 ------------ 37,100,384 ------------ TOTAL GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS (Cost $60,703,485)................................... 60,676,596 ------------ MORTGAGE DERIVATIVES--14.8% FANNIE MAE (IO)--10.6% 5.000% 10/01/33 ................. Aaa/AAA 11,477 2,789,679 5.500% 04/01/36 ................. Aaa/AAA 8,636 2,176,973 5.500% 05/25/23 ................. Aaa/AAA 1,640 543,559 5.500% 07/25/28 ................. Aaa/AAA 35,997 2,777,597 5.500% 04/01/36 ................. Aaa/AAA 14,557 3,703,757 5.000% 02/01/35 ................. Aaa/AAA 3,620 876,674 5.000% 02/01/35 ................. Aaa/AAA 2,154 478,240 4.500% 12/01/18 ................. Aaa/AAA 8,703 1,335,530 4.500% 01/01/19 ................. Aaa/AAA 8,702 1,337,906 4.500% 03/01/20 ................. Aaa/AAA 3,260 506,233 4.500% 03/01/20 ................. Aaa/AAA 3,322 522,761 ------------ 17,048,909 ------------ FANNIE MAE (PO)--0.5% 0.000% 06/25/36 ................. Aaa/AAA 1,440 869,292 ------------ FREDDIE MAC (IO)--0.7% 5.500% 07/15/16 ................. Aaa/AAA 1,322 228,136 5.500% 05/15/24 ................. Aaa/AAA 7,066 334,718 5.500% 12/15/24 ................. Aaa/AAA 3,682 194,018 5.000% 05/15/34 ................. Aaa/AAA 11,299 393,616 ------------ 1,150,488 ------------ FREDDIE MAC (PO)--1.0% 0.000% 09/15/35 ................. Aaa/AAA 1,199 706,637 0.000% 09/15/36 ................. Aaa/AAA 1,417 865,025 ------------ 1,571,662 ------------ MOODY'S/ PAR FAIR S&P(B) (000'S) VALUE ------- ------- ------------ NON-AGENCY--2.0% Chase Mortgage Finance Corp. Series 2003-S15, 2A11 (a) IVIO 2.045% 01/25/34 ................. Aaa/AAA $11,791 $ 555,182 Citicorp Mortgage Securities, Inc. Series 2004-2, A3 (a) IVIO 2.045% 03/25/34 ................. Aaa/AAA 15,389 796,849 CWALT Series 2006-43CB IO 6.000% 02/25/37 ................. Aaa/AAA 5,112 1,833,941 ------------ 3,185,972 ------------ TOTAL MORTGAGE DERIVATIVES (Cost $22,825,787)................................... 23,826,323 ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--52.7% Banc of America Mortgage Securities, Inc. Series 2005-H (a) 4.802% 09/25/35 ................. Aaa/AAA 2,000 1,952,065 Banc of America Mortgage Securities, Inc. Series 2007-3 6.000% 03/25/49 ................. Aaa/AAA 5,000 4,913,672 Citigroup Mortgage Loan Trust, Inc. Series 2007-AR8 (a) 5.930% 07/25/37 ................. Aaa/AAA 4,935 4,908,306 Countrywide Asset-Backed Certificates Series 2004-AB2 (a) 6.105% 05/25/36 ................. Aa3/AA 500 431,654 Countrywide Home Loan Mortgage Pass-Through Trust Series 2007-HY1 (a) 5.702% 04/25/37 ................. Aaa/AAA 2,792 2,762,698 CWALT Series 2003-3 (a) 6.005% 04/25/18 ................. Aaa/AAA 1,633 1,631,347 CWALT Series 2006-2CB 5.500% 03/25/36 ................. Aaa/AAA 915 906,864 CWALT Series 2006-43CB 6.000% 02/25/37 ................. Aaa/AAA 1,769 1,768,829 CWALT Series 2006-HY13 (a) 5.905% 02/25/37 ................. Aaa/AAA 12,561 12,479,785 CWALT Series 2006-J2 6.000% 04/25/36 ................. Aaa/AAA 8,793 8,785,243 CWALT Series 2007-2CB 5.750% 03/25/37 ................. Aa1/AAA 5,383 5,366,799 CWALT Series 2007-J2 6.000% 07/25/37 ................. Aaa/AAA 1,953 1,933,692 Fannie Mae REMICS Series 2005-25 (a) 5.855% 04/25/35 ................. Aaa/AAA 2,521 2,498,582 First Horizon Asset Securities, Inc. Series 2006-AR1 (a) 5.865% 05/25/36 ................. Aaa/AAA 4,316 4,288,595 The accompanying notes are an integral part of the financial statements. 6 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2007 MOODY'S/ PAR FAIR S&P(B) (000'S) VALUE ------- ------- ------------ COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED) Freddie Mac REMIC Series 2995 (a) 6.011% 06/15/35 ................. Aaa/AAA $ 2,434 $ 2,426,626 JP Morgan Mortgage Trust Series 2005-A4 (a) 5.176% 07/25/35 ................. Aaa/AAA 1,411 1,377,605 JP Morgan Mortgage Trust Series 2005-A6 (a) 4.971% 08/25/35 ................. Aaa/AAA 927 910,239 Residential Asset Securitization Trust Series 2007-A5 6.000% 05/25/37 ................. Aaa/AAA 1,880 1,873,293 Residential Funding Mortgage Securities I Series 2006-SA4 (a) 6.121% 11/25/36 ................. Aaa/AAA 8,080 8,060,232 Residential Funding Mortgage Securities I Series 2007-SA2 5.681% 04/25/37 ................. Aa1/AAA 4,741 4,631,886 Washington Mutual, Inc. Series 2007-HY3 (a) 5.352% 03/25/37 ................. Aaa/AA 1,653 1,603,624 Washington Mutual, Inc. Series 2007-HY4 (a) 5.560% 04/25/37 ................. Aaa/AAA 4,625 4,576,327 Wells Fargo Mortgage- Backed Securities Trust Series 2007-10 6.250% 07/25/37 ................. Aaa/Aaa 4,853 4,887,493 ------------ TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $85,508,452) .................................. 84,975,456 ------------ CONTRACTS/ NOTIONAL AMOUNT (000'S) ---------- OPTIONS PURCHASED--0.1% CALL OPTIONS--0.1% U.S. Treasury 10 year Note, Strike price $109, Expires 11/20/07 100 121,875 U.S. Treasury 10 year Note, Strike price $110, Expires 11/20/07 100 81,250 ------------ TOTAL OPTIONS PURCHASED (Cost $200,800).............................................. 203,125 ------------ PAR FAIR (000'S) VALUE -------- ------------ SHORT TERM OBLIGATIONS--5.0% GOVERNMENT AGENCIES--0.1% Federal Home Loan Bank (d) 5.009% 09/10/07 $ 190 $ 189,762 ------------ REPURCHASE AGREEMENT--4.9% Lehman Brothers, Inc. (Tri Party Agreement dated 8/31/07 to be repurchased at $7,804,463, collateralized by $7,862,024 par value, Federal National Mortgage Association, 6.00% due 10/01/21, Market Value of collateral is $7,955,975) 5.150% 09/04/07 7,800 7,800,000 ------------ TOTAL SHORT TERM OBLIGATIONS (Cost $7,989,762).................................... 7,989,762 ------------ TOTAL INVESTMENTS--110.2% (Cost $177,228,286).................................. 177,671,262 ------------ SECURITIES SOLD SHORT--(20.3%) FEDERAL NATIONAL MORTGAGE ASSOCIATION 5.000% 09/13/37 TBA $(15,000) $(14,254,680) 5.500% 09/13/37 TBA (19,000) (18,554,678) ------------ TOTAL SECURITIES SOLD SHORT (Proceeds received $(32,541,836))............................ (32,809,358) ------------ OTHER ASSETS IN EXCESS OF LIABILITIES (C)--10.1%....................................... 16,415,646 ------------ NET ASSETS--100.0%........................................... $161,277,550 ============ - ---------- CWALT -- Countrywide Alternative Loan Trust IVIO -- Inverse Interest Only IO -- Interest Only PO -- Principal Only TBA -- To Be Announced (a) Adjustable rate security. Interest rate varies due to interest rate fluctuations, or, in the case of certain asset-backed securities, interest payment shortfalls. (b) Ratings are unaudited. The accompanying notes are an integral part of the financial statements. 7 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 (c) Liabilities in excess of other assets include interest rate swaps as follows: NOTIONAL UNREALIZED TERMINATION AMOUNT FIXED FLOATING APPRECIATION COUNTERPARTY DATE (000) RATE RATE (DEPRECIATION) - --------------- ----------- -------- ----- -------- -------------- Deutsche Bank+ 09/15/09 $50,000 5.545% 3 month $ (627,409) LIBOR Deutsche Bank+ 09/14/12 $20,000 5.575% 3 month (527,084) LIBOR ----------- $(1,154,493) =========== + Portfolio pays the fixed rate and receives the floating rate. (d) All or a portion of the security held as collateral for the following Futures contracts open at August 31, 2007.
NUMBER VALUE VALUE UNREALIZED OF EXPIRATION AT TRADE AT APPRECIATION CONTRACTS TYPE MONTH DATE 8/31/07 (DEPRECIATION) - --------- -------------------------- ----------- ------------ ------------ ---------------- Long Positions: 298 U.S. Treasury 10 Year Note 12/2007 $32,573,191 $32,495,969 $(77,222) Short Positions: 67 U.S. Treasury 2 Year Note 12/2007 ($13,818,482) ($13,812,469) 6,013 163 U.S. Treasury 5 Year Note 12/2007 ($17,391,957) ($17,392,609) (652) -------- $(71,861) ========
The accompanying notes are an integral part of the financial statements. 8 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS Investments, at fair value (cost $177,228,286)............................... $177,671,262 Receivable for securities sold short......................................... 32,541,836 Receivable for investments sold.............................................. 8,170,606 Dividends and interest receivable............................................ 932,923 Prepaid expenses and other assets............................................ 2,873 ------------ Total assets............................................................... 219,319,500 ------------ LIABILITIES Payable for investments purchased............................................ 23,479,674 Distributions payable........................................................ 372,657 Cash overdraft............................................................... 26,348 Short sales at fair value (proceeds received $32,541,836).................... 32,809,358 Unrealized depreciation on swap agreements................................... 1,154,493 Due to broker-variation margin............................................... 71,861 Payable to the Adviser....................................................... 54,110 Accrued expenses and other liabilities....................................... 73,449 ------------ Total liabilities.......................................................... 58,041,950 ------------ Net assets................................................................... $161,277,550 ============ NET ASSETS CONSISTED OF: Capital stock, $0.001 par value ............................................. $ 16,251 Additional paid-in capital .................................................. 162,892,854 Accumulated net investment income ........................................... 35,682 Accumulated net realized loss from investments, futures transactions, short sales, and swap agreements........................................... (616,337) Net unrealized depreciation on investments, futures transactions, short sales, and swap agreements........................................... (1,050,900) ------------ Net assets................................................................... $161,277,550 ============ Net asset value, offering and redemption price per share ($161,277,550 / 16,251,104 outstanding shares of common stock, $0.001 par value, 100,000,000 shares authorized)........................... $ 9.92 ============
The accompanying notes are an integral part of the financial statements. 9 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO STATEMENT OF OPERATIONS
FOR THE PERIOD DECEMBER 19, 2006* TO AUGUST 31, 2007 --------------------- INVESTMENT INCOME Interest income.................................................................................. $ 6,377,706 ----------- Total investment income......................................................................... 6,377,706 ----------- EXPENSES Advisory fees.................................................................................... 481,417 Interest expense................................................................................. 185,835 Administration and accounting fees............................................................... 105,303 Professional fees................................................................................ 43,477 Directors' and officers' fees.................................................................... 35,217 Transfer agent fees.............................................................................. 33,628 Custodian fees................................................................................... 33,187 Printing and shareholder reporting fees.......................................................... 21,160 Registration and filing fees..................................................................... 20,875 Other expenses................................................................................... 1,000 ----------- Total expenses before waivers.................................................................. 961,099 Less: waivers.................................................................................. (179,696) ----------- Net expenses.................................................................................. 781,403 ----------- Net investment income......................................................................... 5,596,303 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS, FUTURES TRANSACTIONS, SHORT SALES AND SWAP AGREEMENTS Net realized gain (loss) from: Investments.................................................................................... 524,556 Futures transactions........................................................................... (1,653,356) Short sales.................................................................................... 47,851 Swap agreements................................................................................ 503,000 ----------- Total net realized loss from investments, futures transactions, short sales, and swap agreements............................................................. (577,949) ----------- Net unrealized appreciation (depreciation) on: Investments.................................................................................... 442,976 Futures transactions........................................................................... (71,861) Short sales.................................................................................... (267,522) Swap agreements................................................................................ (1,154,493) ----------- Total net unrealized depreciation from investments, futures transactions, short sales, and swap agreements............................................................. (1,050,900) ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................................................ $ 3,967,454 =========== * Commencement of operations.
The accompanying notes are an integral part of the financial statements. 10 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD DECEMBER 19, 2006* TO AUGUST 31, 2007 --------------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income............................................................................ $ 5,596,303 Net realized loss from investments, futures transactions, short sales, and swap agreements............................................................... (577,949) Net unrealized depreciation on investments, futures transactions, short sales, and swap agreements............................................................... (1,050,900) ------------ Net increase in net assets resulting from operations................................................................................ 3,967,454 ------------ LESS DIVIDENDS TO SHAREHOLDERS FROM: Net investment income............................................................................ (5,618,485) ------------ INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS(1).................................................................... 162,928,581 ------------ Total increase in net assets..................................................................... 161,277,550 ------------ NET ASSETS Beginning of period.............................................................................. -- ------------ End of period**.................................................................................. $161,277,550 ============ - ---------- * Commencement of operations. ** Includes undistributed net investment income of $35,682 for the period ended August 31, 2007. (1) See Note 4 in the Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements. 11 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Contained below is per share operating performance data for a share outstanding during the period, total investment return, ratios to average net assets and other supplemental data for the respective period. This information has been derived from information provided in the financial statements. - --------------------------------------------------------------------------------
FOR THE PERIOD DECEMBER 19, 2006* TO AUGUST 31, 2007 --------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ........................................ $ 10.00 Net investment income ....................................................... 0.38 Net realized and unrealized gain (loss) on investments, futures transactions, short sales, and swap agreements ........................... (0.08) -------- Net increase in net assets resulting from operations ........................ 0.30 -------- Dividends to shareholders from: Net investment income ....................................................... (0.38) Net realized capital gains .................................................. -- -------- Net asset value, end of period .............................................. $ 9.92 ======== Total investment return(1) .................................................. 3.10% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) ................................... $161,278 Ratio of expenses to average net assets with waivers and expense reimbursements (excluding interest expense)(2) ........................... 0.60% Ratio of expenses to average net assets with waivers and expense reimbursements (including interest expense)(2) ........................... 0.78% Ratio of expenses to average net assets without waivers and expense reimbursements (including interest expense)(2).. ......................... 0.95% Ratio of net investment income to average net assets(2). .................... 5.58% Portfolio turnover rate ..................................................... 259.47%(3) * Commencement of operations. (1) Total investment return is calculated by 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. (3) The portfolio turnover rate excluding TBA transactions (see Note 1 in Notes to the Financial Statements) is 125.15% for the period December 19, 2006 to August 31, 2007.
The accompanying notes are an integral part of the financial statements. 12 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Bear Stearns CUFS MLP Mortgage Portfolio (the "Portfolio"), which commenced investment operations on December 19, 2006. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion shares are currently classified into one hundred and eighteen 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." PORTFOLIO VALUATION -- The Portfolio's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed income securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Investments in other open-end investment companies, if held, are valued based on the NAV of the investment companies (which may use fair value pricing as discussed in their prospectuses). If price quotes are unavailable or deemed unreliable, securities will be fair valued in accordance with procedures adopted by the Company's Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. 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. INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES -- The Portfolio 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. Paydown gains and losses on mortgage and asset-backed securities are presented as an adjustment to interest income. Dividend income is recorded on the ex-dividend date. Distributions received on securities that represent a return of capital or capital gains are recorded as a reduction of cost of investments and/or as a realized gain. The Portfolio estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. The Portfolio's investment income, expenses and unrealized and realized gains and losses are allocated daily. Expenses incurred for all of the RBB fund 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 Portfolio. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily and paid monthly. Distributions from net realized capital gains, if any, are declared and paid at least annually to shareholders and recorded on ex-date for the Portfolio. Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations which may differ from generally accepted accounting principles in the United States of America. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is the Portfolio'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 Portfolio may enter into contracts that provide general indemnifications. The Portfolio's maximum exposure under these arrangements is dependent on claims that may be made against the Portfolio in the future, and, therefore, cannot be estimated; however, based on experience, the risk of material loss from such claims is considered remote. 13 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) MORTGAGE-RELATED SECURITIES GENERALLY -- The Portfolio may invest in mortgage pass-through securities and multiple-class pass-through securities, such as collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or participation certificates as well as other securities collateralized by or representing a direct or indirect interest in mortgage-related securities or mortgage loans. The Portfolio may also invest in certain stripped mortgage-backed securities. Some of these securities may contain "embedded leverage" which can make them more sensitive to small movements in interest rates. The types of mortgage-related securities in which the Portfolio may invest include: mortgage pass-through securities, including CMOs and REMICs, which may or may not be U.S. Government guaranteed, privately issued mortgage-related securities, stripped mortgage-backed securities, including interest only ("IO") or principal only ("PO") class securities, and floating rate and inverse floating rate securities. Stripped mortgage-backed securities represent a participation in, or are secured by and payable from, mortgage loans on real property, and may be structured in classes with rights to receive varying proportions of principal and interest. Payments received for IOs and POs are used to reduce the cost of the security. Payments in excess of cost are recognized as interest income on the Statement of Operations based on a security's yield to maturity. If the underlying mortgage assets experience greater then anticipated payments of principal, the Portfolio may fail to recoup some or all of it's initial investment in IO securities. For PO securities, accelerated payments of principal will cause a faster then anticipated return of the initial investment resulting in an increased yield to maturity for the security. The market value of these securities is highly sensitive to changes in interest rates. TBAs -- The Portfolio may purchase securities on a to-be-announced ("TBA") basis, with payment and delivery scheduled for a future date. These transactions are subject to market fluctuations and are subject to the risk that their value at delivery may be more or less than the trade date purchase price. Although the Portfolio may purchase securities on a when-issued or forward commitment basis with the intention of acquiring the securities for its portfolio, the Portfolio may dispose of when-issued securities or forward commitments prior to settlement if the Adviser deems it appropriate. FINANCIAL FUTURES CONTRACTS -- The Portfolio may enter into futures contracts to hedge against changes in interest rates and securities prices, or to otherwise manage its term structure, sector selections and duration. Upon entering into a futures contract, the Portfolio is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin." Subsequent payments ("variation margin") are made or received by the Portfolio each day, depending on the daily fluctuation of the value of the contract. The daily changes in the contract are recorded as unrealized gain or loss. The Portfolio recognizes a realized gain or loss when the contract is closed. The risks associated with entering into financial futures contracts include the possibility that a change in the value of the contract may not correlate with the changes in the value of the underlying instruments. In addition, investing in financial futures contracts involves the risk that the Fund could lose more than the original margin deposit and subsequent payments required for a futures transaction. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts. OPTIONS CONTRACTS -- The Portfolio may write covered call and put options on futures, or securities it owns or in which it may invest. Writing put options tends to increase the Portfolio's exposure to the underlying instrument. When the Portfolio writes a call or put option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. These liabilities are reflected as written options outstanding in the Statement of Assets and Liabilities. Payments received or made, if any, from writing options with premiums to be determined on a future date are reflected as such on the Statement of Assets and Liabilities. Premiums received from writing options that expire are treated as realized gains. Premiums received from writing options that are exercised or closed are added to the proceeds or offset against amounts paid on the underlying future or security transaction to determine the realized gain or loss. The Portfolio, as a writer of an option, has no control over whether the underlying future or security may be sold (call) or purchased (put), and as a result bears the market risk of an unfavorable change in the price of the future or security underlying the written option. The Portfolio may not be able to enter into a closing transaction because of an illiquid market. The Portfolio may also purchase put and call options. Purchasing call options tends to increase the Portfolio's exposure to the underlying instrument. Purchasing put options tends to decrease the Portfolio's exposure to the underlying instrument. The Portfolio pays a premium which is included in the Portfolio's Statement of Assets and Liabilities as an investment and subsequently marked to market to reflect the current value of the option. Premiums paid for purchasing options that expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options that are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying future or security transaction to determine the realized gain or loss. 14 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) SWAP AGREEMENTS -- The Portfolio may invest in swap agreements for the purpose of hedging against changes in interest rates. Swap agreements involve the exchange by the Portfolio with another party of their respective commitments to pay or receive interest with respect to a notional amount of principle. Swaps are marked to market daily based upon quotations from independent market makers and the change, if any, is recorded as unrealized gain or loss in the statement of operations. Net payments of interest are recorded as realized gain or loss. SHORT SALES -- The Portfolio may engage in short sales of securities. A short sale is a sale by the Portfolio of a security which has been borrowed from a third party on the expectation that the market price will decline. If the price of the security drops, the Portfolio will make a profit by purchasing the security in the market at a lower price than the price at which it sold the security. If the price of the security rises, the Portfolio may have to cover its short position at a higher price than the short sale price, resulting in a loss to the Portfolio. Possible losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested. 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 as collateral, subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the collateral falls below this amount, the 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. REVERSE REPURCHASE AGREEMENTS -- The Portfolio may borrow money by entering into transactions called reverse repurchase agreements. Under these arrangements, the Portfolio will sell portfolio securities to dealers in U.S. Government securities or members of the Federal Reserve System, with an agreement to repurchase the security on an agreed date, price and interest payment. Reverse repurchase agreements involve the possible risk that the value of portfolio securities the Portfolio relinquishes may decline below the price the Portfolio must pay when the transaction closes. Borrowings may magnify the potential for gain or loss on amounts invested resulting in an increase in the speculative character of the Portfolio's outstanding shares. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns Companies, Inc. ("Bear Stearns"), serves as investment adviser to the Portfolio pursuant to an investment advisory agreement with the Company (the "Advisory Agreement"). For its services, the Adviser is paid a monthly fee at the annual rate of 0.48% of the Portfolio's average daily net assets. BSAM is voluntarily waiving a portion of its advisory fee and reimbursing certain expenses in order to limit the Portfolio's total annual portfolio operating expenses excluding interest expense to 0.60% of the Portfolio's average daily net assets. The fee waiver and expense reimbursement are not contractual, and can be terminated at any time. For the period ended August 31, 2007, investment advisory fees were $481,417, of which $139,578 was waived by the Adviser. As of August 31, 2007, the Portfolio owed the Adviser $54,110 in advisory fees. Bear Stearns Pricing Direct, an affiliate of the Portfolio's investment adviser, is the pricing service used to value the Portfolio's fixed income securities having a remaining maturity of greater than 60 days. Bear Stearns Pricing Direct is considered to be an independent pricing service because the Portfolio's investment adviser has no influence on how the securities are priced. 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 Portfolio. For providing administration and accounting services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.08% of the Portfolio's first $250 million of average daily net assets; 0.06% of the next $250 million of average daily net assets; and 0.04% of the average daily net assets in excess of $500 million. For the period ended August 31, 2007, PFPC's administration and accounting fees were $105,303. PFPC voluntarily agreed to waive a portion of its administration and accounting service fees for the Portfolio. For the period ended August 31, 2007, $40,118 was waived by PFPC. Included in the administration and accounting fees, shown above, are fees for providing regulatory administration services to RBB. For providing these services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to its net assets of the RBB Funds. 15 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) In addition, PFPC serves as the Portfolio's transfer and dividend disbursing agent. For providing transfer agent services, PFPC is entitled to receive an annual fee of $25,000, paid monthly, plus out-of-pocket expenses. For the period ended August 31, 2007, PFPC transfer agency fees were $33,628. PFPC Trust Company provides certain custodial services to the Portfolio. 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. As compensation for such custodial services, PFPC Trust Company is entitled to receive a monthly fee equal to an annual rate of 0.01% of the first $250 million of the Portfolio's average daily gross assets; 0.0075% of the next $250 million of the Portfolio's average daily gross assets; and 0.005% of the Portfolio's average daily gross assets over $500 million. There is a minimum monthly fee of $1,200 for the Portfolio, exclusive of transaction charges and out-of-pocket expenses charged to the Portfolio. For the period August 31, 2007 PFPC Trust Company's custodian fees were $33,187. 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 Portfolio. As compensation for such administrative services, PFPC Distributors is entitled to receive a fee paid by PFPC from the fees PFPC receives from the Portfolio pursuant to the Administration and Accounting Services Agreement. The Portfolio will not pay PFPC or PFPC's affiliates at a later time for any amounts waived or any amounts assumed. As of August 31, 2007, the Portfolio owed PFPC and its affiliates $27,248 for their services, which is included as a component of accrued expenses and other liabilities on the accompanying Statement of Assets and Liabilities. 3. INVESTMENT IN SECURITIES For the period ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments and including TBA securities) of the Portfolio were as follows: PURCHASES SALES ------------ ------------ Investment Securities $580,017,955 $408,536,310 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, the Portfolio has 100,000,000 shares of $0.001 par value common stock authorized. Transactions in capital shares were as follows: FOR THE PERIOD ENDED AUGUST 31, 2007 -------------------------- SHARES VALUE ---------- ------------ Sales...................................... 15,858,652 $159,001,000 Reinvestments.............................. 392,553 3,928,597 Redemptions................................ (101) (1,016) ---------- ------------ Net Increase............................... 16,251,104 $162,928,581 ========== ============ 5. FEDERAL INCOME TAX INFORMATION At August 31, 2007, federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Portfolio were as follows: FEDERAL TAX UNREALIZED UNREALIZED NET UNREALIZED COST APPRECIATION DEPRECIATION DEPRECIATION ------------ ------------ ------------ -------------- $177,228,286 $1,949,660 $(1,506,684) $442,976 The following permanent differences as of August 31, 2007, attributable to the swap and paydown adjustments, were reclassified to the following accounts: INCREASE IN DECREASE IN ACCUMULATED ACCUMULATED DECREASE IN NET INVESTMENT NET REALIZED PAID-IN INCOME LOSS CAPITAL -------------- ------------ ----------- $57,864 $(38,388) $(19,476) 16 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONCLUDED) As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS --------------- --------------- $408,339 $ -- As of August 31, 2007, the Fund had a capital loss carryforward of $685,873, available to offset future capital gains. This capital loss carryforward will expire on August 31, 2015 if it is not utilized by 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 period ended August 31, 2007, the Fund does not expect to elect to defer any losses for the period December 19, 2007 to August 31, 2007. 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 paid during the year ended August 31, 2007 was as follows: Ordinary income $5,618,485 Long-term capital gains -- Distributions from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. 6. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management has adopted FIN 48 and has determined that it has no impact on the Portfolio's financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Although still in the process of evaluating the impact, if any, upon adoption of the standard, management believes there will be no material impact other than enhanced disclosures. 17 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Bear Stearns CUFS MLP Mortgage Portfolio and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments of Bear Stearns CUFS MLP Mortgage Portfolio, one of the portfolios constituting The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2007, and the related statements of operations, changes in net assets and the financial highlights for the period from December 19, 2006 (commencement of operations) through August 31, 2007. 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. 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. The Portfolio is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Portfolio's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 Bear Stearns CUFS MLP Mortgage Portfolio of The RBB Fund, Inc. as of August 31, 2007, the results of its operations, the changes in its net assets and its financial highlights for the period from December 19, 2006 (commencement of operations) through August 31, 2007, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 21, 2007 18 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO OTHER INFORMATION (UNAUDITED) PROXY VOTING Policies and procedures that the Portfolio uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Portfolio 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) 519-CUFS (2837) and on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES The Company will file its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q will be available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF ADVISORY AGREEMENT As required by the Investment Company Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the Investment Company Act (the "Independent Directors"), considered the approval of the Advisory Agreement between BSAM and the Company on behalf of the Portfolio at the meeting of the Board held on May 24, 2007. At this meeting, the Board approved the Advisory Agreement for an additional one-year term ending August 16, 2008. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to engage BSAM to provide advisory services to the Portfolio pursuant to the terms of the Advisory Agreement and based upon the information provided to the Directors in connection with the meetings. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from BSAM mailed in advance of the meeting that addressed most, if not all, of the factors listed below. BSAM also made presentations during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of BSAM's services to be provided to the Portfolio; (ii) descriptions of the experience and qualifications of BSAM's personnel providing those services; (iii) BSAM's investment philosophies and processes; (iv) BSAM's assets under management and client descriptions; (v) BSAM's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) BSAM's proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) BSAM's compliance procedures; (viii) BSAM's financial information and insurance coverage; (ix) the extent to which economies of scale are relevant to the Portfolio; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Portfolio's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Portfolio to the performance of its Lipper peer group; and (xi) a report comparing the performance of the Portfolio to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. The Directors met in executive session with counsel to discuss and consider information presented, as well as the Directors' responsibilities and duties in connection with approving the Advisory Agreement. The Directors considered that the Portfolio's actual total expense ratio and actual advisory fees (including waivers) each were lower than the median of its Lipper peer group. It was further considered by the Directors that BSAM has voluntarily agreed to continue to waive its advisory fee and reimburse expenses to limit total annual operating expenses of the Portfolio to 0.60% of its average net assets. The Directors noted that the Portfolio's performance for the period since inception to March 31, 2007 exceeded that of the Portfolio's benchmark. The Directors then determined that the nature, extent and quality of the services provided by BSAM in advising the Portfolio was satisfactory. The Directors concluded that BSAM does not derive any other compensation or benefits from advising the Portfolio. BSAM does not engage in soft dollar transactions with respect to the Portfolio and no revenue sharing payments are currently being made by BSAM to any affiliates. Further, the Directors noted that BSAM experienced a net loss with respect to providing advisory services to the Portfolio since its inception. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately the Independent Directors, concluded that the proposed advisory fee structure was reasonable and determined that BSAM's Advisory Agreement be approved for an additional one-year period ending August 16, 2008. 19 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO 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 the Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2007, the tax character for federal income purpose was as follows: Ordinary income $5,618,485 Long-term capital gains -- Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. 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 2008. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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 consequence of their investment in the Fund. 20 BEAR STEARNS CUFS(R) MLP MORTGAGE 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 (888) 261-4073.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR* - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 16 Comcast Corporation; Comcast Corporation Chairman, Comcast Corporation AMDOCS Limited 1500 Market Street, (cable television and (service provider to 35th Floor communications); Director, NDS telecommunications Philadelphia, PA 19102 Group PLC (provider of systems companies) DOB: 7/16/33 and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial services 16 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to Investment Trust Wilmington, DE 19809 present. (registered DOB: 3/7/43 investment company); WT Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, Fox 16 None Fox Chase Cancer Center Chase Cancer Center (biomedical 333 Cottman Avenue research and medical care). Philadelphia, PA 19111 DOB: 12/6/35 - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 16 None 106 Pierrepont Street Partners, L.P. (an investment Brooklyn, NY 11201 Director 1991 to present partnership) from 2000 to 2006. DOB: 5/21/48 - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor of Law, 16 WT Mutual Fund Villanova University Villanova University School of (registered School of Law Law since July 1997. investment company); 299 North Spring Mill Road NYSE Regulation Villanova, PA 19085 Inc.; Financial DOB: 4/28/51 Industry Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed.
21 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR* - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 16 Moyco Technologies, Moyco Technologies, Inc. and President, Moyco Inc. 200 Commerce Drive Technologies, Inc. (manufacturer Montgomeryville, PA 18936 of precision coated and DOB: 3/24/34 industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York State Assembly 16 Reich and Tang Group 300 East 57th Street (1981-2004); Founding Partner, (asset management); New York, NY 10022 Straniere Law Firm (1980 to The Sparx Japan DOB: 3/28/41 date); Partner, Gotham Strategies Funds Group (consulting firm) (2005 to date); (registered Partner, The Gotham Global Group investment company) (consulting firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Director, Weiss, Peck & Greer Fund Group (1992 to 2005); and Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed.
22 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR* - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 16 Kensington Funds Oppenheimer & President and prior thereto, (registered Company, Inc. Executive Vice President of investment company) 200 Park Avenue Oppenheimer & Co., Inc., formerly New York, NY 10166 Fahnestock & Co., Inc. (a DOB: 4/16/38 registered broker-dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 16 Cornerstone Bank 103 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------ * Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc, 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 employee of Oppenheimer & Co., Inc. a registered broker-dealer.
23 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF POSITION(S) TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present Certified Public Accountant; Vice N/A N/A 103 Bellevue Parkway and and Chairman of the Board, Fox Chase Wilmington, DE 19809 Treasurer 1988 to present Cancer Center; Trustee Emeritus, DOB: 6/29/24 Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Chief Since 2004 President, Vigilant Compliance N/A N/A Esquire, CPA Compliance Services since 2004; Senior Legal Vigilant Compliance Officer Counsel, PFPC Inc. from 2002 to Services 2004; Chief Legal Counsel, 186 Dundee Drive, Corviant Corporation (Investment Suite 700 Adviser, Broker-Dealer and Williamstown, NJ 08094 Service Provider to Investment DOB: 12/25/62 Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
24 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PRIVACY NOTICE THE BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO of The RBB Fund, Inc. (the "Portfolio") 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 Portfolio. 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 Portfolio 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 Portfolio 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) 519-CUFS (2387). 25 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO - -------------------------------------------------------------------------------- INVESTMENT ADVISERS ------------------- Bear Stearns Asset Management Inc. 383 Madison Avenue New York, NY 10179 ADMINISTRATOR ------------- PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT -------------- PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 PRINCIPAL UNDERWRITER --------------------- 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 LEGAL COUNSEL ------------- Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103 [THIS PAGE INTENTIONALLY LEFT BLANK] [LOGO OMITTED] BEAR STEARNS [GRAPHIC OMITTED] BEAR STEARNS ENHANCED INCOME FUND OF THE RBB FUND, INC. ANNUAL REPORT August 31, 2007 This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution unless preceded or accompanied by a current prospectus for the Fund. BEAR STEARNS ENHANCED INCOME FUND ANNUAL REPORT FOR THE PERIOD ENDED AUGUST 31, 2007 - -------------------------------------------------------------------------------- Dear Shareholder: We are pleased to present the annual report for the Bear Stearns Enhanced Income Fund (the "Fund"), a series of The RBB Fund, Inc., covering the period from March 6, 2007 through August 31, 2007. Portfolio performance information, market commentary and our outlook for the period ended August 31, 2007 follows. We encourage you to carefully review the enclosed information to stay informed. Portfolio Performance and Investment Environment: From inception in March of this year through the end of August, the Fund generated a periodic total return of 1.61% with a 30-day yield of 5.35%. The Fund's primary benchmark, the Merrill Lynch 3-month U.S. Treasury Bill Index, returned 2.52% during the same period. Since inception of the Fund, the fixed income markets have experienced a repricing of risk across various sectors and increased volatility resulting primarily from the developments in the sub-prime mortgage market. S&P Rating Services and Moody's Investor Services responded by downgrading and placing on watch numerous securities backed by sub-prime collateral. As fears of contagion grew, liquidity and price levels in investment grade fixed income sectors declined. Short-term lending rates, specifically the 3-Month LIBOR, increased dramatically and the Federal Reserve (as well as the European Central Bank and the Bank of England) were forced to inject liquidity into the market. As a result of the developments in sub-prime mortgages and the ensuing lack of confidence in short-term borrowing and growing illiquidity in commercial paper, the market has priced in the expectation of a 100 basis point Federal Funds rate cut by March of 2008. We agreed with market expectations to some extent, and anticipated a rate cut as soon as the September Fed meeting. However, it is important to note that while a rate cut may restore investor confidence, its economic benefit may not be immediately realized. Looking forward, we believe short-maturity interest rates will remain volatile. The fixed income markets may continue to see increased investor risk aversion in response to uncertainty in the housing market. We will continue to closely monitor the housing market and its effect on the U.S. consumer, from which potential adjustments to our economic outlook may be drawn. Shares of the Bear Stearns Enhanced Income Fund are distributed by PFPC Distributors, Inc., King of Prussia, PA 19406. Sincerely, Scott Pavlak, CFA Senior Managing Director Portfolio Manager Bear Stearns Asset Management - ---------------------------------- 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.BSAMONLINE.COM OR BY CALLING 1-800-436-4118. 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. THE PERFORMANCE QUOTED REFLECTS FEE WAIVERS IN EFFECT AND WOULD HAVE BEEN LESS IN THEIR ABSENCE. THE FUND'S ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS, IS 0.26%. THIS RATE CAN FLUCTUATE AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. 1 BEAR STEARNS ENHANCED INCOME FUND FUND EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. The example is 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 from March 6, 2007* through August 31, 2007, 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 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 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. 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 any transactional costs were included, your costs would have been higher.
--------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID DURING MARCH 6, 2007* AUGUST 31, 2007 PERIOD** ----------------------- -------------------- -------------------- Actual $1,000.00 $1,016.10 $0.99 Hypothetical (5% return before expenses) 1,000.00 1,023.53 0.99
- ----------------------------------- *Commencement of operations. **Expenses are equal to the Fund's annualized expense ratio of 0.20%, which includes waived fees or reimbursed expenses, multiplied by the number of days (179) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Fund's ending account value on the first line is based on the actual total return of 1.61%. 2 BEAR STEARNS ENHANCED INCOME FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007
% OF NET SECURITY TYPE CLASSIFICATION ASSETS VALUE - ------------------------------------------------------------------------------------------------ CORPORATE BONDS 27.4% $143,972,200 ASSET BACKED SECURITIES 17.3 90,965,196 GOVERNMENT AGENCY OBLIGATIONS 16.7 87,532,420 SHORT TERM OBLIGATIONS 12.6 66,313,232 GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS 10.0 52,659,025 NON-GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS 9.1 47,939,974 COMMERCIAL MORTGAGE-BACKED SECURITIES 5.7 29,773,095 MUNICIPAL BONDS 0.5 2,700,698 OTHER ASSETS IN EXCESS OF LIABILITIES 0.7 3,372,100 ----- ------------ NET ASSETS 100.0% $525,227,940 ===== ============ - -------------------------------- Portfolio holdings are subject to change at any time.
3 BEAR STEARNS ENHANCED INCOME FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 MOODY'S/ PAR FAIR S&P(b) (000'S) VALUE -------- ------- ------------ GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS--10.0% FEDERAL HOME LOAN MORTGAGE CORPORATION--2.4% 5.750% 07/15/11 Aaa(b)/AAA $ 1,428 $ 1,430,516 3.000% 03/15/20 Aaa/AAA 997 991,251 2.500% 06/15/22 Aaa/AAA 1,255 1,243,055 5.911% 02/15/36 (a) Aaa/AAA 8,984 8,881,439 ------------ 12,546,261 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--7.5% 5.000% 12/25/25 Aaa/AAA 500 497,951 5.805% 11/25/34(a) Aaa/AAA 10,019 9,923,520 5.755% 07/25/35(a) Aaa/AAA 4,663 4,607,618 4.656% 09/01/35(a) Aaa/AAA 2,553 2,555,427 5.755% 02/25/37(a) Aaa/AAA 9,195 9,095,974 5.755% 02/25/37(a) Aaa/AAA 12,794 12,609,981 ------------ 39,290,471 ------------ GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--0.1% 3.000% 07/20/25 Aaa /AAA 826 822,293 ------------ TOTAL GOVERNMENT AGENCY MORTGAGE-BACKED OBLIGATIONS (Cost $53,246,936) .................................. 52,659,025 ------------ NON-GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES--9.1% Countrywide Alternative Loan Trust Series 2006-OA9(a) 5.738% 07/20/46 Aaa/AAA 8,324 8,160,376 Countrywide Home Loan Mortgage Pass Through Trust Series 2003-HYB1(a) 3.686% 05/19/33 Aaa/AAA 2,040 2,035,158 Harborview Mortgage Loan Trust Series 2006-12(a) 5.728% 01/19/38 Aaa/AAA 8,585 8,334,149 Master Adjustable Rate Mortgages Trust Series 2006-OA1(a) 5.715% 04/25/46 Aaa/AAA 7,453 7,305,477 Merrill Lynch Mortgage Investors, Inc. Series 2005-A8 5.250% 08/25/36 Aaa/AAA 1,801 1,792,888 Residential Asset Securitization Trust Series 2007-A5(a) 5.905% 05/25/37 NR/AAA 8,816 8,758,589 Structured Asset Mortgage Investments, Inc. Series 2006-AR7(a) 5.715% 08/25/36 Aaa/AAA 7,739 7,568,154 MOODY'S/ PAR FAIR S&P(b) (000'S) VALUE -------- ------- ------------ NON-GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES--(CONTINUED) Structured Asset Securities Corp. Series 2003-34A(a) 7.420% 11/25/33 Aaa/AAA $ 628 $ 644,099 Structured Asset Securities Corp. Series 2005-6 5.000% 05/25/35 Aaa/AAA 1,928 1,918,787 Washington Mutual, Inc. Series 2002-S8 4.500% 01/25/18 NR/AAA 1,427 1,422,297 ------------ TOTAL NON-GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $48,736,083) .................................. 47,939,974 ------------ COMMERCIAL MORTGAGE-BACKED SECURITIES--5.7% Capco America Securitization Corp. Series 1998-D7 6.260% 10/15/30 Aaa/NR 1,917 1,924,607 CS First Boston Mortgage Securities Corp. Series 1998-C1 6.480% 05/17/40 Aaa/AAA 2,530 2,537,139 First Union-Lehman Brothers-Bank of America Series 1998-C2 6.560% 11/18/35 Aaa/AAA 3,805 3,805,100 GMAC Commercial Mortgage Securities, Inc. Series 1998-C2 6.420% 05/15/35 Aaa/AAA 7,438 7,459,953 GS Mortgage Securities Corp. II Series 1999-C1 6.110% 11/18/30 Aaa/AAA 2,966 2,969,342 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2001-CIBC 6.244% 04/15/35 NR/AAA 1,290 1,298,062 JP Morgan Chase Commercial Mortgage Securities Corp. Series 2005-CB13(a) 5.666% 01/12/43 Aaa/NR 4,900 4,886,273 JP Morgan Commercial Mortgage Finance Corp. Series 1999-C7 6.507% 10/15/35 NR/AAA 1,315 1,320,090 LB-UBS Commercial Mortgage Trust Series 2003-C3 2.599% 05/15/27 Aaa/AAA 611 602,676 LB-UBS Commercial Mortgage Trust Series 2002-C7 3.899% 12/15/26 NR/AAA 2,986 2,969,853 ------------ TOTAL COMMERCIAL MORTGAGE- BACKED SECURITIES (Cost $29,855,056) .................................. 29,773,095 ------------ The accompanying notes are an integral part of the financial statements. 4 BEAR STEARNS ENHANCED INCOME FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2007 MOODY'S/ PAR FAIR S&P(b) (000'S) VALUE -------- ------- ------------ GOVERNMENT AGENCY OBLIGATIONS--16.7% FEDERAL HOME LOAN BANKS--1.9% 5.400% 03/27/09 Aaa/AAA $10,000 $ 10,002,930 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION--11.0% 5.500% 03/05/09 Aaa/AAA 7,500 7,500,030 5.500% 06/12/09 Aaa/AAA 20,000 20,003,020 5.550% 03/04/10 Aaa/AAA 15,000 15,026,310 5.600% 03/05/10 Aaa/AAA 15,000 15,000,090 ------------ 57,529,450 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--3.8% 5.450% 03/05/09 Aaa/AAA 20,000 20,000,040 ------------ TOTAL GOVERNMENT AGENCY OBLIGATIONS (Cost $87,500,978) .................................. 87,532,420 ------------ ASSET BACKED SECURITIES--17.3% Ameriquest Mortgage Securities, Inc. Series 2005-R3 (a) 5.705% 05/25/35 Aaa/AAA 1,709 1,662,592 Ameriquest Mortgage Securities, Inc. Series 2005-R8 (a) 5.765% 10/25/35 Aaa/AAA 4,421 4,400,825 Centex Home Equity Series 2003-C (a) 4.810% 09/25/33 Aaa/AAA 3,100 3,009,951 Chase Funding Mortgage Loan Asset-Backed Certificates Series 2004-2 (a) 5.755% 02/25/35 Aaa/AAA 1,778 1,729,684 Countrywide Asset-Backed Certificates Series 2004-15 (a) 4.025% 01/25/31 Aaa/AAA 575 571,332 Fieldstone Mortgage Investment Corp. Series 2006-1(a) 5.585% 05/25/36 Aaa/AAA 1,310 1,301,078 First Franklin Mortgage Loan Asset Backed Certificates Series 2006-FF15 (a) 5.665% 11/25/36 Aaa/AAA 10,000 9,187,598 JP Morgan Mortgage Acquisition Corp. Series 2006-ACC1(a) 5.655% 05/25/36 Aaa/AAA 8,000 7,482,767 Long Beach Mortgage Loan Trust Series 2005-WL2 (a) 5.685% 08/25/35 Aaa/AAA 4,035 3,997,821 Long Beach Mortgage Loan Trust Series 2006-2 (a) 5.575% 03/25/36 Aaa/AAA 2,608 2,606,002 MOODY'S/ PAR FAIR S&P(b) (000'S) VALUE -------- ------- ------------ ASSET BACKED SECURITIES--(CONTINUED) Morgan Stanley Home Equity Loans Series 2005-2 5.825% 05/25/35 Aaa/AAA $ 8,782 $ 8,549,263 People's Choice Home Loan Securities Trust Series 2005-3 (a) 5.775% 08/25/35 Aaa/AAA 2,354 2,340,597 Residential Asset Securities Corp. Series 2006-EMX8 (a) 5.675% 10/25/36 Aaa/AAA 10,000 9,652,425 Soundview Home Equity Loan Trust Series 2005-OPT4 (a) 5.765% 12/25/35 NR/AAA 5,000 4,787,754 Soundview Home Equity Loan Trust Series 2006-EQ1 (a) 5.665% 10/25/36 Aaa/AAA 12,000 11,152,871 Washington Mutual Asset-Backed Certificates Series 2006-HE2 (a) 5.655% 05/25/36 Aaa/AAA 10,000 9,756,397 Wells Fargo Home Equity Trust Series 2006-1 (a) 5.655% 05/25/36 Aaa/AAA 9,000 8,776,239 ------------ TOTAL ASSET BACKED SECURITIES (Cost $94,641,295) .................................. 90,965,196 ------------ CORPORATE BONDS--27.4% BANKS--4.7% Bank of America Corp. (a) 5.370% 06/19/09 Aa1/AA 10,000 9,950,780 Union Bank of California (a) 5.380% 03/23/09 Aa3/A+ 5,000 5,001,145 Wachovia Corp. (a) 5.410% 10/28/08 Aa3/AA- 10,000 9,988,880 ------------ 24,940,805 ------------ CONSUMER PRODUCTS--1.9% Procter & Gamble Co. 144A 5.370% 07/06/09 Aa3/AA- 10,000 9,998,810 ------------ DIVERSIFIED FINANCIAL SERVICES--16.5% American Express Credit Corp. 144A (a) 5.380% 03/02/09 Aa3/A+ 9,480 9,483,346 American Honda Finance Corp. 144A (a) 5.420% 03/09/09 Aa3/A+ 5,425 5,430,924 CIT Group, Inc. (a) 5.570% 02/21/08 A2/A 2,300 2,269,419 CIT Group, Inc. (a) 5.708% 08/15/08 A2/A 5,000 4,933,930 General Electric Capital Corp. (a) 5.509% 02/02/09 Aaa/AAA 10,000 10,001,510 Goldman Sachs Group, Inc. (a) 5.450% 12/22/08 Aa3/AA- 5,000 4,985,695 HSBC Finance Corp. (a) 5.500% 12/05/08 Aa3/AA- 5,950 5,934,887 The accompanying notes are an integral part of the financial statements. 5 BEAR STEARNS ENHANCED INCOME FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2007 MOODY'S/ PAR FAIR S&P(b) (000'S) VALUE -------- ------- ------------ CORPORATE BONDS--(CONTINUED) IBM International Group Capital LLC (a) 5.550% 02/13/09 A1/A+ $ 5,000 $ 4,999,535 John Deere Capital Corp. (a) 5.410% 04/15/08 A2/A 2,000 2,000,516 Lehman Brothers Holdings, Inc. (a) 5.450% 04/03/09 A1/A+ 10,000 9,790,640 Merrill Lynch & Co., Inc. (a) 5.665% 08/14/09 Aa3/AA- 3,000 2,991,309 Morgan Stanley (a) 5.470% 02/09/09 Aa3/A+ 9,200 9,136,226 SLM Corp. 144A (a) 5.450% 09/15/08 A2/BBB+ 10,000 9,792,600 Washington Mutual Bank (a) 5.446% 05/01/09 A1/A 5,000 4,896,580 ------------ 86,647,117 ------------ ELECTRIC--0.8% FPL Group Capital Inc. (a) 5.551% 02/16/08 A2/A- 4,385 4,386,202 ------------ INSURANCE--0.6% Nationwide Life Global Funding I 144A (a) 5.440% 09/23/08 Aa3/AA- 3,000 3,003,381 ------------ MINING & METALS--1.0% BHP Billiton Finance Ltd. (a) 5.390% 03/27/09 A1/A+ 5,000 5,000,835 ------------ TELECOMMUNICATIONS--1.9% AT&T, Inc. (a) 5.648% 05/15/08 A2/A 10,000 9,995,050 ------------ TOTAL CORPORATE BONDS (Cost $144,809,474) ................................. 143,972,200 ------------ MUNICIPAL BONDS--0.5% Alabama Power Co. 3.125% 05/01/08 A2/A 2,745 2,700,698 ------------ TOTAL MUNICIPAL BONDS (Cost $2,703,906) ................................... 2,700,698 ------------ SHORT TERM OBLIGATIONS--12.6% COMMERCIAL PAPER--12.4% Deutsche Bank Financial 5.250% 09/04/07 8,000 7,996,500 Rabobank USA Financial Corp. 5.480% 09/05/07 19,500 19,488,334 Societe Generale 5.440% 09/12/07 19,000 18,968,418 UBS Finance Delaware LLC 5.240% 09/06/07 19,000 18,986,172 ------------ 65,439,424 ------------ FAIR SHARES VALUE -------- ------------ INVESTMENT COMPANY--0.2% PNC Bank Money Market (c) 4.460% 09/04/07 873,808 $ 873,808 ------------ TOTAL SHORT TERM OBLIGATIONS (Cost $66,313,232) .................................. 66,313,232 ------------ TOTAL INVESTMENTS--99.3% (Cost $527,806,960) ..................................... 521,855,840 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.7% ....................................... 3,372,100 ------------ NET ASSETS--100.0% ......................................... $525,227,940 ============ - ------------------------------ (a)Adjustable rate security. Percentage of adjustable rate securities to net assets is as follows: Corporate Bonds 29.3% Asset Backed Securities 15.7 Government Agency Mortgage-Backed Obligations 9.1 Non Government Agency Mortgage-Backed Securities 8.1 Commercial Mortgage-Backed Securities 0.9 ---- Total 63.1% ==== (b)Ratings are unaudited. (c)Security is affiliated to the underwriter of the Fund. 144A -- Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that Rule except to qualified institutional buyers. The accompanying notes are an integral part of the financial statements. 6 BEAR STEARNS ENHANCED INCOME FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007
ASSETS Investments, at fair value (cost $526,933,152)........................................... $520,982,032 Affiliated investments, at value (cost $873,808)......................................... 873,808 Dividends and interest receivable........................................................ 3,473,763 Prepaid expenses and other assets........................................................ 7,223 ------------ Total assets ......................................................................... 525,336,826 ------------ LIABILITIES Payable for capital shares redeemed...................................................... 8,988 Payable for dividends.................................................................... 617 Payable to the Adviser................................................................... 44,006 Accrued expenses and other liabilities................................................... 55,275 ------------ Total liabilities .................................................................... 108,886 ------------ Net assets ........................................................................... $525,227,940 ============ NET ASSETS CONSISTED OF: Capital stock, $0.001 par value.......................................................... $ 530,484 Additional paid-in capital............................................................... 530,649,193 Distributions in excess of net investment income......................................... (617) Accumulated net realized gain from investments........................................... -- Net unrealized depreciation on investments............................................... (5,951,120) ------------ Net assets ........................................................................... $525,227,940 ============ Net asset value, offering and redemption price per share ($525,227,940 / 530,484,273 outstanding shares of common stock, $0.001 par value, 50,000,000,000 shares authorized)..................................................... $ 0.99 ============
The accompanying notes are an integral part of the financial statements. 7 BEAR STEARNS ENHANCED INCOME FUND STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 6, 2007* TO AUGUST 31, 2007 --------------------- INVESTMENT INCOME Interest income.......................................................................... $13,655,536 Interest from affiliate.................................................................. 35,224 ----------- Total investment income.................................................................. 13,690,760 ----------- EXPENSES Advisory fees............................................................................ 398,239 Administration and accounting fees....................................................... 121,200 Professional fees........................................................................ 62,000 Directors' and officers' fees............................................................ 38,902 Registration and filing fees............................................................. 19,475 Printing and shareholder reporting fees.................................................. 4,666 Custodian fees........................................................................... 6,838 Transfer agent out of pocket fees........................................................ 2,700 Other expenses........................................................................... 1,000 ----------- Total expenses before waivers and reimbursements ..................................... 655,020 Less: waivers and reimbursements ..................................................... (157,319) ----------- Net expenses ......................................................................... 497,701 ----------- Net investment income.................................................................... 13,193,059 ----------- NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FUTURES Net realized gain (loss) from: Investments .......................................................................... (21,016) Futures transactions ................................................................. 43,052 Net unrealized depreciation on investments............................................... (5,951,120) ----------- Net realized and unrealized gain (loss) from investments................................. (5,929,084) ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ....................................... $ 7,263,975 ===========
- -------------------------------- * Commencement of operations. The accompanying notes are an integral part of the financial statements. 8 BEAR STEARNS ENHANCED INCOME FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 6, 2007* TO AUGUST 31, 2007 --------------------- INCREASE IN NET ASSETS FROM OPERATIONS Net investment income.................................................................... $ 13,193,059 Net realized gain from investments and futures transactions.............................. 22,036 Net unrealized depreciation on investments............................................... (5,951,120) ------------ Net increase in net assets resulting from operations..................................... 7,263,975 ------------ LESS DIVIDENDS TO SHAREHOLDERS: Net investment income.................................................................... (13,258,750) ------------ INCREASE IN NET ASSETS DERIVED FROM CAPITAL SHARE TRANSACTIONS(1)............................................................ 531,222,715 ------------ Total increase in net assets............................................................. 525,227,940 NET ASSETS Beginning of period...................................................................... -- ------------ End of period**.......................................................................... $525,227,940 ============
- --------------------------------- * Commencement of operations. ** Includes distributions in excess of net investment income of $617 for the period ended August 31, 2007. (1) See Note 4 in the Notes to Financial Statements. The accompanying notes are an integral part of the financial statements. 9 BEAR STEARNS ENHANCED INCOME FUND FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Contained below is per share operating performance data for a share outstanding during the period, total investment return, ratios to average net assets and other supplemental data for the respective period. This information has been derived from information provided in the financial statements. - -------------------------------------------------------------------------------- FOR THE PERIOD MARCH 6, 2007* TO AUGUST 31, 2007 ----------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period........................... $ 1.00 Net investment income.......................................... 0.03 Net realized and unrealized loss on investments ............... (0.01) -------- Net increase in net assets resulting from operations........... 0.02 -------- Dividends to shareholders from: Net investment income.......................................... (0.03) Net realized capital gains..................................... -- -------- Net asset value, end of period................................. $ 0.99 ======== Total investment return(1)..................................... 1.61% RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted)...................... $525,228 Ratio of expenses to average net assets(2)..................... 0.20% Ratio of expenses to average net assets without waivers and expense reimbursements(2)................................... 0.26% Ratio of net investment income to average net assets(2)........ 5.30% Portfolio turnover rate........................................ 21.51% - -------------------------------- * Commencement of operations. (1) Total investment return is calculated by 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 BEAR STEARNS ENHANCED INCOME FUND NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Bear Stearns Enhanced Income Fund (the "Fund"), which commenced investment operations on March 6, 2007. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion are currently classified into one hundred and eighteen 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." PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Fixed Income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed Income securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Investments in other open-end investment companies, if any, are valued based on the NAV of the investment companies (which may use fair value pricing as discussed in their prospectuses). If price quotes are unavailable or deemed unreliable, securities will be fair valued in accordance with procedures adopted by the Company's Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. 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. 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. Distributions received on securities that represent a return of capital or capital gains are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. The Fund's investment income, expenses and unrealized and realized gains and losses are allocated daily. Expenses incurred for all of the RBB fund 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 are declared daily and paid monthly. Distributions from net realized capital gains, if any, are declared and paid at least annually to shareholders and recorded on ex-date for the Fund. Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations which may differ from generally accepted accounting principles in the United States of America. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. 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 from such claims is considered remote. 11 BEAR STEARNS ENHANCED INCOME FUND NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) FUTURES -- The Fund may enter into futures contracts. A futures contract is an agreement between two parties to buy and sell a security at a set price on a future date. Upon entering into such a contract, a Fund is required to pledge to the broker an amount of cash and/or securities equal to the minimum "initial margin" requirements of the exchange on which such contract is traded. Pursuant to the contract, the Fund agrees to receive from, or pay to the broker, an amount of cash equal to the daily fluctuation in value of the contract. Such a receipt of payment is known as a "variation margin" and is recorded by the Fund as an unrealized gain or loss. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The Fund is also required to fully collateralize futures contracts purchased. The Fund only enters into futures contracts that are traded on exchanges. MORTGAGE-RELATED SECURITIES GENERALLY -- The Portfolio may invest in mortgage pass-through securities and multiple-class pass-through securities, such as collateralized mortgage obligations ("CMOs") and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or participation certificates as well as other securities collateralized by or representing a direct or indirect interest in mortgage-related securities or mortgage loans. The Portfolio may also invest in certain stripped mortgage-backed securities. Some of these securities may contain "embedded leverage" which can make them more sensitive to small movements in interest rates. 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Bear Stearns Asset Management, Inc. ("BSAM" or the "Adviser"), a wholly-owned subsidiary of The Bear Stearns Companies, Inc. ("Bear Stearns"), serves as investment adviser to the Fund pursuant to an investment advisory agreement with the Company (the "Advisory Agreement"). For its services, the Adviser is paid a monthly fee at the annual rate of 0.16% of the Fund's average daily net assets. BSAM is voluntarily waiving a portion of its advisory fee and reimbursing certain expenses in order to limit the Fund's total annual portfolio operating expenses to 0.20% of the Fund's average daily net assets. The fee waiver and expense reimbursement are not contractual, and can be terminated at any time. For the period ended August 31, 2007, investment advisory fees were $398,239 and $126,069 was waived by the Adviser. As of August 31, 2007, the Fund owed the Adviser $44,006. 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 Fund. Administration and accounting fees accrued also include Transfer Agent and dividend disbursing agent fees, Custodian fees and Administrative Service fees. For providing administrative and accounting services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.0625% of the Fund's first $500 million of average daily net assets; 0.04% of the Fund's next $250 million of average daily net assets; 0.035% of the Fund's next $250 million of average daily net assets; and 0.03% of the Fund's average daily net assets in excess of $1 billion. For the period ended August 31, 2007, PFPC's administration and accounting fees were $121,200. PFPC voluntarily agreed to waive a portion of its administration and accounting fees from the Fund. For the period ended August 31, 2007, $31,250 was waived by PFPC. Included in the administration and accounting fees, shown above, are fees for providing regulatory administration services to RBB. For providing these services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to its net assets of the RBB funds. For providing transfer agent services, PFPC is entitled to receive out of pocket expenses. For the period ended August 31, 2007, PFPC out of pocket transfer agency fees were $2,700. 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 the period ended August 31, 2007, PFPC Trust Company received transaction charges and out of pocket expenses of $6,838. 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 is entitled to receive a fee paid by PFPC from the fees PFPC receives from the Fund pursuant to the Administration and Accounting Services Agreement. The Fund will not pay PFPC or PFPC's affiliates at a later time for any amounts waived or any amounts assumed. 12 BEAR STEARNS ENHANCED INCOME FUND NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) As of August 31, 2007, the Fund owed PFPC and its affiliates $16,201 for their services. 3. INVESTMENT IN SECURITIES For the period ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows: PURCHASES SALES ------------- ------------ Investment Securities $557,085,372 $105,033,328 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, the Fund has 50,000,000,000 shares of common stock authorized. Transactions in capital shares were as follows: FOR THE PERIOD ENDED AUGUST 31, 2007 -------------------------------- SHARES VALUE ------------- ------------ Sales......................................... 594,629,640 $594,629,640 Reinvestments................................. 13,283,409 13,258,134 Redemptions................................... (77,428,776) (76,665,059) ------------ ------------ Net Increase.................................. 530,484,273 $531,222,715 ============ ============ As of August 31, 2007, the following shareholder held a majority of the outstanding shares of the Fund. Bear Stearns Asset Management, Inc. 82.38% 5. FEDERAL INCOME TAX INFORMATION At August 31, 2007, 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 DEPRECIATION ------------ ------------ ------------ -------------- $527,806,960 $133,773 $(6,084,893) $(5,951,120) The following permanent differences as of August 31, 2007, attributable to the return of capital, redesignation of dividends and paydown adjustments, were reclassified to the following accounts: INCREASE DECREASE UNDISTRIBUTED ACCUMULATED NET DECREASE NET INVESTMENT INCOME REALIZED GAIN PAID IN CAPITAL --------------------- --------------- --------------- $65,074 $(22,036) $(43,038) As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM INCOME GAINS ------------ ------------- $ -- $ -- The federal income tax character of distributions paid during the year ended August 31, 2007 was as follows: Ordinary income $ 13,209,357 Long-term capital gains 25,031 Return of capital 23,562 13 BEAR STEARNS ENHANCED INCOME FUND NOTES TO FINANCIAL STATEMENTS FOR THE PERIOD ENDED AUGUST 31, 2007 (CONTINUED) Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. At August 31, 2007, 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 period ended August 31, 2007, the Fund did not incur any post-October capital losses for the period March 6, 2007 through August 31, 2007. The differences between book and tax 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. 6. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109." FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as: a liability for unrecognized tax benefits; a reduction of an income tax refund receivable; a reduction of deferred tax assets; an increase in deferred tax liability; or a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management has adopted FIN 48 and has determined that it has no impact on the Fund's financial statements. In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") 157, Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Although still in the process of evauating the impact, if any, upon adoption of the standard, management believes there will be no material impact other than enhanced disclosures. 7. SUBSEQUENT EVENTS At a Meeting held on September 6, 2007, the Board of Directors of the RBB Fund, Inc. (the "Board") voted to declare a share combination in the form of a 1-for-10 reverse stock split of the outstanding shares of Common Stock of the Bear Stearns Enhanced Income Fund (the "Fund"). In conjunction with the reverse stock split, the Fund will change one of its primary investment strategies to seeking to maintain a stable net asset value per share. Effective December 7, 2007, any references in the Prospectus and SAI to the Fund's strategy to "seek to maintain a stable $1.00 net asset value" are hereby replaced with "seek to maintain a stable net asset value." 14 BEAR STEARNS ENHANCED INCOME FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of Bear Stearns Enhanced Income Fund and Board of Directors of The RBB Fund, Inc.: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments of Bear Stearns Enhanced Income Fund, one of the portfolios constituting The RBB Fund, Inc. (the "Fund"), as of August 31, 2007, and the related statements of operations, changes in net assets and the financial highlights for the period from March 6, 2007 (commencement of operations) through August 31, 2007. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of August 31, 2007, by correspondence with the custodian and brokers. 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 Bear Stearns Enhanced Income Fund of The RBB Fund, Inc. as of August 31, 2007, the results of its operations, the changes in its net assets and its financial highlights for the period from March 6, 2007 (commencement of operations) through August 31, 2007, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 21, 2007 15 BEAR STEARNS ENHANCED INCOME FUND OTHER INFORMATION (UNAUDITED) 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) 509-7229 and on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES The Company will file its complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q will be available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF ADVISORY AGREEMENT As required by the Investment Company Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the Investment Company Act (the "Independent Directors"), considered the approval of the Advisory Agreement between the Adviser and the Company on behalf of the Fund at the meeting of the Board held on May 24, 2007. At this Meeting, the Board approved the continuation of the Advisory Agreement for a one-year term ending August 16, 2008. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to engage the Adviser to provide advisory services to the Fund pursuant to the terms of the Advisory Agreement and based upon the information provided to the Directors in connection with the meeting. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made presentations during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services to be provided to the Fund; (ii) descriptions of the experience and qualifications of the Adviser's personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information and insurance coverage; (ix) the extent to which economies of scale are relevant to the Fund; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to the performance of its Lipper peer group; and (xi) a report comparing the performance of the Fund to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. The Directors then met in executive session with counsel to discuss and consider information presented, as well as the Directors' responsibilities and duties in connection with approving the Advisory Agreement. The Directors considered the nature of the investments which the Adviser anticipated for the Fund. The Directors noted the management experience of the portfolio managers of the Fund, noting in particular their expertise in fixed income investments. The Directors noted that the Adviser does not manage any other product in a similar strategy as that of the Fund. Further, the Directors considered the performance of the Fund, noting that the Fund commenced operations on March 6, 2007; therefore performance information was not included in the presentation materials. The Directors noted that the Adviser agreed to voluntarily waive a portion of its advisory fee and reimburse expenses of the Fund to limit the Fund's total annual operating expenses to 0.20% of average net assets. 16 BEAR STEARNS ENHANCED INCOME FUND OTHER INFORMATION (UNAUDITED) (CONCLUDED) The Directors determined that the nature, extent and quality of services to be provided by the Adviser in advising the Fund were reasonably likely to be satisfactory. The Directors discussed and considered any economies of scale which may be realized by the Fund as a result of asset growth. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately the Independent Directors, concluded that the proposed advisory fee structure was reasonable and determined that the Adviser's Advisory Agreement be approved for an initial one-year period ending August 16, 2008. 17 BEAR STEARNS ENHANCED INCOME PORTFOLIO 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 of the U.S. federal income tax status of distributions received by the Fund's shareholders in respect of such fiscal year. The federal income tax character of distributions paid during the year ended August 31, 2007 was as follows: Ordinary income $13,244,963 Long-term capital gains 6,521 Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. 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 2008. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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 consequence of their investment in the Fund. 18 BEAR STEARNS ENHANCED INCOME 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 (866) 509-7229.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Comcast Corporation Vice Chairman, Comcast Corporation; 1500 Market Street, Corporation (cable AMDOCS Limited 35th Floor television and (service provider Philadelphia, PA 19102 communications); Director, to telecommunica- DOB: 7/16/33 NDS Group PLC (provider tions companies) of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial services 16 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to Investment Trust Wilmington, DE 19809 present. (registered invest- DOB: 3/7/43 ment company); WT Mutual Fund (registered invest- ment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, 16 None Fox Chase Cancer Center Fox Chase Cancer Center 333 Cottman Avenue (biomedical research and Philadelphia, PA 19111 medical care). DOB: 12/6/35 - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 16 None 106 Pierrepont Street Partners, L.P. (an investment Brooklyn, NY 11201 Director 1991 to present partnership) from 2000 to 2006. DOB: 5/21/48 - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor of Law, 16 WT Mutual Fund Villanova University School Villanova University School (registered invest- of Law of Law since July 1997. ment company); 299 North Spring Mill Road NYSE Regulation Villanova, PA 19085 Inc.; Financial DOB: 4/28/51 Industry Regulatory Authority (FINRA) - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 19 BEAR STEARNS ENHANCED INCOME FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, 16 Moyco Moyco Technologies, Inc. Director and President, Technologies, Inc. 200 Commerce Drive Moyco Technologies, Inc. Montgomeryville, PA 18936 (manufacturer of precision DOB: 3/24/34 coated and industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York State 16 Reich and Tang 300 East 57th Street Assembly (1981-2004); Group (asset New York, NY 10022 Founding Partner, Straniere management); DOB: 3/28/41 Law Firm (1980 to date); The Sparx Japan Partner, Gotham Strategies Funds Group (consulting firm) (2005 to (registered invest- date); Partner, The Gotham ment company) Global Group (consulting firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Director, Weiss, Peck & Greer Fund Group (1992 to 2005); and Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS(2) - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior 16 Kensington Funds Oppenheimer & Vice President and prior (registered invest- Company, Inc. thereto, Executive Vice ment company) 200 Park Avenue President of Oppenheimer & Co., New York, NY 10166 Inc., formerly Fahnestock & DOB: 4/16/38 Co., Inc. (a registered broker- dealer). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 16 Cornerstone Bank 103 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc., 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 20 BEAR STEARNS ENHANCED INCOME FUND FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present Certified Public Accountant; N/A N/A 103 Bellevue Parkway and and Vice Chairman of the Board, Wilmington, DE 19809 Treasurer 1988 to present Fox Chase Cancer Center; DOB: 6/29/24 Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 President, Vigilant Compliance N/A N/A Vigilant Compliance Services Compliance Services since 2004; Senior 186 Dundee Drive, Suite 700 Officer Legal Counsel, PFPC Inc. from Williamstown, NJ 08094 2002 to 2004; Chief Legal DOB: 12/25/62 Counsel, Corviant Corporation (Investment Adviser, Broker- Dealer and Service Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
21 BEAR STEARNS ENHANCED INCOME FUND PRIVACY NOTICE THE BEAR STEARNS ENHANCED INCOME 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 (866) 509-7229. 22 BEAR STEARNS ENHANCED INCOME FUND - -------------------------------------------------------------------------------- INVESTMENT ADVISERS ------------------- Bear Stearns Asset Management Inc. 383 Madison Avenue New York, NY 10179 ADMINISTRATOR ------------- PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT -------------- PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 PRINCIPAL UNDERWRITER --------------------- 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 LEGAL COUNSEL ------------- Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103 [GRAPHIC OMITTED] MARVIN & PALMER(R) ASSOCIATES, INC. GLOBAL EQUITY MANAGEMENT MARVIN & PALMER LARGE CAP GROWTH FUND OF THE RBB FUND, INC. ANNUAL REPORT AUGUST 31, 2007 THIS REPORT IS SUBMITTED FOR THE GENERAL INFORMATION OF THE SHAREHOLDERS OF THE FUND. IT IS NOT AUTHORIZED FOR DISTRIBUTION UNLESS PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS FOR THE FUND. SHARES OF THE FUND ARE DISTRIBUTED BY PFPC DISTRIBUTORS, INC. 760 MOORE ROAD, KING OF PRUSSIA, PA 19406 MARVIN & PALMER LARGE CAP GROWTH FUND ANNUAL INVESTMENT ADVISER'S REPORT AUGUST 31, 2007 (UNAUDITED) DEAR FELLOW SHAREHOLDER: It has been a short time since the launch of the Marvin & Palmer Large Cap Growth Fund on July 2, 2007, but it is with much excitement that we provide you with the Fund's annual report for the fiscal period ended August 31, 2007. The Fund gained 2.0% during this period, significantly outperforming the Russell 1000 Growth Index which was flat. INVESTMENT CLIMATE AND OUTLOOK Equity markets were extremely volatile during this period. From the peak in mid-July to the trough in mid-August, the broad market dropped 10% before rallying sharply. This volatility was caused primarily by concerns that financial markets in general, and credit markets in particular, were going to seize up due to sub-prime mortgage issues rippling through the U.S. housing market. The Fed subsequently opened the discount window and cut rates to calm the jittery nerves of investors. As a result, the markets rallied through the end of August. Large cap growth equities were the beneficiaries of this volatility as investors looked for large, stable and growing companies during stormy times. Concerns about a recession in the U.S. were reduced by the continued economic strength of the international markets. The prevailing question is whether the demand-led growth from the roughly three billion people in the emerging economies can overpower the negative impact of 4.4 million unsold homes in the U.S. Our view is that it will. Commodities, as evidenced by the CRB Raw Industrials Spot Price Index, remain on a steep uptrend at record highs. The weak dollar will likely continue but slow its pace of decline. This should give a lift to the U.S. manufacturing sector as the domestic economy slows. Liquidity remains high, providing a huge shock absorber to any global financial crisis as non-gold international reserves held by central banks climbed to a new record high of $5.73 trillion in June, up 23.4% year on year. INVESTMENT REVIEW AND PORTFOLIO STRATEGY The Marvin & Palmer Large Cap Growth Fund outperformed the Russell 1000 Growth Index by nearly 2% for the two-month period ended August 31, 2007. Our outperformance was driven by positive stock selection primarily in our overweight sectors. Our emphasis on companies with significant international exposure was very positive. Concerns about a sharp economic downturn in the U.S. led domestically focused stocks to underperform. The Fund had particularly strong performance in the technology, energy and industrial sectors where stocks such as Juniper Networks, VMware, National Oilwell Varco and Fluor led the way. On a sector basis, the Fund is overweight in materials, energy, industrials and information technology. We remain underweight in consumer staples, consumer discretionary and financials. We remain positive on the outlook for the U.S. market. A substantial portion of the Fund's earnings growth came from overseas. Our research on those foreign markets continues to give us confidence that growth in those countries and sectors will continue. We believe North America's leading large capitalization companies will continue to take advantage of that growth. We appreciate your support and confidence in our firm's investment philosophy, process and people. Please let us know if there is any way we can improve your experience with us. David F. Marvin, CFA Chairman Marvin & Palmer Associates, Inc. 1 MARVIN & PALMER LARGE CAP GROWTH FUND ANNUAL REPORT AUGUST 31, 2007 (UNAUDITED) - -------------------------------------------------------------------------------- Total Returns For the Period Ended August 31, 2007 SINCE INCEPTION* ---------- LARGE CAP GROWTH FUND 2.00% RUSSELL 1000 GROWTH(R) INDEX 0.02% - -------------------------------------------------------------------------------- * The Fund commenced operations on July 2, 2007. 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 BY CALLING 1-877-821-2117. 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. THE TABLE DOES NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS, IS 0.80%. THIS RATE IS CAPPED AT 0.80%, ALTHOUGH IT CAN FLUCTUATE BELOW 0.80% AND MAY DIFFER FROM THE ACTUAL EXPENSES INCURRED BY THE FUND FOR THE PERIOD COVERED BY THIS REPORT. 2 MARVIN & PALMER LARGE CAP GROWTH FUND FUND EXPENSE DISCLOSURE AUGUST 31, 2007 (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management fees and other Fund 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. This example is based on an investment of $1,000 invested at the beginning of the period from July 2, 2007 through August 31, 2007, 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 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.
LARGE CAP GROWTH FUND ----------------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID JULY 2, 2007* AUGUST 31, 2007 DURING PERIOD** ----------------------- -------------------- --------------- Actual $1,000.00 $ 1,020.00 $1.33 Hypothetical (5% return before expenses) 1,000.00 1,006.90 1.32
- ------------------------------ * Commencement of operations. ** Expenses are equal to an annualized six-month expense ratio of 0.80% for the 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 period (60), then divided by 365 to reflect the period. The Fund's ending account values on the first line in each table are based on the actual six-month total return for the Fund of 2.00%. 3 MARVIN & PALMER LARGE CAP GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2007 % of Net Assets Value -------- --------------- Domestic Common Stocks: Technology Hardware & Equipment....... 21.8% $ 3,336,581 Capital Goods......................... 20.4 3,115,948 Energy................................ 11.9 1,819,560 Materials............................. 8.7 1,325,682 Semiconductors & Semiconductors Equipment.......................... 4.9 752,423 Software & Services................... 4.6 709,936 Pharmaceuticals, Biotechnology & Life Sciences...................... 4.4 677,803 Diversified Financials................ 3.9 601,437 Health Care Equipment & Services...... 3.9 594,732 Retailing............................. 2.4 359,595 Food, Beverages & Tobacco............. 2.1 322,680 Consumer Services..................... 1.6 238,283 Consumer Durables & Apparel........... 1.3 190,429 Automobiles & Components.............. 1.1 173,043 Food & Staples Retailing.............. 0.4 53,160 Temporary Investment .................... 6.4 980,323 Other Assets In Excess Of Liabilities........................ 0.2 31,769 ------ ------------ NET ASSETS -- 100.0%................... 100.0% $ 15,283,384 ====== ============ - ----------------------- Portfolio holdings are subject to change at any time. The accompanying notes are an integral part of the financial statements. 4 MARVIN & PALMER LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2007 Shares Value ---------- ----------- DOMESTIC COMMON STOCKS -- 93.4% AUTOMOBILES & COMPONENTS -- 1.1% Johnson Controls, Inc. ...................... 1,530 $ 173,043 ----------- CAPITAL GOODS -- 20.4% Boeing Co. .................................. 2,260 218,542 Deere & Co. ................................. 4,560 620,433 Fluor Corp. ................................. 4,140 526,401 Foster Wheeler Ltd.* ........................ 2,250 266,490 General Dynamics Corp. ...................... 2,710 212,898 McDermott International, Inc.* .............. 2,480 238,055 Parker Hannifin Corp. ....................... 2,640 283,721 Precision Castparts Corp. ................... 4,250 553,817 Rockwell Collins, Inc. ...................... 2,840 195,591 ----------- 3,115,948 ----------- CONSUMER DURABLES & APPAREL -- 1.3% Nike, Inc. .................................. 3,380 190,429 ----------- CONSUMER SERVICES -- 1.6% Las Vegas Sands Corp.* ...................... 2,390 238,283 ----------- DIVERSIFIED FINANCIALS -- 3.9% Federal National Mortgage Association ....... 3,000 196,830 Goldman Sachs Group, Inc. (The) ............. 690 121,447 Morgan Stanley .............................. 4,540 283,160 ----------- 601,437 ----------- ENERGY -- 11.9% Cameron International Corp.* ................ 1,770 144,733 National Oilwell Varco, Inc.* ............... 5,030 643,840 Schlumberger Ltd. ........................... 6,600 636,900 Transocean, Inc.* ........................... 3,750 394,087 ----------- 1,819,560 ----------- FOOD & STAPLES RETAILING -- 0.4% Kroger Co. (The) ............................ 2,000 53,160 ----------- FOOD, BEVERAGES & TOBACCO -- 2.1% Coca-Cola Co. (The) ......................... 6,000 322,680 ----------- HEALTH CARE EQUIPMENT & SERVICES -- 3.9% Medco Health Solutions, Inc.* ............... 6,960 594,732 ----------- MATERIALS -- 8.7% Freeport-McMoRan Copper & Gold, Inc. ........ 2,030 177,463 Monsanto Co. ................................ 9,710 677,175 Mosaic Co. (The)* ........................... 11,210 471,044 ----------- 1,325,682 ----------- PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES -- 4.4% Gilead Sciences, Inc.* ...................... 5,760 209,491 Schering-Plough Corp. ....................... 15,600 468,312 ----------- 677,803 ----------- Shares Value ---------- ----------- RETAILING -- 2.4% Amazon.Com, Inc.* ........................... 4,500 $ 359,595 ----------- SEMICONDUCTORS & SEMICONDUCTORS EQUIPMENT -- 4.9% Intel Corp. ................................. 8,200 211,150 Nvidia Corp.* ............................... 10,580 541,273 ----------- 752,423 ----------- SOFTWARE & SERVICES -- 4.6% Google, Inc., Class A* ...................... 950 489,488 VMware, Inc., Class A* ...................... 3,200 220,448 ----------- 709,936 ----------- TECHNOLOGY HARDWARE & EQUIPMENT -- 21.8% Apple, Inc.* ................................ 3,030 419,594 Cisco Systems, Inc.* ........................ 20,150 643,188 Corning, Inc. ............................... 7,720 180,416 EMC Corp.* .................................. 31,900 627,154 International Business Machines Corp. ....... 2,820 329,066 Juniper Networks, Inc.* ..................... 19,830 652,804 SanDisk Corp.* .............................. 8,640 484,359 ----------- 3,336,581 ----------- TOTAL DOMESTIC COMMON STOCKS (Cost $13,573,045) ..................... 14,271,292 ----------- TEMPORARY INVESTMENT -- 6.4% PNC Bank Money Market Account 4.46%, 09/04/07 .......................... 980,323 980,323 ----------- TOTAL TEMPORARY INVESTMENT (Cost $980,323) ........................ 980,323 ----------- TOTAL INVESTMENTS -- 99.8% (Cost $14,553,368) ..................... 15,251,615 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% ...................... 31,769 ----------- NET ASSETS -- 100.0% ........................ $15,283,384 =========== - --------------------- * Non-income producing. The accompanying notes are an integral part of the financial statements. 5 MARVIN & PALMER LARGE CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2007 ASSETS Investment securities at value (cost $14,553,368)........ $ 15,251,615 Receivable from Investment Adviser....................... 37,595 Dividends receivable..................................... 8,945 Prepaid expenses......................................... 19,648 -------------- Total Assets........................................... 15,317,803 -------------- LIABILITIES Accrued expenses payable................................. 34,419 -------------- Total Liabilities...................................... 34,419 -------------- NET ASSETS Capital stock, $0.001 par value.......................... $ 1,498 Additional paid-in capital .............................. 14,908,618 Undistributed net investment income...................... 3,604 Accumulated net realized loss from investments........... (328,583) Net unrealized appreciation on investments............... 698,247 -------------- Net assets applicable to shares outstanding.............. $ 15,283,384 ============== Shares outstanding.......................................... 1,497,845 ============== Net asset value, offering and redemption price per share ... $ 10.20 ============== The accompanying notes are an integral part of the financial statements. 6 MARVIN & PALMER LARGE CAP GROWTH FUND STATEMENT OF OPERATIONS FOR THE PERIOD JULY 2, 2007* TO AUGUST 31, 2007 ------------------ INVESTMENT INCOME Dividends................................................ $ 17,255 ----------- Total investment income................................ 17,255 ----------- EXPENSES Administration and accounting fees....................... 26,693 Professional fees........................................ 19,615 Advisory fees............................................ 11,157 Registration and filing fees............................. 3,322 Custodian fees........................................... 1,771 Printing and shareholder reporting fees.................. 1,476 Transfer agent out of pocket fees........................ 1,279 Directors' and officers' fees............................ 1,188 Other expenses........................................... 902 ----------- Total expenses before waivers and reimbursements....... 67,403 Less: waivers and reimbursements ........................ (53,752) ----------- Net expenses............................................. 13,651 ----------- Net investment income....................................... 3,604 ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS: Net realized loss from: Investments............................................ (328,583) Net change in unrealized appreciation on: Investments............................................ 698,247 ----------- Net realized and unrealized gain from investments........... 369,664 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 373,268 =========== - ------------------- * Commencement of Operations. The accompanying notes are an integral part of the financial statements. 7 MARVIN & PALMER LARGE CAP GROWTH FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JULY 2, 2007* TO AUGUST 31, 2007 ------------------ INCREASE IN NET ASSETS RESULTING FROM OPERATIONS Net investment income........................................................ $ 3,604 Net realized loss from investments........................................... (328,583) Net change in unrealized appreciation on investments......................... 698,247 ----------- Net increase in net assets resulting from operations......................... 373,268 ----------- Increase in net assets derived from capital share transactions (see Note 4)..... 14,910,116 ----------- Total increase in net assets............................................... 15,283,384 NET ASSETS Beginning of period.......................................................... -- ----------- End of period**.............................................................. $15,283,384 ===========
- --------------------- * Commencement of Operations. ** Includes undistributed net investment income of $3,604. The accompanying notes are an integral part of the financial statements. 8 MARVIN & PALMER LARGE CAP GROWTH 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 respective period. This information has been derived from information provided in the financial statements. - -------------------------------------------------------------------------------- FOR THE PERIOD JULY 2, 2007* TO AUGUST 31, 2007 -------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ..................... $ 10.00 --------- Net investment income (loss) ............................. -- Net realized and unrealized gain from investments ........ 0.20 --------- Net increase in net assets resulting from operations ..... 0.20 --------- Net asset value, end of period ........................... $ 10.20 --------- Total investment return(1) ............................... 2.00% ========= RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) ............... $15,283 Ratio of expenses to average net assets(2) ............... 0.80% Ratio of expenses to average net assets without waivers and expense reimbursements(2) ......................... 3.93% Ratio of net investment income to average net assets(2) .. 0.21% Portfolio turnover rate .................................. 29% - --------------------- * Commencement of operations. (1) Total investment return is calculated by 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. 9 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2007 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB" or the "Company") 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 sixteen active investment portfolios, including the Marvin & Palmer Large Cap Growth Fund (the "Fund"), which commenced investment operations on July 2, 2007. RBB has authorized capital of one hundred billion shares of common stock of which 77.873 billion are currently classified into one hundred and eighteen 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." PORTFOLIO VALUATION -- The Fund's net asset value ("NAV") is calculated once daily at the close of regular trading hours on the New York Stock Exchange ("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 the National Association of Securities Dealers Automatic Quotation System (NASDAQ) market system where they are primarily traded. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed Income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. Fixed Income securities having a remaining maturity of 60 days or less are amortized to maturity based on their cost. Foreign securities are valued based on prices from the primary market in which they are traded, and are translated from the local currency into U.S. dollars using current exchange rates. Investments in other open-end investment companies are valued based on the NAV of the investment companies (which may use fair value pricing as discussed in their prospectuses). If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Company's Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. 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. 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. Distributions received on securities that represent a return of capital or capital gains are recorded as a reduction of cost of investments and/or as a realized gain. The Fund estimates the components of distributions received that may be considered return of capital distributions or capital gain distributions. The Fund's investment income, expenses and unrealized and realized gains and losses are allocated daily. 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 the RBB fund 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 Fund. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income and distributions from net realized capital gains, if any, are declared, recorded on ex-date and paid at least annually to shareholders. Income dividends and capital gain distributions are determined in accordance with U.S. federal income tax regulations, which may differ from generally accepted accounting principles. Permanent book and tax basis differences relating to shareholder distributions will result in reclassifications within the components of net assets. 10 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 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 Marvin & Palmer Associates, Inc. ("Marvin & Palmer Associates" or the "Adviser"), serves as investment adviser to the Fund pursuant to an investment advisory agreement with the Company (the "Advisory Agreement"). For its services, the Adviser is paid a monthly fee at the annual rate of 0.65% of the Fund's average daily net assets. The Adviser has agreed to limit the Fund's total operating expenses to the extent that such expenses exceed 0.80% of the Fund's average daily net assets. This limitation is effected in waivers of advisory fees and reimbursement of expenses exceeding the advisory fee as necessary. If at any time during the first three years the Advisory Agreement is in effect the Fund's total annual operating expenses are less than 0.80% of the Fund's average daily net assets, the Adviser is entitled to reimbursement by the Fund of the advisory fees waived and other payments remitted by the Adviser to the Fund. For the period ended August 31, 2007, investment advisory fees accrued and waived were $11,157 and expenses reimbursed or to be reimbursed by the Adviser were $37,595. 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 Fund. Administration and accounting fees accrued also include certain Transfer Agent and dividend disbursing agent fees, certain Custodian fees and Administrative Service fees. For providing administrative and accounting services, PFPC is entitled to receive a monthly fee equal to an annual rate of 0.15% of the Fund's first $250 million of average daily net assets; 0.12% of the Fund's next $250 million of average daily net assets; 0.10% of the Fund's next $250 million of average daily net assets; 0.08% of the Fund's next $750 million of average daily net assets; and 0.06% of the Fund's average daily net assets in excess of $1,500 million. For the period ended August 31, 2007, PFPC's administration and accounting fees were $26,693. Included in the administration and accounting fees, shown above, are fees for providing regulatory administration services to RBB. For providing these services, PFPC is entitled to receive compensation as agreed to by the Company and PFPC. This fee is allocated to each portfolio in proportion to its net assets of the RBB Funds. In addition, PFPC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agent services, PFPC is entitled to receive out of pocket expenses. For the period ended August 31, 2007, PFPC out of pocket transfer agency fees were $1,279. 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 the period ended August 31, 2007, PFPC Trust Company received transaction charges and out of pocket expenses of $1,771. 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 is entitled to receive a fee paid by PFPC from the fees PFPC receives from the Fund pursuant to the Administration and Accounting Services Agreement. PFPC voluntarily agreed to waive a portion of its fees from the Fund. For the period ended August 31, 2007, $5,000 of Administration and accounting fees were waived. The Fund will not pay PFPC or PFPC's affiliates at a later time for any amounts waived or any amounts assumed. 11 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2007 As of August 31, 2007, the Fund owed PFPC and its affiliates $13,399 for their services. 3. INVESTMENT IN SECURITIES For the period ended August 31, 2007, aggregate purchases and sales of investment securities (excluding short-term investments) of the Fund were as follows: PURCHASES SALES ------------- ------------- Investment Securities................... $16,860,000 $2,958,372 4. CAPITAL SHARE TRANSACTIONS As of August 31, 2007, the Fund has 100,000,000 shares of $0.001 par value common stock authorized. Transactions in capital shares were as follows: FOR THE PERIOD JULY 2, 2007 TO AUGUST 31, 2007 ---------------------------- SHARES AMOUNT --------- ------------ Sales ................................ 1,507,805 $ 15,010,116 Reinvestments ........................ -- -- Redemptions .......................... (9,960) (100,000) --------- ------------ Net Increase ......................... 1,497,845 $ 14,910,116 ========= ============ 5. FEDERAL INCOME TAX INFORMATION At August 31, 2007, 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 ----------- ------------ ------------ -------------- $14,572,693 $803,680 $(124,758) $678,922 As of August 31, 2007, the components of distributable earnings on a tax basis were as follows: UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS --------------- --------------- $3,604 $-- At August 31, 2007, 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, 2007, the Fund expects to elect to treat post-October capital losses of $309,258 incurred in the period July 2, 2007 through August 31, 2007 as having been incurred in the following fiscal year. 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. 12 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2007 6. IN KIND TRANSFER OF SECURITIES For the period ended August 31, 2007, the Fund received portfolio securities in lieu of cash for shareholder subscriptions. The value of these subscriptions was as follows: VALUE OF THE CAPITAL SHARES SUBSCRIPTIONS SUBSCRIPTIONS --------------- ---------------- $7,900,000 795,569 7. NEW ACCOUNTING PRONOUNCEMENTS In July 2006, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 48 ("FIN 48") "Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109". FIN 48 provides guidance as to how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be booked as a tax expense in the current year and recognized as (1) a liability for unrecognized tax benefits, (2) a reduction of an income tax refund receivable, (3) a reduction of deferred tax assets, (4) an increase in deferred tax liability or (5) a combination thereof. Adoption of FIN 48 is required for the last net asset value calculation in the first required financial statement reporting period for fiscal years beginning after December 15, 2006. At this time, management is in the process of reviewing the impact, if any, of FIN 48 on the Fund's financial statements. In September 2006, FASB issued Statement of Financial Accounting Standards 157 ("SFAS 157"), Fair Value Measurements, which clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. Adoption of SFAS 157 requires the use of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. At this time, management is in the process of reviewing the impact, if any, of the SFAS 157 on the Fund's financial statements. 13 MARVIN & PALMER LARGE CAP GROWTH FUND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO THE BOARD OF DIRECTORS AND SHAREHOLDERS 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 Marvin & Palmer Large Cap Growth Fund, a separately managed portfolio of The RBB Fund, Inc. (the "Fund") at August 31, 2007, the results of its operations, the changes in its net assets, and its financial highlights for the period July 2, 2007 to August 31, 2007, 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 audit 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 audit, which included confirmation of securities at August 31, 2007 by correspondence with the custodian, provides a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 26, 2007 14 MARVIN & PALMER LARGE 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 Directors and is available without charge, upon request, by calling (877) 821-2117.
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ DISINTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky Director 1988 to present Since 1969, Director and 16 Comcast Corporation; Comcast Corporation Vice Chairman, Comcast AMDOCS Limited (service 1500 Market Street, Corporation (cable provider to 35th Floor television and telecommunications Philadelphia, PA 19102 communications); Director, companies) DOB: 7/16/33 NDS Group PLC (provider of systems and applications for digital pay TV). - ------------------------------------------------------------------------------------------------------------------------------------ Nicholas A. Giordano Director Since 2006 Consultant, financial services 16 Kalmar Pooled Investment 103 Bellevue Parkway organizations from 1997 Trust (registered Wilmington, DE 19422 to present. investment company); WT DOB: 03/7/43 Mutual Fund (registered investment company); Independence Blue Cross; IntriCon Corporation (industrial furnaces and ovens); Commerce Bancorp, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay Director 1988 to present Since 2000, Vice President, 16 None Fox Chase Cancer Center Fox Chase Cancer Center 333 Cottman Avenue (biomedical research and Philadelphia, PA 19111 medical care). DOB: 12/06/35 - ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group 16 None 106 Pierrepont Street Capital Partners, L.P. Brooklyn, NY 11201 Director 1991 to present (an investment partnership) DOB: 5/21/48 from 2000 to 2006. - ------------------------------------------------------------------------------------------------------------------------------------ Mark A. Sargent Director Since 2006 Dean and Professor of Law, 16 WT Mutual Fund Villanova University School Villanova University School (registered investment of Law of Law since July 1997. company); NYSE 299 North Spring Mill Road Regulation, Inc.; Villanova, PA 19085 Financial Industry DOB: 4/28/51 Regulatory Authority - ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 16 Moyco Technologies, Inc. Moyco Technologies, Inc. and President, Moyco 200 Commerce Drive Technologies, Inc.(manufacturer Montgomeryville, PA 18936 of precision coated and DOB: 3/24/34 industrial abrasives). Since 1999, Director, Pennsylvania Business Bank. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. 15 MARVIN & PALMER LARGE CAP GROWTH FUND FUND MANAGEMENT (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS - ------------------------------------------------------------------------------------------------------------------------------------ Robert A. Straniere Director Since 2006 Member, New York State 16 Reich and Tang Group 300 East 57th Street Assembly (1981-2004); (asset management); New York, NY 10022 Founding Partner, Straniere The Sparx Japan Funds DOB: 3/28/41 Law Firm (1980 to date); Group (registered Partner, Gotham Strategies investment company) (consulting firm) (2005 to date); Partner, The Gotham Global Group (consulting firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Director, Weiss, Peck & Greer Fund Group (1992 to 2005); and Partner, Kanter-Davidoff (law firm) (2006 to date). - ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 16 Kensington Funds 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). Since November 2004, Director of Kensington Funds. - ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall Director 2002 to present Director of PFPC Inc. from 16 Cornerstone Bank 103 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; and Director of Cornerstone Bank since March 2004. - ------------------------------------------------------------------------------------------------------------------------------------
* Each Director oversees sixteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director, except Messrs. Giordano, Sargent and Straniere, may continue to serve as a Director until the last day of the year 2011, unless otherwise extended by vote of the disinterested Directors, or until his successor is elected and qualified or his death, resignation or removal. Subject to the Company's Retirement Policy, Messrs. Giordano, Sargent and Straniere may serve until the last day of the calendar year in which the applicable Director attains age 75 or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. (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, the investment adviser to the Company's Senbanc Fund, Hilliard Lyons Research Advisors, a division of J.J.B. Hilliard, W.L. Lyons, Inc., 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 employee of Oppenheimer & Co., Inc., a registered broker-dealer. 16 MARVIN & PALMER LARGE CAP GROWTH FUND FUND MANAGEMENT (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR* DIRECTOR - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS - ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach President 1991 to present and Certified Public Accountant; N/A N/A 103 Bellevue Parkway and 1988 to present Vice Chairman of the Board, Wilmington, DE 19809 Treasurer Fox Chase Cancer Center; DOB: 6/29/24 Trustee Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; Managing General Partner, President since 2002, Treasurer since 1981 and Chief Compliance Officer since September 2004 of Chestnut Street Exchange Fund. - ------------------------------------------------------------------------------------------------------------------------------------ Jennifer Rogers Secretary 2007 to present Since 2005, 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: 7/28/74 Stevens & Young, LLC (law firm) from 1999 to 2005. - ------------------------------------------------------------------------------------------------------------------------------------ Salvatore Faia, Esquire, CPA Chief Since 2004 President, Vigilant Compliance N/A N/A Vigilant Compliance Services Compliance Services since 2004; Senior 186 Dundee Drive, Suite 700 Officer Legal Counsel, PFPC Inc. Williamstown, NJ 08094 from 2002 to 2004; Chief DOB: 12/25/62 Legal Counsel, Corviant Corporation (Investment Adviser, Broker-Dealer and Service Provider to Investment Advisers and Separate Account Providers) from 2001 to 2002. - ------------------------------------------------------------------------------------------------------------------------------------
17 MARVIN & PALMER LARGE 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 of the U.S. federal tax status of distributions received by the Fund's shareholders in respect of such fiscal year. During the fiscal year ended August 31, 2007, the Fund paid no dividends or distributions to its shareholders. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2007. 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 2008. Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. 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 Fund. 18 MARVIN & PALMER LARGE CAP GROWTH FUND OTHER INFORMATION (UNAUDITED) 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 (888) 520-3277 and on the Securities and Exchange Commission's ("SEC") website at http://www.sec.gov. QUARTERLY PORTFOLIO SCHEDULES The Company will file a complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) on Form N-Q. The Company's Form N-Q will be available on the SEC website at http://www.sec.gov and may be reviewed and copied at the SEC Public Reference Room in Washington, D.C. Information on the operation of the SEC Public Reference Room may be obtained by calling 1-800-SEC-0330. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS As required by the Investment Company Act, the Company's Board of Directors (the "Board"), including all of the Directors who are not "interested persons" of the Company, as that term is defined in the Investment Company Act (the "Independent Directors"), considered the renewal of the investment advisory agreement between the Adviser and the Company (the "Advisory Agreement") on behalf of the Fund at a meeting of the Board held on May 24, 2007. At this meeting, the Board approved the Advisory Agreement for an additional one-year term. The Board's decision to approve the Advisory Agreement reflects the exercise of its business judgment to continue the existing arrangement. In approving the Advisory Agreement, the Board considered information provided by the Adviser with the assistance and advice of counsel to the Independent Directors and the Company. In considering the renewal of and approval of the Advisory Agreement, the Directors took into account all the materials provided prior to and during the meeting, the presentations made during the meeting, and the discussions during the meeting. The Directors discussed the materials from the Adviser mailed in advance of the meeting that addressed most, if not all, of the factors listed below. The Adviser also made a presentation during the meeting and responded to questions from the Directors. Among other things, the Directors considered (i) the nature, extent, and quality of the Adviser's services provided to the Fund; (ii) descriptions of the experience and qualifications of the Adviser's personnel providing those services; (iii) the Adviser's investment philosophies and processes; (iv) the Adviser's assets under management and client descriptions; (v) the Adviser's soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) the Adviser's current and proposed advisory fee arrangements with the Company and other similarly managed clients; (vii) the Adviser's compliance procedures; (viii) the Adviser's financial information, insurance coverage and profitability analysis related to providing advisory services to the Fund; (ix) the extent to which economies of scale are relevant to the Fund; (x) a report prepared by Lipper, Inc. ("Lipper") comparing the Fund's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of the Fund to the performance of its Lipper peer group; and (xi) a report comparing the performance of the Fund to the performance of its benchmark. No one factor was determinative in the Board's consideration of the Advisory Agreement. The Directors then met in executive session with counsel to discuss and consider information presented in connection with the continuation of the Advisory Agreement as well as the Directors' responsibilities and duties in approving the Advisory Agreement. The Directors noted that because the Fund had not commenced investment operations no comparative fee or performance data was provided by Lipper. The Directors considered the Adviser's advisory services and processes and the type of securities to be purchased by the Adviser for the Fund in relation to the proposed advisory fee payable to the Adviser and the estimated total expense ratio for the Fund. The Directors noted that the Adviser agreed to waive advisory fees and reimburse expenses to the extent that such expenses exceed 0.80% of the Fund's average daily net assets. The Directors noted that the Adviser's composite performance for U.S equity stocks exceeded the performance of the Russell 1000 Growth(R) Index and the S&P 500(R) Index over the 10 and 15 year periods ended March 31, 2007 as reported by the Adviser. For each of the three, five and seven year periods then ended, the Adviser's composite performance exceeded the performance of the Russell 1000 Growth(R) Index but trailed the performance of the S&P 500(R) Index. The Directors determined that the nature, extent and quality of services to be provided by the Adviser in advising the Fund was satisfactory; and the benefits expected to be derived by the Adviser from managing the Fund, including its use of soft dollars and its method for selecting brokers, seemed reasonable. The Directors recognized that because the Fund had not yet commenced investment operations that the effect of any economies of scale due to asset growth could not currently be evaluated. Based on all of the information presented to the Board and its consideration of relevant factors, the Board, and separately the Independent Directors, concluded that the advisory fee structure was reasonable and determined that the Adviser's Advisory Agreement be continued for an additional one-year period ending August 16, 2008. 19 MARVIN & PALMER LARGE CAP GROWTH FUND PRIVACY NOTICE THE MARVIN & PALMER LARGE 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) 821-2117. 20 [THIS PAGE INTENTIONALLY LEFT BLANK.] Investment Adviser Marvin & Palmer Associates, Inc. 1201 N. Market Street Suite 2300 Wilmington, DE 19801-1165 Administrator PFPC Inc. 301 Bellevue Parkway Wilmington, DE 19809 Transfer Agent PFPC Inc. 101 Sabin Street Pawtucket, RI 02860 Principal Underwriter 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 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, Nicholas A. Giordano, 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 were $353,700 for 2006 and $390,500 for 2007. 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 were $1,100 for 2006 and $4,500 for 2007. These fees were 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 were $0 for 2006 and $0 for 2007. 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 were $7,100 for 2006 and $0 for 2007. These fees were for the semi-annual review of the financial statements for the period ended February 28, 2006. (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) Not Applicable. (d) 100% (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 was 0%. (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 were $0 for 2006 and $0 for 2007. (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. Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this Form. 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 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 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) 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 second fiscal quarter of the period covered by this 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) Senior Officer 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(b) 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 November 5, 2007 --------------------------------------------------------------------------- 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 officer & principal financial officer) Date November 5, 2007 --------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 g42233codeeth.txt CODE OF ETHICS EX-99.CODE ETH THE RBB FUND, INC. CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS The Board of Directors (the "Board") of The RBB Fund, Inc. (the "Company") has adopted this Code of Ethics (the "Code") for certain senior officers of the Company to guide and remind such officers of their responsibilities to the Company, and shareholders of the series of the Company (the "Funds"). Such officers are expected to act in accordance with the guidance and standards set forth in this Code. I. COVERED OFFICERS AND PURPOSE OF THE CODE The Code applies to the Company's President, who is the Company's principal executive officer, and the Treasurer, who is the Company's principal financial officer, and any persons performing similar functions on behalf of the Company, regardless of whether such persons are employed by the Company or a third party (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company*; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer is obligated to use his or her best efforts to promote the factors listed above, should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. ETHICAL HANDLING OF ACTUAL AND APPARENT CONFLICTS OF INTEREST A. CONFLICTS OF INTEREST - GENERAL - ------------------------- * If a Covered Person becomes aware that information filed with the SEC or made available to the public contains any false or misleading information or omits to disclose necessary information, he or she shall promptly report it to the Audit Committee. 1. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his or her service to, the Company and its shareholders, including if a Covered Officer, or a member of his or her family, receives improper personal benefits as a result of his or her position with the Company. 2. A conflict of interest generally arises if a Covered Officer, or a member of his or her family, directly or indirectly participates in any investment, interest, association, activity or relationship that may impair or appear to impair the Covered Officer's objectivity. B. SCOPE This Code does not, and is not intended to, repeat or replace the following programs and procedures, and such conflicts that fall outside of the parameters of this Code: 1. Certain conflicts of interest already are subject to conflicts of interest provisions in the Investment Company Act of 1940, as amended (the "1940 Act"), and the Investment Advisers Act of 1940 (the "Advisers Act"). 2. The Company's and each investment adviser's compliance programs and procedures that are designed to prevent, or identify and correct, violations of these provisions. C. TYPES OF CONFLICTS 1. CONTRACTUAL RELATIONSHIPS Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company, investment advisers, or service providers of which the Covered Officers may also be officers or employees. As a result, this Code recognizes that the Covered Officers may, in the normal course of their duties (whether formally for the Company, for the investment adviser or for the service providers), be involved in establishing policies and implementing decisions that will have different effects on the Company, each adviser and the administrator. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the investment adviser or administrator and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the 1940 Act and the Advisers Act, such activities will be deemed to have been handled ethically. 2. OTHER INVESTMENT COMPANIES In addition, it is recognized by the Company's Board that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. 3. ADDITIONAL CONFLICTS Other conflicts of interest may be covered by the Code, even if such conflicts of interest are not subject to provisions in the 1940 Act and the Advisers Act. D. PERSONAL INTERESTS The major principle of this Code is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that this list is not exhaustive. Each Covered Officer must: o not use his or her personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company; o not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Company; o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; and o report at least annually affiliations or other relationships with the Company, each investment adviser or the distributor, including any related conflict of interest. E. REPORTING OF CONFLICTS 1. Required Disclosures If certain conflict of interest situations are engaged in by Covered Officers or by members of their family, these conflicts of interest must be promptly discussed with the Audit Committee. These conflicts of interest include: o service as a director on the board of any public or private company; o the receipt of any non-nominal gifts in excess of $250.00; o the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership; and o any other interest, relationship or matter that a Covered Person or the Board determines, in his or her reasonable judgement, warrants disclosure. 2. Recommended Disclosures There are potential conflict of interest situations, which may be engaged in by Covered Officers or by members of their family, that should be discussed with the Audit Committee. A Covered Person should use reasonable judgement to determine if a conflict, other than conflicts listed under section E(1), is material and warrants disclosure to the Audit Committee. III. COMPLIANCE AND DISCLOSURE A. COMPLIANCE Each Covered Officer should: 1. familiarize himself or herself with the disclosure requirements generally applicable to the Company; 2. not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, governmental regulators and self-regulatory organizations and any other organization; 3. to the extent appropriate within his or her area of responsibility, consult with other officers and employees of the Company, investment advisers and other service providers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Company files with, or submits to, the SEC and in other public communications made by the Company; and 4. promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. B. DISCLOSURE Unless otherwise required by law, this Code shall be disclosed as required by the SEC. IV. ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board on the certification attached hereto as Appendix A that he or she has received, read, and understands the Code; o annually thereafter affirm to the Board that he or she has complied with the requirements of the Code and reported any violations of the Code; o not retaliate against any other Covered Officer or any employee of the Company affiliated persons of the Company or the Company's service providers for reports of potential violations that are made in good faith; and o notify the Chairman of the Audit Committee promptly if he or she knows of any violation of this Code. Failure to do so is itself a violation of this Code. V. REPORTING PROCEDURES 1. RESPONSIBILITY** o The Company's Audit Committee is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. o The Company's Audit Committee may consult Company counsel in order to effectively discharge its responsibilities. 2. INVESTIGATION PROCEDURES** The Company will follow these procedures in investigating and enforcing the Code: o The Audit Committee will take all appropriate action to investigate any potential violations of the Code; o If, after such investigation, the Audit Committee believes that no violation has occurred, the Audit Committee is not required to take any further action; o Any matter that the Audit Committee believes is a violation of this Code will be reported to the Board; and o If the Board concurs that a violation has occurred, it will take action which it considers appropriate. Such action may include a review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of each service provider or its governing body; or a recommendation to dismiss the Covered Officer. 3. WAIVERS - ---------------------------- ** The Audit Committee may delegate its responsibilities and investigation procedures to the Chairman of the Audit Committee. Any approvals or waivers(psi), implicit or otherwise, sought by a Covered Person will be considered by the Audit Committee. Such Committee will be responsible for granting waivers, as appropriate; and any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. A waiver is the approval of a material departure from a provision of this Code. An implicit waiver is the Company's failure to take action within a reasonable period of time regarding a material departure from a provision of this Code that has been made known to the Audit Committee of the Company. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Company for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Company, each investment adviser, distributor, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Company's and its investment advisers' and distributor's codes of ethics under Rule 17j-1 under the 1940 Act (see Exhibit A for a list of the investment advisers and distributor of the Company) are separate requirements applying to the Covered Officers and others, and are not part of this Code. VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of disinterested directors, as that term is defined by the 1940 Act. VII. CONFIDENTIALITY AND RECORDKEEPING All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Audit Committee. Subject to the confidentiality provisions above, the Company will maintain and preserve for a period of not less than six (6) years from the date of submission or the date action is taken, the first two (2) years in an easily accessible place, a copy of the Covered Officer's annual certifications and any information or materials supplied to the Audit Committee that provided the basis for any amendment or waiver to this Code or relating to any violation of the Code and sanctions imposed for such violation, together with a written record of the approval or action taken by the Board. VIII. INTERNAL USE The Code is intended solely for the internal use by the Company and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. Adopted: July 23, 2003 REVISED: SEPTEMBER 13, 2005 EXHIBIT A List of Advisers and Distributor Abundance Technologies, Inc. Bear Stearns Asset Management BlackRock Institutional Management Corporation Bogle Investment Management LP Hilliard Lyons Research Trust Marvin & Palmer Associates Robeco Investment Management Schneider Capital Management, Inc. Sustainable Asset Management PFPC Distributors, Inc. APPENDIX A - ---------- THE RBB FUND, INC. CERTIFICATION AND ACKNOWLEDGMENT OF RECEIPT OF CODE OF ETHICS FOR PRINCIPAL OFFICERS AND SENIOR FINANCIAL OFFICERS I acknowledge and certify that I have received a copy of the Code of Ethics for Principal Officers and Senior Financial Officers of The RBB Fund, Inc. (the "Code"). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures. I acknowledge my commitment to comply with the Code. APPLICABLE NEXT YEAR: I acknowledge that I complied with the Code for the fiscal year ended . --------- I acknowledge that I reported all violations of this Code of Ethics for the fiscal year ended of which I am aware. ---------- (PLEASE SUBMIT ON A SEPARATE PIECE OF PAPER, EXCEPTIONS TO THESE ACKNOWLEDGEMENTS.) - ------------------------------- -------------------------------- Officer Name (Please Print) Officer Signature -------------------------------- Date EX-99.CERT 3 g42233_302cert.txt 302 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Edward J. Roach, certify that: 1. I have reviewed this report on Form N-CSR of The RBB Fund, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 5, 2007 /s/ Edward J. Roach ------------------ ---------------------------------------------- Edward J. Roach, President & Treasurer (principal executive officer & principal financial officer) EX-99.906CERT 4 g42233_906cert.txt 906 CERTIFICATION CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, Edward J. Roach, President & Treasurer of The RBB Fund, Inc. (the "Registrant"), certify that: 1. The Registrant's periodic report on Form N-CSR for the period ended August 31, 2007 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: November 5, 2007 /s/ Edward J. Roach ------------------ ---------------------------------------------- Edward J. Roach, President & Treasurer (principal executive officer & principal financial officer) THIS CERTIFICATION IS BEING FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION SOLELY PURSUANT TO RULE 30A-2(B) UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND 18 U.S.C. SS.1350 AND IS NOT BEING FILED AS PART OF THE REPORT OR AS A SEPARATE DISCLOSURE DOCUMENT. -----END PRIVACY-ENHANCED MESSAGE-----