-----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, Muqgpr3+jz1O8Dp+ifDAloZcJyEwtmirWNx3sSmLfBhCbRY1ELUGGCESwpC4nEYL dK4c4fCyx6udy0X1KRTF1w== 0000950123-09-059074.txt : 20091106 0000950123-09-059074.hdr.sgml : 20091106 20091106130620 ACCESSION NUMBER: 0000950123-09-059074 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20090831 FILED AS OF DATE: 20091106 DATE AS OF CHANGE: 20091106 EFFECTIVENESS DATE: 20091106 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: 091163736 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 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 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 S000015913 Marvin & Palmer Large Cap Growth Fund C000043700 Marvin & Palmer Large Cap Growth Fund MPAUX 0000831114 S000018555 Free Market U.S. Equity Fund C000051460 Institutional Class 0000831114 S000018556 Free Market International Equity Fund C000051461 Institutional Class 0000831114 S000018557 Free Market Fixed Income Fund C000051462 Institutional Class 0000831114 S000019098 SAM Sustainable Water Fund C000052814 INSTITUTIONAL C000052815 INVESTOR 0000831114 S000019099 SAM Sustainable Climate Fund C000052818 INSTITUTIONAL C000052819 INVESTOR 0000831114 S000025304 SAM Sustainable Global Active Fund C000075423 Institutional C000075424 Investor N-CSR 1 ncsr.txt RBB NCSR 0809 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) Salvatore Faia 103 Bellevue Parkway, 4th Floor Wilmington, DE 19809 (Name and address of agent for service) Registrant's telephone number, including area code: 302-791-2670 Date of fiscal year end: August 31 Date of reporting period: August 31, 2009 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. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. The Report to Shareholders is attached herewith. INVESTMENT ADVISER ABUNDANCE TECHNOLOGIES, INC. 5955 Deerfield Blvd. Mason, OH 45040 ADMINISTRATOR PNC Global Investment Servicing (U.S.), Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.), 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 FREE MARKET U.S. EQUITY FUND FREE MARKET INTERNATIONAL EQUITY FUND FREE MARKET FIXED INCOME FUND OF THE RBB FUND, INC. ANNUAL REPORT August 31, 2009 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 the Free Market Funds are distributed by PFPC Distributors, Inc., 760 Moore Road, King of Prussia, PA 19406. [THIS PAGE INTENTIONALLY LEFT BLANK.] FREE MARKET FUNDS ANNUAL INVESTMENT ADVISER'S REPORT AUGUST 31, 2009 (UNAUDITED) Dear Fellow Shareholder, It has been almost two years since the launch of the Abundance Free Market Mutual Funds (the "Funds") on December 31, 2007. The Funds have steadily gained assets since their start despite the big swings in the global markets. A long-term focus is key during volatile times. Having a long-term focus requires keeping the emotions of fear and greed in check. For most the past 12 months, fear dominated greed, causing some investors to flee to cash. However during the spring and summer, the pressure not to lose has been replaced by the pressure to not miss out, and that fear leads to speculation, not investing. Such speculation combines the two motivations that are abhorrent to rational long-term investors. Such volatility is a good reminder of why Abundance Technologies, Inc. ("Abundance") recommends that shareholders maintain both a well diversified portfolio and a long-term perspective. When you can take the long view, supported by a prudent and well-thought-out strategy, the markets' day-to-day ups and downs don't seem as threatening. Abundance strives to deliver the performance of capital markets and add value through Free Market Investment strategies and Structured Market Portfolios. Grounded in the conviction that Free Markets work, Abundance avoids the cost-generating activity of stock picking and market timing. Instead, we focus on the dimensions of capital markets that reward investors as intelligently and effectively as possible. Our disciplined approach to life-long investing provides both the individual investor and the financial professional with the academic foundation upon which to help achieve investment goals. Throughout its history, Abundance has sought to improve its research and investment technologies. Our Free Market Funds are the latest example of this evolution. Each fund strategy targets a broad and diverse group of stocks or bonds across various markets, using other mutual funds that specifically target certain asset classes. The Funds are broadly diversified and designed to work together in your total investment plan. The work is never complete, however, and Abundance will continue to research solutions to address your future needs. We invite you to contact your financial professional or explore our website, www.MyMatrix.cc, to learn more about the concepts and strategies of Abundance's investing. We appreciate your support and confidence in our firm's investment philosophy, process and people. Thank you, as always, for investing with Abundance Technologies, Inc. /s/ Mark E Matson Mark E Matson President and Chief Executive Officer Abundance Technologies, Inc. 1 FREE MARKET FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2009 (UNAUDITED) FREE MARKET US EQUITY FUND--INVESTMENT REVIEW Over the past 12 months, investors' resolve has been tested repeatedly. In 2008, the U.S. financial markets endured their worst calendar year since the 1930s. The first two months of 2009 brought more bad news and falling prices before stocks rebounded to turn in their best quarter since 2003. Nobody knows where the stock market will go from here, particularly in the shorter term. However, the magnitude and speed of the stock market's recent swings underscore the importance of avoiding changes to your portfolio based on emotions. It also underscores the importance of maintaining a broadly diversified portfolio. Returns for the broad US market, as measured by the Russell 3000 Index, were - -18.63%. Asset class returns ranged from -18.25% for S&P 500 Index (US large cap) to -21.30% for the Russell 2000 Index (US small cap). Despite the negative returns for the twelve months ended August 31, 2009, all asset classes experienced large positive returns during the last several months. For the twelve months ended August 31, 2009, the Free Market U.S. Equity Fund provided a total return of -19.19%, at net asset value. This compares with a return of -19.71% for the fund's benchmark, the Russell 2500 Index. Nevertheless as a result of the Free Market Fund's diversified investment approach, performance principally was determined by broad structural trends in global equity markets, rather than the behavior of a limited number of stocks, which the underlying funds held. Among the most important factors explaining differences in the behavior of diversified equity funds, like the Free Market U.S. Equity Fund, are company size and company value/growth characteristics of the underlying fund holdings. Size is measured by market capitalization and "value" classification is a function of stock price relative to one or more fundamental characteristics. U.S. Small Company Stocks performed slightly less than Large Company Stocks. The Russell 2000 Index has returned -21.30% from September 1, 2008 through August 31, 2009, while the S&P 500 Index was down 18.25%. Furthermore, for the same time period, the Russell 2000 Value Index was down at -20.69% and the Russell 1000 Value Index, returned -20.27%. In summary, US large cap stocks performed better than small cap stocks and helped to bring returns up. Furthermore, US small value stocks did slightly worse than US Small Growth Stocks, which also contributed to returns of the Fund. The same is true for US Large Value which was outperformed by US Large Growth. Today's environment underscores that markets are highly unpredictable over the short term. In other words, anything can happen, so a balanced, diversified, long-term approach is favored. 2 FREE MARKET FUNDS FREE MARKET U.S. EQUITY FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2009 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Free Market U.S. Equity Fund vs. Russell 2500(R) Index and Composite Index (PERFORMANCE GRAPH)
Free Market Russell U.S. Equity 2500(R) Value Composite Fund Index Index ----------- ---------- --------- Dec 07 10000 10000 10000 Jan 08 10470 9389 9477 Feb 08 10250 9130.8 9118.77 Mar 08 10260 9063.23 9136.1 Apr 08 10630 9550.84 9526.21 May 08 10970 10004.5 9744.36 Jun 08 9900 9189.13 8883.93 Jul 08 10010 9252.54 9053.61 Aug 08 10290 9517.16 9314.36 Sep-08 9470 8571.16 8640.93 Oct-08 7510 6724.93 7023.35 Nov-08 6690 5995.95 6360.34 Dec-08 6948 6321.53 6589.32 Jan-09 6128 5752.59 5842.75 Feb-09 5348 5130.73 5111.82 Mar-09 5865 5599.17 5560.64 Apr-09 6827 6462 6277.96 May-09 7171 6659.09 6544.14 Jun-09 7202 6734.34 6553.96 Jul-09 7941 7341.78 7159.55 Aug-09 8316 7642.06 7453.8
The chart assumes a hypothetical $10,000 initial investment in the Fund made on December 31, 2007 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is a professionally managed mutual fund while the Russell 2500(R) Index and Composite Index are unmanaged, do not incur sales charges and/or expenses and are not available for investment. The Composite Index is comprised of the S&P 500(R) Index, Russell 1000(R) Value Index, Russell 2000(R) Index and Russell 2000(R) Value Index, each weighted 25%. Total Returns for the Period Ended August 31, 2009
SINCE 1 YEAR INCEPTION* ------ ---------- FREE MARKET U.S. EQUITY FUND -19.19% -10.47% RUSSELL 2500(R) INDEX -19.71% -14.90% COMPOSITE INDEX -20.13% -16.27%
* Annualized - The Fund commenced operations on December 31, 2007. 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. 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. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-866-780-0357 EXT. 3863. THE FUND'S ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 1.21%. The Fund's aggregate total return since inception is based on a decrease in net asset value from $10.00 per share on December 31, 2007 (commencement of operations) to $8.21 per share on August 31, 2009. Portfolio composition is subject to change. 3 FREE MARKET FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2009 (UNAUDITED) FREE MARKET INTERNATIONAL EQUITY FUND--INVESTMENT REVIEW After several quarters of negative returns, developed and emerging markets equities rebounded sharply in the second quarter of 2009. The springtime rally helped international markets recoup most of the losses sustained earlier in the fiscal year September 1, 2008 through August 31, 2009. This rally helped international equities outperform US stocks for the period. Still, global markets remained well below their late-2007 highs. Nevertheless, using the MSCI World excluding US Index as a proxy, developed markets equities had their third-best quarter since the inception of that Index in 1970. Furthermore, emerging markets equities had very strong performance and were by far the best performing asset class during 2009. Despite some encouraging signs, continued job losses and persistent uncertainty about the health of global economies, both the United States and overseas, suggested that the road ahead could still be bumpy. For the twelve months ended August 31, 2009, the Free Market International Equity Fund provided a total return of -7.71%, at net asset value. This compares with a return of -14.41% for the Fund's benchmark, the MSCI World (excluding US) Index. A contributing factor to the outperformance of the Fund compared to the benchmark was the Fund's tilt towards small and value as well as exposure to emerging markets. Nevertheless as a result of the Free Market Fund's diversified investment approach, performance principally was determined by broad structural trends in global equity markets, rather than the behavior of a limited number of stocks, which the underlying funds held. Among the most important factors explaining differences in the behavior of diversified equity funds, like the Free Market International Equity Fund, are company size and company value/growth characteristics of the underlying fund holdings. International Large Company Stocks fared worse than International Small Company Stocks. The MSCI EAFE Index (net of dividends) has returned -14.41% from September 1, 2008 through August 31, 2009, while the MSCI EAFE Small Cap Index was down 8.51%. Furthermore, for the same time period, the MSCI EAFE Value Index (net of dividends) was down 10.66% and the MSCI Emerging Markets Index (net of dividends) also declined 9.95%. In summary, factors that helped lift the Fund's return over the benchmark included international value and small cap asset classes as well as all categories of emerging markets. While international large asset classes pulled the Fund's performance lower. The Fund's increased exposure, when compared to the MSCI World (excluding US) Index, to small and value companies as well as emerging markets' companies contributed to the Fund's higher return. The benchmark's increased exposure to large companies helped to bring its results lower. Today's environment underscores that markets are highly unpredictable over the short term. In other words, anything can happen, so a balanced, diversified, long-term approach is favored. 4 FREE MARKET FUNDS FREE MARKET INTERNATIONAL EQUITY FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2009 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Free Market International Equity Fund vs. MSCI World (excluding U.S.) Index and Composite Index (PERFORMANCE GRAPH)
MSCI Free Market World International (excluding Composite Equity Fund U.S.) Index Index ------------- ----------- ---------- Dec 07 10000 10000 10000 Jan 08 9880 9236 8981 Feb 08 10060 9182.43 9278.27 Mar 08 10090 9094.28 9111.26 Apr 08 10440 9572.64 9608.74 May 08 10560 9718.14 9707.71 Jun 08 9580 8942.64 8835.96 Jul 08 9240 8724.43 8517.86 Aug 08 8850 8602.29 8109.86 Sep-08 7630 7310.23 6834.17 Oct-08 5830 5700.52 5265.05 Nov-08 5480 5370.46 4978.63 Dec-08 5948 5676.57 5305.73 Jan-09 5347 5174.76 4857.39 Feb-09 4787 4691.96 4415.37 Mar-09 5225 5068.72 4794.65 Apr-09 6100 5759.59 5539.74 May-09 7027 6539.44 6301.45 Jun-09 6976 6467.5 6286.33 Jul-09 7699 7100.03 6878.5 Aug-09 8168 7362.73 7235.49
The chart assumes a hypothetical $10,000 initial investment in the Fund made on December 31, 2007 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is a professionally managed mutual fund while the MSCI World (excluding U.S.) Index and Composite Index are unmanaged, do not incur sales charges and/or expenses and are not available for investment. The Composite Index is comprised of the MSCI EAFE Index, MSCI EAFE Value Index, MSCI EAFE Small Company Index and MSCI Emerging Markets Free Index, each weighted 25%. Total Returns for the Period Ended to August 31, 2009
SINCE 1 YEAR INCEPTION* ------ ---------- FREE MARKET INTERNATIONAL EQUITY FUND -7.71% -11.42% MSCI WORLD (EXCLUDING U.S.) INDEX -14.41% -18.82% COMPOSITE INDEX -11.02% -17.83%
* Annualized - The Fund commenced operations on December 31, 2007. 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. 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. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-866-780-0357 EXT. 3863. THE FUND'S ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 1.49%. The Fund's aggregate total return since inception is based on a decrease in net asset value from $10.00 per share on December 31, 2007 (commencement of operations) to $8.02 per share on August 31, 2009. Portfolio composition is subject to change. 5 FREE MARKET FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2009 (UNAUDITED) FREE MARKET FIXED INCOME FUND--INVESTMENT REVIEW The period was an erratic time for the fixed income market as well. After Lehman Brothers collapsed late last year, investors steered clear of corporate bonds and instead sought safety in US Treasury bonds. The differences between the yields of Treasuries and those of corporate bonds surged to levels not seen since the 1930s. Later in the twelve months ended August 31, 2009 optimism from the stock market spread to corporate bonds. In December 2008, the Federal Reserve Board responded to the credit crisis by lowering its target for short-term interest rates to a range of 0% to 0.25%, an all-time low. For the period overall, the Barclays US Aggregate Index -- a measure of high-quality, fixed-rate, longer maturity, taxable bonds -- returned 7.94%. In comparison, the Merrill Lynch Three Month Treasury Bill Index returned a modest 0.66. The Fund focuses on mutual funds that invest in high quality and shorter-term Government and Corporate fixed income assets. For the twelve months ended August 31, 2009, the Free Market Fixed Income Fund provided a total return of 4.62%, at net asset value. This compares with a return of 6.02% for the fund's benchmark, the Citigroup World Government Bond 1 - 5 Year Currency Hedged US Dollar Index. A bright spot for investors so far this year is that high quality bonds / fixed income markets have provided a positive return for the period September 1, 2008 through August 31, 2009. Although the Free Market Fund underperformed its benchmark for the entire period, it did perform as expected. A contributing factor to the under-performance of the Fund compared to the benchmark was the Fund's shorter average maturity compared to its benchmark, since longer maturities performed slightly better. 6 FREE MARKET FUNDS FREE MARKET FIXED INCOME FUND ANNUAL INVESTMENT ADVISER'S REPORT (CONCLUDED) AUGUST 31, 2009 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Free Market Fixed Income Fund vs. Citigroup World Govt. Bond 1-5 Year Currency Hedged U.S. Dollar Index and Composite Index (PERFORMANCE GRAPH)
Citigroup World Govt. Bond 1-5 Free Market Year Currency Fixed Income Hedged U.S. Composite Fund Dollar Index Index ------------ ----------- --------- Dec 07 10000 10000 10000 Jan 08 10010 10150 10157 Feb 08 10040 10217 10214.9 Mar 08 10046 10215 10245.5 Apr 08 9976.3 10147.5 10194.3 May 08 9956.3 10089.7 10147.4 Jun 08 9981.2 10090.7 10165.7 Jul 08 10021.3 10165.4 10189.1 Aug 08 10061.4 10228.4 10248.2 Sep-08 10029 10294.9 10219.5 Oct-08 10100 10445.2 10169.4 Nov-08 10241 10557 10373.8 Dec-08 10384 10662.5 10559.5 Jan-09 10353 10666.8 10504.6 Feb-09 10333 10689.2 10486.7 Mar-09 10384 10744.8 10571.7 Apr-09 10404 10746.9 10581.2 May-09 10424 10751.2 10609.8 Jun-09 10445 10769.5 10622.5 Jul-09 10475 10808.3 10689.4 Aug-09 10526 10846.1 10750.3
The chart assumes a hypothetical $10,000 initial investment in the Fund made on December 31, 2007 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is a professionally managed mutual fund while the Citigroup World Govt. Bond 1-5 Year Currency Hedged U.S. Dollar Index and Composite Index are unmanaged, do not incur sales charges and/or expenses and are not available for investment. The Composite Index is comprised of the Three-Month Treasury Bill Index, Lehman Brothers Intermediate Government Bond Index, Merrill Lynch 1-3 Year U.S. Government/Corporate Index and Lehman Brothers Aggregate Bond Index, each weighted 25%. Total Returns for the Period Ended to August 31, 2009
SINCE 1 YEAR INCEPTION* ------ ---------- FREE MARKET FIXED INCOME FUND 4.62% 3.12% CITIGROUP WORLD GOVT. BOND 1-5 YEAR CURRENCY HEDGED U.S. DOLLAR INDEX 6.02% 4.97% COMPOSITE INDEX 4.92% 4.44%
* Annualized - The Fund commenced operations on December 31, 2007. 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. 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. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-866-780-0357 EXT. 3863. THE FUND'S ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, IS 1.19%. The Fund's aggregate total return since inception is based on an increase in net asset value from $10.00 per share on December 31, 2007 (commencement of operations) to $10.35 per share on August 31, 2009. Portfolio composition is subject to change. 7 FREE MARKET FUNDS 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, 2009 through August 31, 2009, 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.
FREE MARKET U.S. EQUITY FUND --------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2009 AUGUST 31, 2009 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,554.90 $4.64 Hypothetical (5% return before expenses) 1,000.00 1,021.53 3.68
FREE MARKET INTERNATIONAL EQUITY FUND --------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2009 AUGUST 31, 2009 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,706.40 $4.98 Hypothetical (5% return before expenses) 1,000.00 1,021.48 3.73
8 FREE MARKET FUNDS FUND EXPENSE EXAMPLES (CONCLUDED) (UNAUDITED)
FREE MARKET FIXED INCOME FUND --------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2009 AUGUST 31, 2009 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,018.70 $3.82 Hypothetical (5% return before expenses) 1,000.00 1,021.38 3.83
* Expenses are equal to an annualized six-month expense ratio of 0.72% for the Free Market U.S. Equity Fund, 0.73% for the Free Market International Equity Fund and 0.75% for the Free Market Fixed Income Fund, 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 annualized expense ratios do not reflect fees and expenses associated with the underlying funds. If such fees and expenses had been included, the expenses would have been higher. The range of weighted expense ratios of the underlying funds held by the Funds, as stated in the current prospectus, were as follows:
FREE MARKET U.S. FREE MARKET INTERNATIONAL FREE MARKET FIXED EQUITY FUND EQUITY FUND INCOME FUND - ---------------- ------------------------- ----------------- 0.02%-0.13% 0.01%-0.28% 0.01%-0.07%
Each 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 55.49% for the Free Market U.S. Equity Fund, 70.64% for the Free Market International Equity Fund and 1.87% for the Free Market Fixed Income Fund. 9 FREE MARKET FUNDS FREE MARKET U.S. EQUITY FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2009
NUMBER OF SHARES VALUE --------- ------------ EQUITY FUNDS -- 99.8% U.S. Large Cap Value Portfolio III .................. 7,739,622 $ 94,036,406 U.S. Large Company Institutional Index Portfolio .... 5,786,895 46,642,376 U.S. Micro Cap Portfolio ............................ 4,775,908 46,660,618 U.S. Small Cap Portfolio ............................ 3,085,991 46,536,745 U.S. Small Cap Value Portfolio ...................... 4,305,171 77,536,128 ------------ TOTAL EQUITY FUNDS (Cost $329,532,851) ........................... 311,412,273 ------------ TOTAL INVESTMENTS -- 99.8% (Cost $329,532,851) ........................... 311,412,273 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% ....... 691,461 ------------ NET ASSETS -- 100.0% ................................ $312,103,734 ============
PORTFOLIO HOLDINGS SUMMARY TABLE (UNAUDITED)
% OF NET ASSETS VALUE --------- ------------ Equity Funds ........................................ 99.8% $311,412,273 Other Assets In Excess of Liabilities ............... 0.2% 691,461 ----- ------------ NET ASSETS .......................................... 100.0% $312,103,734 ===== ============
- ---------- Portfolio holdings are subject to change at any time. The following is a summary of the inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (See Note 1 in Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUT INPUT --------------- ------------ ----------- ------------ Investments in Securities* $311,412,273 $311,412,273 $-- $-- ============ ============ === ===
* Please refer to the Portfolio of Investments for further details. The accompanying notes are an integral part of the financial statements. 10 FREE MARKET FUNDS FREE MARKET INTERNATIONAL EQUITY FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2009
NUMBER OF SHARES VALUE --------- ------------ INTERNATIONAL EQUITY FUNDS -- 99.8% Asia Pacific Small Company Portfolio ................ 276,677 $ 5,193,224 Continental Small Company Portfolio ................. 694,556 9,932,153 DFA International Small Cap Value Portfolio ......... 6,999,702 103,595,587 DFA International Value Portfolio III ............... 5,052,182 77,449,944 Emerging Markets Portfolio .......................... 565,073 13,460,044 Emerging Markets Small Cap Portfolio ................ 778,210 12,591,445 Emerging Markets Value Portfolio .................... 460,722 12,522,430 Japanese Small Company Portfolio .................... 346,415 5,206,619 Large Cap International Portfolio ................... 727,653 12,944,939 United Kingdom Small Company Portfolio .............. 269,991 5,205,417 ------------ TOTAL INTERNATIONAL EQUITY FUNDS (Cost $257,094,920) ........................... 258,101,802 ------------ TOTAL INVESTMENTS -- 99.8% (Cost $257,094,920) ........................... 258,101,802 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% ....... 530,302 ------------ NET ASSETS -- 100.0% ................................ $258,632,104 ============
PORTFOLIO HOLDINGS SUMMARY TABLE (UNAUDITED)
% OF NET ASSETS VALUE --------- ------------ International Equity Funds .......................... 99.8% $258,101,802 Other Assets In Excess of Liabilities ............... 0.2% 530,302 ----- ------------ NET ASSETS .......................................... 100.0% $258,632,104 ===== ============
- ---------- Portfolio holdings are subject to change at any time. The following is a summary of the inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (See Note 1 in Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUT INPUT --------------- ------------ ----------- ------------ Investments in Securities* $258,101,802 $258,101,802 $-- $-- ============ ============ === ===
* Please refer to the Portfolio of Investments for further details. The accompanying notes are an integral part of the financial statements. 11 FREE MARKET FUNDS FREE MARKET FIXED INCOME FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2009
NUMBER OF SHARES VALUE --------- ------------ FIXED INCOME FUNDS -- 99.6% DFA Five-Year Global Fixed Income Portfolio ......... 4,670,918 $ 52,360,987 DFA Five-Year Government Portfolio .................. 2,646,810 28,823,760 DFA Intermediate Government Fixed Income Portfolio .. 1,926,428 23,656,540 DFA One-Year Fixed Income Portfolio ................. 5,038,817 52,000,596 DFA Two-Year Global Fixed Income Portfolio .......... 5,098,851 52,365,203 ------------ TOTAL FIXED INCOME FUNDS (Cost $206,197,500) ........................... 209,207,086 ------------ TOTAL INVESTMENTS -- 99.6% (Cost $206,197,500) ........................... 209,207,086 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.4% ....... 899,755 ------------ NET ASSETS -- 100.0% ................................ $210,106,841 ============
PORTFOLIO HOLDINGS SUMMARY TABLE (UNAUDITED)
% OF NET ASSETS VALUE --------- ------------ Fixed Income Funds .................................. 99.6% $209,207,086 Other Assets In Excess of Liabilities ............... 0.4% 899,755 ----- ------------ NET ASSETS -- 100.0% ................................ 100.0% $210,106,841 ===== ============
- ---------- Portfolio holdings are subject to change at any time. The following is a summary of the inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (See Note 1 in Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUT INPUT --------------- ------------ ----------- ------------ Investments in Securities* $209,207,086 $209,207,086 $-- $-- ============ ============ === ===
* Please refer to the Portfolio of Investments for further details. The accompanying notes are an integral part of the financial statements. 12 FREE MARKET FUNDS STATEMENTS OF ASSETS AND LIABILITIES AUGUST 31, 2009
FREE MARKET FREE MARKET FREE MARKET U.S. EQUITY INTERNATIONAL FIXED INCOME FUND EQUITY FUND FUND ------------ ------------- ------------- ASSETS Investments in non-affiliated funds, at value + ........ $311,412,273 $258,101,802 $209,207,086 Cash and cash equivalents .............................. 942,238 589,596 1,151,452 Receivables Receivable for capital shares sold .................. 777,505 560,214 769,625 Dividends and interest receivable ................... 336 192 14 Prepaid expenses and other assets ...................... 9,756 7,594 8,158 ------------ ------------ ------------ Total assets ..................................... 313,142,108 259,259,398 211,136,335 ------------ ------------ ------------ LIABILITIES Payables Investments purchased ............................... 734,396 370,798 835,432 Capital shares redeemed ............................. 109,548 91,318 50,516 Investment adviser .................................. 127,910 104,883 85,170 Other accrued expenses and liabilities ................. 66,520 60,295 58,376 ------------ ------------ ------------ Total liabilities ................................ 1,038,374 627,294 1,029,494 ------------ ------------ ------------ Net Assets ............................................. $312,103,734 $258,632,104 $210,106,841 ------------ ------------ ------------ NET ASSETS CONSISTS OF Par value .............................................. $ 38,002 $ 32,261 $ 20,296 Paid-in capital ........................................ 331,089,019 255,733,525 204,813,969 Undistributed net investment income .................... 452,185 1,869,067 1,268,126 Accumulated net realized gain/(loss) from investments .. (1,354,894) (9,631) 994,864 Net unrealized appreciation/(depreciation) on investments ......................................... (18,120,578) 1,006,882 3,009,586 ------------ ------------ ------------ Net Assets ............................................. $312,103,734 $258,632,104 $210,106,841 ============ ============ ============ Shares outstanding ($0.001 par value, 100,000,000 shares authorized) .................................. 38,001,654 32,261,245 20,296,328 ------------ ------------ ------------ Net asset value, offering and redemption price per share ............................................... $ 8.21 $ 8.02 $ 10.35 ============ ============ ============ + Investment in non-affiliated funds, at cost .......... $329,532,851 $257,094,920 $206,197,500 ============ ============ ============
The accompanying notes are an integral part of the financial statements. 13 FREE MARKET FUNDS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2009
FREE MARKET FREE MARKET FREE MARKET U.S. EQUITY INTERNATIONAL FIXED INCOME FUND EQUITY FUND FUND ------------ ------------- ------------- INVESTMENT INCOME Dividends from non-affiliated funds .................... $ 4,274,612 $ 4,363,439 $ 3,352,985 Interest from non-affiliated funds ..................... 994 732 536 Interest allocated from non-affiliated funds ........... -- -- 1,117,756 Expenses allocated from non-affiliated funds ........... -- -- (31,688) ------------ ------------ ------------ Total investment income ............................. 4,275,606 4,364,171 4,439,589 ------------ ------------ ------------ EXPENSES Advisory fees (Note 2) ................................. 1,018,085 796,657 818,087 Administration and accounting fees (Note 2) ............ 258,187 205,796 206,755 Directors' and officers' fees .......................... 80,725 63,298 65,748 Professional fees ...................................... 41,349 36,381 35,956 Registration and filing fees ........................... 19,870 16,635 16,411 Insurance expense ...................................... 18,073 12,731 14,530 Printing and shareholder reporting fees ................ 17,325 14,081 12,963 Transfer agent fees (Note 2) ........................... 11,557 10,868 12,440 Custodian fees (Note 2) ................................ 2,402 2,402 2,402 Other expenses ......................................... 2,158 2,158 2,158 ------------ ------------ ------------ Total expenses ...................................... 1,469,731 1,161,007 1,187,450 ------------ ------------ ------------ Net investment income .................................. 2,805,875 3,203,164 3,252,139 ------------ ------------ ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS NET REALIZED GAIN/(LOSS) FROM: Non-affiliated funds ................................ (1,339,474) 56,839 777,574 Allocated from non-affiliated funds ................. -- -- 217,290 Foreign currency transactions allocated from non-affiliated funds ............................. -- -- 207,461 NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Non-affiliated funds ................................ (17,705,184) 16,019,226 2,453,228 ------------ ------------ ------------ Net realized and unrealized gain/(loss) on investments ......................................... (19,044,658) 16,076,065 3,655,553 ------------ ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........................................ $(16,238,783) $ 19,279,229 $ 6,907,692 ============ ============ ============
The accompanying notes are an integral part of the financial statements. 14 FREE MARKET U.S. EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED PERIOD ENDED AUGUST 31, 2009 AUGUST 31, 2008* --------------- ---------------- FROM OPERATIONS: Net investment income ..................................... $ 2,805,875 $ 13,167 Net realized gain/(loss) from investments ................. (1,339,474) -- Net change in unrealized depreciation from investments .... (17,705,184) (415,394) ------------- ------------- Net decrease in net assets resulting from operations ......... (16,238,783) (402,227) ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ..................................... (2,401,803) -- ------------- ------------- Net decrease in net assets from dividends and distributions to shareholders .............................................. (2,401,803) -- ------------- ------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold ................................. 165,094,648 193,722,496 Reinvestment of distributions ............................. 2,401,259 -- Shares redeemed ........................................... (23,790,681) (6,281,175) ------------- ------------- Net increase in net assets from capital shares ............... 143,705,226 187,441,321 ------------- ------------- Total increase in net assets ................................. 125,064,640 187,039,094 NET ASSETS: Beginning of period ....................................... 187,039,094 -- ------------- ------------- End of period ............................................. $ 312,103,734 $ 187,039,094 ============= ============= Undistributed net investment income, end of period ........... $ 452,185 $ 30,616 ============= ============= CAPITAL SHARE TRANSACTIONS: Shares sold ............................................... 22,974,273 18,789,368 Shares reinvested ......................................... 350,038 -- Shares redeemed ........................................... (3,503,840) (608,185) ------------- ------------- Total share transactions .................................. 19,820,471 18,181,183 ============= =============
- ---------- * The Fund commenced operations on December 31, 2007. The accompanying notes are an integral part of the financial statements. 15 FREE MARKET INTERNATIONAL EQUITY FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED PERIOD ENDED AUGUST 31, 2009 AUGUST 31, 2008* --------------- ---------------- FROM OPERATIONS: Net investment income ..................................... $ 3,203,164 $ 1,191,237 Net realized gain from investments ........................ 56,839 -- Net change in unrealized appreciation (depreciation) from investments ............................................ 16,019,226 (15,012,344) ------------- ------------- Net increase/(decrease) in net assets resulting from operations ................................................ 19,279,229 (13,821,107) ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ..................................... (2,609,280) -- ------------- ------------- Net decrease in net assets from dividends and distributions to shareholders .............................................. (2,609,280) -- ------------- ------------- CAPITAL SHARE TRANSACTIONS: Proceeds from shares sold ................................. 130,210,322 149,183,025 Reinvestment of distributions ............................. 2,608,705 -- Shares redeemed ........................................... (21,677,551) (4,541,239) ------------- ------------- Net increase in net assets from capital shares ............... 111,141,476 144,641,786 ------------- ------------- Total increase in net assets ................................. 127,811,425 130,820,679 NET ASSETS: Beginning of period ....................................... 130,820,679 -- ------------- ------------- End of period ............................................. $ 258,632,104 $ 130,820,679 ============= ============= Undistributed net investment income, end of period ........... $ 1,869,067 $ 1,208,659 ============= ============= CAPITAL SHARE TRANSACTIONS: Shares sold ............................................... 20,582,378 15,252,957 Shares reinvested ......................................... 446,696 -- Shares redeemed ........................................... (3,557,044) (463,742) ------------- ------------- Total share transactions ..................................... 17,472,030 14,789,215 ============= =============
- ---------- * The Fund commenced operations on December 31, 2007. The accompanying notes are an integral part of the financial statements. 16 FREE MARKET FIXED INCOME FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED PERIOD ENDED AUGUST 31, 2009 AUGUST 31, 2008* --------------- ---------------- FROM OPERATIONS: Net investment income ..................................... $ 3,252,139 $ 97,312 Net realized gain from investments and foreign currency transactions ........................................... 1,202,325 -- Net change in unrealized appreciation from investments .... 2,453,228 556,358 ------------- ------------- Net increase in net assets resulting from operations ......... 6,907,692 653,670 ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ..................................... (2,191,528) (114,734) Tax return of capital ..................................... -- (46,628) ------------- ------------- Net decrease in net assets from dividends and distributions to shareholders .............................................. (2,191,528) (161,362) ------------- ------------- CAPITAL TRANSACTIONS: Proceeds from shares sold ................................. 127,993,708 133,282,079 Reinvestment of distributions ............................. 2,191,099 161,361 Shares redeemed ........................................... (53,776,508) (4,953,370) ------------- ------------- Net increase in net assets from capital shares ............... 76,408,299 128,490,070 ------------- ------------- Total increase in net assets ................................. 81,124,463 128,982,378 NET ASSETS: Beginning of period ....................................... 128,982,378 -- ------------- ------------- End of period ............................................. $ 210,106,841 $ 128,982,378 ============= ============= Undistributed net investment income (loss), end of period .... $ 1,268,126 $ -- ============= ============= SHARE TRANSACTIONS: Shares sold ............................................... 12,560,233 13,330,026 Shares reinvested ......................................... 216,781 16,180 Shares redeemed ........................................... (5,331,134) (495,758) ------------- ------------- Total share transactions ..................................... 7,445,880 12,850,448 ============= =============
- ---------- * The Fund commenced operations on December 31, 2007. The accompanying notes are an integral part of the financial statements. 17 FREE MARKET FUNDS FREE MARKET U.S. EQUITY 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 PERIOD DECEMBER 31, FOR THE YEAR 2007(1) ENDED THROUGH AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ......................... $ 10.29 $ 10.00 -------- -------- Net investment income ........................................ 0.10(2) --(3) Net realized and unrealized gain/(loss) on investments ....... (2.09) 0.29 -------- -------- Net increase/(decrease) in net assets resulting from operations ................................................ (1.99) 0.29 -------- -------- Dividends and distributions to shareholders from: Net investment income ........................................ (0.09) -- -------- -------- Total dividends and distributions to shareholders ............ (0.09) -- -------- -------- Net asset value, end of period ............................... $ 8.21 $ 10.29 ======== ======== Total investment return(4) ................................... (19.19)% 2.90%(5) ======== ======== RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) .................... $312,104 $187,039 Ratio of expenses to average net assets(6) ................... 0.72% 0.84%(7) Ratio of net investment income to average net assets(6) ...... 1.37% 0.02%(7) Portfolio turnover rate ...................................... 1% 0%(5)
- ---------- (1) Commencement of operations. (2) The selected per share data was calculated using the average shares outstanding method for the period. (3) Amount less than $0.005 per share. (4) 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. (5) Not annualized. (6) The Fund also will indirectly bear its prorated share of expenses of the underlying funds. Such expenses are not included in the calculation of this ratio. (7) Annualized. The accompanying notes are an integral part of the financial statements. 18 FREE MARKET FUNDS FREE MARKET INTERNATIONAL EQUITY 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 PERIOD DECEMBER 31, FOR THE YEAR 2007(1) ENDED THROUGH AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ......................... $ 8.85 $ 10.00 -------- -------- Net investment income ........................................ 0.13(2) 0.08 Net realized and unrealized loss on investments .............. (0.85) (1.23) -------- -------- Net decrease in net assets resulting from operations ......... (0.72) (1.15) -------- -------- Dividends and distributions to shareholders from: Net investment income ........................................ (0.11) -- -------- -------- Total dividends and distributions to shareholders ............ (0.11) -- -------- -------- Net asset value, end of period ............................... $ 8.02 $ 8.85 ======== ======== Total investment return(3) ................................... (7.71)% (11.50)%(4) ======== ======== RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) .................... $258,632 $130,821 Ratio of expenses to average net assets(5) ................... 0.73% 0.92%(6) Ratio of net investment income to average net assets(5) ...... 2.01% 2.94%(6) Portfolio turnover rate ...................................... 2% 0%(4)
- ---------- (1) Commencement of operations. (2) The selected per share data was calculated using the average shares outstanding method for the period. (3) 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. (4) Not annualized. (5) The Fund also will indirectly bear its prorated share of expenses of the underlying funds. Such expenses are not included in the calculation of this ratio. (6) Annualized. The accompanying notes are an integral part of the financial statements. 19 FREE MARKET FUNDS FREE MARKET FIXED INCOME 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 PERIOD FOR THE DECEMBER 31, 2007(1) YEAR ENDED THROUGH AUGUST 31, 2009 AUGUST 31, 2008 --------------- -------------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ......................... $ 10.04 $ 10.00 -------- -------- Net investment income ........................................ 0.21(2) 0.02 Net realized and unrealized gain on investments .............. 0.25 0.04 -------- -------- Net increase in net assets resulting from operations ......... 0.46 0.06 -------- -------- Dividends and distributions to shareholders from: Net investment income ........................................ (0.15) (0.02) Tax return of capital ........................................ -- --(3) -------- -------- Total dividends and distributions to shareholders ............ (0.15) (0.02) -------- -------- Net asset value, end of period ............................... $ 10.35 $ 10.04 ======== ======== Total investment return(4) ................................... 4.62% 0.61%(5) ======== ======== RATIO/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) .................... $210,107 $128,982 Ratio of expenses to average net assets(6) ................... 0.75% 0.97%(7) Ratio of net investment income to average net assets(6)....... 2.06% 0.26%(7) Portfolio turnover rate ...................................... 84% 0%(5)
- ---------- (1) Commencement of operations. (2) The selected per share data was calculated using the average shares outstanding method for the period. (3) Amount less than $0.005 per share. (4) 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. (5) Not annualized. (6) The Fund also will indirectly bear its prorated share of expenses of the underlying funds. Such expenses are not included in the calculation of this ratio. (7) Annualized. The accompanying notes are an integral part of the financial statements. 20 FREE MARKET FUNDS NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2009 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 nineteen active investment portfolios, including the Free Market U.S. Equity Fund, Free Market International Equity Fund, and the Free Market Fixed Income Fund (each a "Fund," collectively the "Funds"). Each Fund operates as a "Fund of Funds" and commenced investment operations on December 31, 2007. RBB has authorized capital of one hundred billion shares of common stock of which 78.973 billion shares are currently classified into one hundred and twenty-nine classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten separate "families." PORTFOLIO VALUATION -- Investments in the underlying funds are valued at each fund's net asset value determined as of the close of business on the New York Stock Exchange (generally 4:00 p.m. Eastern time). As required, some securities and assets may be valued at fair value as determined in good faith by the Company's Board of Directors. Direct investments in fixed income securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. The Funds have adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 - quoted prices in active markets for identical securities - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 - significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments) In April 2009, FASB issued FASB Staff Position No. 157-4, Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, ("FSP 157-4"). FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs used in valuation techniques used to measure fair value and changes in inputs over the period. FSP 157-4 expands the three-level hierarchy disclosure and the level three-roll forward disclosure for each major security type as described in paragraph 19 of FAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. 21 FREE MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Funds' net assets as of August 31, 2009 is included with each Fund's Schedule of 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 and those differences could be significant. 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 when 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. The Funds estimate the components of distributions received that may be considered return of capital distributions or capital gain distributions. Each 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 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. In addition to the net annual operating expenses that the Funds bear directly, the shareholders indirectly bear the Fund's pro-rata expenses of the underlying mutual funds in which each Fund invests. During the year ended August 31, 2009, the Abundance Free Market Fixed Income Fund recognized its pro-rata share of net investment income and realized and unrealized gains/ losses on a daily basis from its investment in the DFA One-Year Fixed Income Series and the DFA Two-Year Global Fixed Income Series which were treated as partnerships for both federal income tax and U.S. GAAP purposes for a portion of the year. 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 Free Market Fixed Income Fund which declares and pays quarterly 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. 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. 22 FREE MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 CASH AND CASH EQUIVALENTS -- The Fund considers liquid assets deposited with a bank, money market funds, and certain short term debt instruments with maturities of 3 months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. 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. INVESTMENT ADVISER AND OTHER SERVICES Abundance Technologies, Inc. ("Abundance" or the "Adviser"), serves as each Fund's investment adviser. For its advisory services, Abundance is entitled to receive 0.50% of each Fund's average daily net assets, computed daily and payable monthly. The Adviser has voluntarily agreed to waive its advisory fee and/or reimburse certain expenses in order to limit total annual fund operating expenses of Free Market U.S. Equity Fund, Free Market International Equity Fund and the Free Market Fixed Income Fund to 1.13%, 1.35% and 1.00%, respectively, of the particular Fund's average daily net assets. The expense limitations include expenses incurred as a result of investing in other investment companies. The Adviser may discontinue these arrangements at any time. For the year ended August 31, 2009, investment advisory fees were:
GROSS ADVISORY FEES ------------------- Free Market U.S. Equity Fund $1,018,085 Free Market International Equity Fund 796,657 Free Market Fixed Income Fund 818,087
The Funds will not pay Abundance at a later time for any amounts they may waive or any amounts that Abundance has assumed. PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as administrator for the Funds. Administration and accounting fees accrued also include transfer agent, custodian fees and administrative service fees. For providing administrative and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets and is subject to certain minimum monthly fees. Included in the administration and accounting fees are fees for providing regulatory administration services to RBB. For providing these services, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to each portfolio in proportion to its assets of the Company. For providing transfer agent services, PNC is entitled to receive out-of-pocket expenses. For providing custodian services to the Funds, PFPC Trust Company, an affiliate of PNC, is entitled to receive out of pocket expenses. PFPC Distributors, Inc., an affiliate of PNC, serves as the principal underwriter and distributor of the Funds' shares pursuant to a Distribution Agreement with RBB. 23 FREE MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Fund or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding short-term investments) of the Funds were as follows:
PURCHASES SALES ------------ ----------- Free Market U.S. Equity Fund $150,160,017 $ 2,469,010 Free Market International Equity Fund 118,601,310 2,724,057 Free Market Fixed Income Fund 212,387,100 133,747,526
5. CAPITAL SHARE TRANSACTIONS As of August 31, 2009, 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. Free Market U.S. Equity Fund (2 shareholders) 98% Free Market International Equity Fund (2 shareholders) 98% Free Market Fixed Income Fund (2 shareholders) 98%
6. FEDERAL INCOME TAX INFORMATION FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Funds' tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2006-2009), and has concluded that no provision for income tax is required in the Funds' financial statements. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation of guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). 24 FREE MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 At August 31, 2009, federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by each Fund were as follows:
NET UNREALIZED FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) ------------ ------------ ------------ -------------- Free Market U.S. Equity Fund $330,887,745 $ -- $(19,475,472) $(19,475,472) Free Market International Equity Fund 258,288,163 3,576,133 (3,762,494) (186,361) Free Market Fixed Income Fund 206,323,522 3,169,677 (286,113) 2,883,564
Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. The following permanent differences as of August 31, 2009, primarily attributable to non deductible expenses, reclassifications of short term capital gain distribution and foreign currency, were reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME GAIN CAPITAL -------------- ------------ -------- Free Market U.S. Equity Fund $ 17,497 $ (15,420) $(2,077) Free Market International Equity Fund 66,524 (66,470) (54) Free Market Fixed Income Fund 207,515 (207,461) (54)
At August 31, 2009, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS -------------- --------------- Free Market U.S. Equity Fund $ 452,185 $ -- Free Market International Equity Fund 1,869,067 1,183,612 Free Market Fixed Income Fund 2,215,411 173,601
The differences between 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 income tax purposes. 25 FREE MARKET FUNDS NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2009 The federal income tax character of distributions paid during the fiscal period ended August 31, 2009 were as follows:
ORDINARY LONG-TERM RETURN OF INCOME GAINS CAPITAL TOTAL ---------- --------- --------- ---------- Free Market U.S. Equity Fund $2,401,803 $-- $-- $2,401,803 Free Market International Equity Fund 2,609,280 -- -- 2,609,280 Free Market Fixed Income Fund 2,191,528 -- -- 2,191,528
The federal income tax character of distributions paid during the fiscal period ended August 31, 2008 were as follows:
ORDINARY LONG-TERM RETURN OF INCOME GAINS CAPITAL TOTAL ---------- --------- --------- ---------- Free Market U.S. Equity Fund $ -- $-- $ -- $ -- Free Market International Equity Fund -- -- -- -- Free Market Fixed Income Fund 114,734 -- 46,628 161,362
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. At August 31, 2009, the Funds had no capital loss carryforwards available to offset future capital gains. 7. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through October 22, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements. 26 FREE MARKET 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 Free Market U.S. Equity Fund, Free Market International Equity Fund, and Free Market Fixed Income Fund, separately managed portfolios of The RBB Fund, Inc. (the "Fund") at August 31, 2009, and the results of their operations for the year then ended, and the changes in their net assets and the financial highlights for the year then ended and for the period December 31, 2007 (commencement of operations) through August 31, 2008, 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 22, 2009 27 FREE MARKET 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, 2009, the following dividends and distributions were paid by each of the Funds:
ORDINARY LONG-TERM RETURN OF INCOME GAINS CAPITAL TOTAL ---------- --------- --------- ----------- Free Market U.S. Equity Fund $2,401,803 $-- $-- $2,401,803 Free Market International Equity Fund 2,609,280 -- -- 2,609,280 Free Market Fixed Income Fund 2,191,528 -- -- 2,191,528
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 100% for the Free Market U.S. Equity Fund and 78% for the Free Market International Equity Fund. The percentage of total ordinary income dividends qualifying for the corporate dividends received deduction is 100% for the Free Market U.S. Equity Fund. These amounts were reported to shareholders as income in 2008. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2009. 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 2010. 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. 28 FREE MARKET 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 Free Market Funds at (866) 780-0357 ext. 3863 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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENT 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 agreement between Abundance and the Company (the "Advisory Agreement") on behalf of the Free Market U.S. Equity Fund, the Free Market International Equity Fund, and the Free Market Fixed Income Fund at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 Abundance 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of Abundance's services provided to the Funds; (ii) descriptions of the experience and qualifications of Abundance's personnel providing those services; (iii) Abundance's investment philosophies and processes; (iv) Abundance's assets under management and client descriptions; (v) Abundance's current advisory fee arrangements with the Company and other similarly managed clients; (vi) Abundance's compliance procedures; (vii) Abundance's financial information, insurance coverage and profitability analysis related to providing advisory services to the Funds; (vii) the extent to which economies of scale are relevant to the Funds; (ix) a report prepared by Lipper, Inc. ("Lipper") comparing each Fund's management fees and total expense ratio to those of its Lipper peer group and comparing the performance of each Fund to the performance of its Lipper peer group; and (x) a report comparing the performance of each Fund to the performance of its benchmark. As part of their review, the Board considered the nature, extent and quality of the services provided by Abundance. The Board concluded that Abundance had substantial resources to provide services to the Funds and that Abundance's services had been acceptable. 29 FREE MARKET FUNDS OTHER INFORMATION (CONCLUDED) (UNAUDITED) The Board also considered the investment performance of the Funds and Abundance. The Board considered the Funds' investment performance in light of their investment objectives and investment strategies. The Board, including all of the Independent Directors, concluded that the investment performance of each of the Funds as compared to their respective benchmarks and Lipper peer groups was acceptable. In reaching these conclusions, the Board also considered the recent extraordinary market conditions. The Board also considered the advisory fee rates payable by the Funds under the Advisory Agreement. In this regard, information on the fees paid by the Funds and the Funds' total operating expense ratios (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that the advisory fees, before and after fee waivers, of the Funds, were higher than median fees of each Fund's respective peer group, but that actual total expenses were lower than the respective peer group medians. After reviewing the information regarding Abundance's costs, profitability and economies of scale, and after considering Abundance's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Funds were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 30 FREE MARKET 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 866-780-0357.
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- ------------------------------- ------------- ---------------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services 19 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to Investment Trust; Wilmington, DE 19809 present. (registered invest- DOB: 3/43 ment company) WT Mutual Fund; (registered invest- ment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox 19 None 103 Bellevue Parkway Chase Cancer Center (biomedical Wilmington, DE 19809 research and medical care) DOB: 12/35 (2000-2004). Arnold M. Reichman Chairman 2005 to Director, Gabelli Group Capital 19 None 103 Bellevue Parkway Director present 1991 Partners, L.P. (an investment Wilmington, DE 19809 to present partnership) from 2000 to 2006. DOB: 5/48 Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 19 MTI Holding Group, 103 Bellevue Parkway and President, MTI Holding Inc. (formerly known Wilmington, DE 19809 Group, Inc. (formerly known as as Moyco Technologies, DOB: 3/34 Moyco Technologies, Inc.) Inc.) (manufacturer of precision coated and industrial abrasives).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 FREE MARKET FUNDS FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- ------------------------------- ------------- ----------------------- DISINTERESTED DIRECTORS Robert A. Straniere Director 2006 to present Since 2009, Administrative Law 19 Reich and Tang Group 103 Bellevue Parkway Judge, New York City. Founding (asset management); The Wilmington, DE 19809 Partner, Straniere Law Firm SPARX Asia Funds Group DOB: 3/41 (1980 to date); Partner, Gotham (registered investment Strategies (consulting firm) company) (2005 to date); Partner, The Gotham Global Group (consult- ing firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Partner, Kanter-Davidoff (law firm) (2006 to present). INTERESTED DIRECTORS(2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 19 Comcast Corporation; 103 Bellevue Parkway Chairman, Comcast Corporation AMDOCS Limited (service Wilmington, DE 19809 (cable television and provider to DOB: 7/33 communications). telecommunications companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 19 Kensington Funds 103 Bellevue Parkway President and prior thereto, (registered investment Wilmington, DE 19809 Executive Vice President of company) 6 Portfolios DOB: 4/38 Oppenheimer & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 32 FREE MARKET FUNDS FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- ------------------------------- ------------- ---------------- INTERESTED DIRECTORS(2) J. Richard Carnall Director 2002 to Director of Haydon Bolts, Inc. 19 Cornerstone Bank 103 Bellevue Parkway present (bolt manufacturer) and Wilmington, DE 19809 Parkway Real Estate Company DOB: 9/38 (subsidiary of Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004. OFFICERS Salvatore Faia, President and President President, Vigilant Compliance N/A N/A Esquire, CPA Vigilant Chief June 2009 to Services since 2004; Senior Compliance Services Compliance present and Legal Counsel, PNC Global 713 Chelsea Road Officer Chief Investment Servicing (U.S.), Mullica Hill, NJ Compliance Inc. from 2002 to 2004; and 08062 DOB: 12/62 Officer 2004 Director of Energy Income to present Partnership since 2005. Joel Weiss Treasurer June 2009 to Vice President and Managing N/A N/A 103 Bellevue Parkway present Director, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.) Inc. since 1993. DOB: 1/63 Jennifer Rogers Secretary 2007 to Since 2005, Vice President and N/A N/A 103 Bellevue Parkway present Counsel, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.), Inc. DOB: 7/74 (financial services company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw 103 Assistant 2005 to Since 1995, Vice President of N/A N/A Bellevue Parkway Treasurer present PNC Global Investment Servicing Wilmington, DE 19809 (U.S.) Inc. (financial services DOB: 10/60 company). Michael P. Malloy Assistant 1999 to Partner, Drinker Biddle & Reath N/A N/A One Logan Square Secretary present LLP (law firm) since 1993. 18th and Cherry Streets Philadelphia, PA 19103 DOB: 7/59
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 33 FREE MARKET FUNDS PRIVACY NOTICE THE FREE MARKET 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: - 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 - 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 (866) 573-2152. 34 BEAR STEARNS (GRAPHIC) BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO OF THE RBB FUND, INC. ANNUAL REPORT August 31, 2009 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 YEAR ENDED AUGUST 31, 2009 (UNAUDITED) We are pleased to present the Bear Stearns CUFS MLP Mortgage Portfolio ("the Portfolio") annual report covering the period from September 1, 2008 through August 31, 2009. Portfolio performance information, market commentary and our outlook for the period ended August 31, 2009 follows. We encourage you to carefully review the enclosed information to stay informed. PORTFOLIO PERFORMANCE AND MARKET REVIEW: From September 1, 2008 through August 31, 2009 the Portfolio generated a periodic total return of (7.82)% net of expenses. The Portfolio's primary benchmark, the Barclays Capital 1- to 3-month U.S. Treasury Bill Index returned 0.74% during the same period, while an index tracking 1-month U.S. LIBOR returned 1.25%. The 30-day yield of the Portfolio at the end of the period was 5.36%, compared to a yield of 0.15% for the Portfolio's benchmark and 0.26% for 1-month LIBOR. The Portfolio underperformed its primary and secondary benchmark. The historic market events of the past year had a dramatic impact on the holdings of the Portfolio. In response to the failure of Lehman Brothers and the government takeovers of Fannie Mae, Freddie Mac and AIG, numerous global policy actions have been put into place to stabilize the financial system. Most meaningful for the Portfolio has been the Federal Reserve's direct purchases of agency mortgage-backed securities (MBS), targeted at $1.25 trillion by the end of 2009. The volatility in mortgage markets generated by these events was significant. Agency mortgage spreads hit all-time highs in November 2008, and the sector underperformed duration-matched Treasurys by -201 basis points (bps) from August 31 to November 30, 2008. However, mortgage spreads recovered once Fed purchases began, and agency mortgages outperformed duration-matched Treasurys by a net +224 bps over the year ended August 31, 2009. Most important to the underperformance of the Portfolio, prime and Alt-A non-agency mortgage markets saw dramatic selling through March 2009, driven by market participants in need of cash. Pricing was also aggravated as the rating agencies took sweeping downgrade actions on thousands of securities at a time. These downgrades have put technical pressure on pricing as holders who are sensitive to certain ratings levels are forced to liquidate positions. Since March, increased demand in non-agency MBS have resulted in an improvement in pricing. PORTFOLIO POSITIONING: The focus of the Portfolio continues to be a combination of agency-backed and private label mortgage securities. Fundamentally, the non-agency sector remains challenged as a result of continued housing weakness and elevated delinquencies and foreclosures. With regard to agency mortgages, the Fed's involvement in the market has pushed spreads significantly tighter since last fall's market dislocation. Another factor that impacted agency MBS during the year was the tightening of lending standards in the wake of the easy lending environment that has caused so many problems. Despite refinancing concerns triggered by the low level of interest rates combined with the administration's programs to facilitate refinancing into agency mortgages, reactions have generally been much less than what was initially expected. While these concerns initially hurt prepayment sensitive sectors such as interest-only securities, performance rebounded in the latter part of the period and ended up adding positively to Portfolio returns. 1 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PERFORMANCE DATA AUGUST 31, 2009 (UNAUDITED) PERFORMANCE The Portfolio's total return from inception on December 19, 2006 through August 31, 2009 was -3.63%, net of all fees and expenses. The Portfolio's benchmark, the Barclay's Capital U.S. Treasury Bills 1-3 Month Index(2), returned 2.82% for the same period. COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN BEAR STEARNS CUFS MLP MORTGAGE PORTFOLIO VS. BARCLAY'S CAPITAL U.S. TREASURY BILLS 1-3 MONTH INDEX (PERFORMANCE GRAPH)
Bear Stearns Barclay's 1-3 month CUFS Institutional T-bill Index LIBOR 1 month index ------------------ ------------------- ------------------- 12/19/06 10000 10000 10000 Feb-07 10133.5 10122.5 10105.3 Aug-07 10309.7 10385.4 10381.3 Feb-08 10520.4 10576.9 10645.2 Aug-08 9818.4 10669.3 10791.8 Feb-09 7842.1 10710.9 10905.5 Aug-09 9050.8 10722.7 10930.6
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 Barclay's Capital U.S. Treasury Bills 1-3 Month Index is unmanaged, does not incur expenses and is not available for investment. TOTAL RETURNS AS OF AUGUST 31, 2009
Average Annual Total Returns 1 Year Since Inception* ------ ---------------- Bear Stearns CUFS(R) MLP Mortgage Portfolio(1) -7.82% -3.63% Barclay's Capital U.S. Treasury Bills 1 to 3 Month Index(2) 0.74% 2.82% 1 Month LIBOR(3) 1.25% 3.33%
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 AND NET ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, ARE 0.80% AND 0.60%, RESPECTIVELY. THE PERFORMANCE DATA REFLECTS FEE WAIVERS AND EXPENSE REIMBURSEMENTS. THE RETURNS WOULD HAVE BEEN LOWER IF THESE WAIVERS AND EXPENSE REIMBURSEMENTS WERE NOT IN EFFECT. PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE. - ---------- * The inception date of the Portfolio was December 19, 2006. (1) Net of fees and expenses. (2) The Barclay's Capital U.S. Treasury Bills 1-3 Month Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. It is not possible to invest directly in an index. (3) The 1-Month LIBOR is a constant maturity index of the London Interbank Offering Rate established to reflect the total return of the 1-Month LIBOR rate. Source: Merrill Lynch. 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 that was invested at the beginning of the period from March 1, 2009 through August 31, 2009, and held for the entire period. ACTUAL EXPENSES The first line of the accompanying table 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 table 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, 2009 AUGUST 31, 2009 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $1,154.10 $3.26 Hypothetical (5% return before expenses) 1,000.00 1,022.14 3.06
- ---------- * Expenses are equal to the Portfolio's annualized six-month 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 15.41%. 3 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2009 (UNAUDITED)
% OF NET SECURITY TYPE/INDUSTRY CLASSIFICATION ASSETS VALUE - ------------------------------------- -------- ------------ GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES 66.5% $ 76,117,150 COLLATERALIZED MORTGAGE OBLIGATIONS 44.9 51,344,858 MORTGAGE DERIVATIVES 15.9 18,250,699 U.S. TREASURY OBLIGATIONS 0.4 404,656 TBA SALE COMMITMENTS (15.8) (18,072,184) LIABILITIES IN EXCESS OF OTHER ASSETS (11.9) (13,605,268) ----- ------------ NET ASSETS 100.0% $114,439,911 ===== ============
Portfolio holdings are subject to change at any time. The accompanying notes are an integral part of the financial statements. 4 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO OF INVESTMENTS AUGUST 31, 2009
MOODY'S/ PAR MARKET S&P (b) (000'S) VALUE -------- --------- ------------- GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES--66.5% FEDERAL HOME LOAN MORTGAGE CORPORATION--18.0% 5.000% 05/01/18 Aaa/AAA $ 1,447 $ 1,527,883 5.000% 09/01/20 Aaa/AAA 2,928 3,075,836 5.911% 08/01/36 (a)(c) Aaa/AAA 4,928 5,181,392 5.964% 09/01/36 (a) Aaa/AAA 3,362 3,547,204 5.863% 11/01/36 (a) Aaa/AAA 2,731 2,854,590 5.807% 08/01/37 (a) Aaa/AAA 4,226 4,438,311 ------------- 20,625,216 ------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION--48.5% 5.000% 06/01/18 Aaa/AAA 2,469 2,576,953 5.000% 02/01/19 Aaa/AAA 2,274 2,373,915 4.781% 12/01/34 (a) Aaa/AAA 4,225 4,321,270 6.020% 10/01/36 (a) Aaa/AAA 2,620 2,760,033 6.088% 10/01/36 (a) Aaa/AAA 1,487 1,572,400 5.500% 12/01/36 Aaa/AAA 403 421,252 5.866% 12/01/36 (a) Aaa/AAA 1,850 1,954,407 5.538% 09/01/37 (a) Aaa/AAA 2,336 2,452,241 4.500% 09/01/39 TBA Aaa/AAA 18,900 19,000,397 6.000% 09/01/39 TBA Aaa/AAA 7,000 7,365,316 6.500% 09/14/39 TBA Aaa/AAA 10,000 10,693,750 ------------- 55,491,934 ------------- TOTAL GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (Cost $74,657,363) ................... 76,117,150 ------------- MORTGAGE DERIVATIVES--15.9% FANNIE MAE (IO)--11.1% 4.500% 12/01/18 Aaa/AAA 6,136 704,597 4.500% 01/01/19 Aaa/AAA 6,099 680,003 4.500% 03/01/20 Aaa/AAA 2,212 239,420 4.500% 03/01/20 Aaa/AAA 2,293 259,245 5.500% 05/25/23 Aaa/AAA 1,640 186,201 5.500% 12/25/24 Aaa/AAA 6,407 677,082 5.500% 07/25/28 Aaa/AAA 12,808 397,001 5.500% 10/25/31 Aaa/AAA 14,940 1,538,066 7.584% 04/25/32 (a) Aaa/AAA 3,023 460,192 6.784% 09/25/32 (a) Aaa/AAA 4,853 426,988 5.000% 10/01/33 Aaa/AAA 8,510 1,452,906 5.000% 12/01/33 (a) Aaa/AAA 1,588 271,396 5.000% 12/01/33 Aaa/AAA 2,685 434,705 5.000% 08/01/34 Aaa/AAA 2,783 540,085 5.000% 04/01/36 Aaa/AAA 6,398 899,812 5.000% 04/01/36 Aaa/AAA 10,321 1,525,864 7.034% 08/25/36 (a) Aaa/AAA 5,539 681,817 5.000% 10/01/36 Aaa/AAA 7,205 1,315,940 ------------- 12,691,320 ------------- FANNIE MAE (PO)--0.7% 5.500% 06/25/36 Aaa/AAA 980 836,684 -------------
MOODY'S/ PAR MARKET S&P (b) (000'S) VALUE -------- --------- ------------- MORTGAGE DERIVATIVES--(CONTINUED) FREDDIE MAC (IO)--1.7% 5.500% 07/15/16 Aaa/AAA $ 1,082 $ 92,428 5.500% 12/15/24 Aaa/AAA 48 1 6.884% 02/25/32 (a) Aaa/AAA 5,324 481,587 6.212% 06/15/36 (a) Aaa/AAA 2,913 316,558 6.307% 09/15/36 (a) Aaa/AAA 5,483 511,024 6.377% 11/15/36 (a) Aaa/AAA 5,517 592,079 ------------- 1,993,677 ------------- FREDDIE MAC (PO)--1.5% 4.000% 09/15/35 Aaa/AAA 1,011 883,204 5.896% 09/15/36 Aaa/AAA 920 846,612 ------------- 1,729,816 ------------- NON-AGENCY (IO)--0.9% CWALT Series 2006-43CB 6.000% 02/25/37 Cc /CCC 5,113 999,202 ------------- TOTAL MORTGAGE DERIVATIVES (Cost $20,538,130) ................... 18,250,699 ------------- COLLATERALIZED MORTGAGE OBLIGATIONS--44.9% Banc of America Mortgage Securities, Inc. Series 2005-H (a) 4.798% 09/25/35 Aaa/A 2,000 1,234,286 Banc of America Mortgage Securities, Inc. Series 2006-B (a) 5.998% 10/20/46 Bbb/CCC 3,427 2,360,935 Banc of America Mortgage Securities, Inc. Series 2007-3 6.000% 09/25/37 Bb /CCC 4,192 3,320,763 Citigroup Mortgage Loan Trust, Inc. Series 2007-AR8 (a) 5.902% 07/25/37 Caa2/BB 3,770 2,562,600 Countrywide Asset-Backed Certificates Series 2004-AB2 (a) 0.866% 05/25/36 Baa3/A 500 18,208 Countrywide Home Loan Mortgage Pass-Through Trust Series 2003-3 (a) 0.766% 04/25/18 Aaa/AAA 717 691,738 Countrywide Home Loan Mortgage Pass-Through Trust Series 2007-HY1 (a) 5.664% 04/25/37 Cc /CCC 2,158 551,009 CWALT Series 2006-43CB 6.000% 02/25/37 C /CCC 1,041 804,462 CWALT Series 2006-HY13 (a) 5.883% 02/25/37 C /CCC 10,427 2,734,763 CWALT Series 2006-J2 6.000% 04/25/36 Caa1/CCC 6,594 5,429,862 CWALT Series 2007-2CB 5.750% 03/25/37 Ca /CCC 4,537 1,066,708 CWALT Series 2007-J2 6.000% 07/25/37 Caa1/C 1,643 1,071,664 Fannie Mae REMICS Series 2003-1 5.500% 04/25/28 Aaa/AAA 1,145 1,146,137
The accompanying notes are an integral part of the financial statements. 5 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2009
MOODY'S/ PAR MARKET S&P (b) (000'S) VALUE -------- --------- ------------- COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED) Fannie Mae REMICS Series 2005-25 (a) 0.616% 04/25/35 Aaa/AAA $ 1,984 $ 1,930,119 Fannie Mae REMICS Series 2005-47 5.500% 09/25/24 Aaa/AAA 924 929,731 Fannie Mae REMICS Series 2005-57 5.500% 05/25/27 Aaa/AAA 697 710,762 Fannie Mae REMICS Series 2006-61 6.000% 10/25/30 Aaa/AAA 3,404 3,485,901 Fannie Mae REMICS Series 2009-40 3.000% 02/25/26 Aaa/AAA 1,583 1,584,401 First Horizon Asset Securities, Inc. Series 2006-AR1 (a) 5.851% 05/25/36 Bbb/B- 3,327 1,077,398 Freddie Mac REMICS Series 2590 5.000% 04/15/16 Aaa/AAA 2,230 2,253,021 Freddie Mac REMICS Series 2752 (a) 0.623% 12/15/30 Aaa/AAA 727 719,287 Freddie Mac REMICS Series 2995 (a) 0.673% 06/15/35 Aaa/AAA 1,010 995,614 Government National Mortgage Association REMICS Series 2008-72 5.250% 12/20/32 Aaa/AAA 1,902 1,917,465 JPMorgan Mortgage Trust Series 2005-A4 (a)(d) 5.166% 07/25/35 Baa1/AAA 1,027 946,282 JPMorgan Mortgage Trust Series 2005-A6 (a)(d) 4.978% 08/25/35 Aaa/AA+ 692 550,008 Residential Asset Securitization Trust Series 2007-A5 6.000% 05/25/37 Caa2/CCC 1,421 1,118,970 Residential Funding Mortgage Securities I Series 2006-SA4 (a) 6.114% 11/25/36 B3 /CCC 5,881 3,810,898 Residential Funding Mortgage Securities I Series 2007-SA2 (a) 5.653% 04/25/37 Ca /CCC 3,738 783,257 Washington Mutual, Inc. Series 2007-HY3 (a) 5.320% 03/25/37 Ccc/CCC 1,645 161,350 Washington Mutual, Inc. Series 2007-HY4 (a) 5.456% 04/25/37 Cc /CCC 3,630 2,355,471
MOODY'S/ PAR MARKET S&P (b) (000'S) VALUE -------- --------- ------------- COLLATERALIZED MORTGAGE OBLIGATIONS--(CONTINUED) Wells Fargo Mortgage Backed Securities Trust Series 2007-10 6.250% 07/25/37 B1 /AA $ 3,488 $ 3,021,788 ------------- TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (Cost $81,431,619) ................... 51,344,858 ------------- U.S. TREASURY OBLIGATIONS--0.4% U.S. TREASURY NOTE--0.4% U.S. Treasury Notes (c) 1.500% 10/31/10 Aaa/AAA 400 404,656 ------------- 404,656 ------------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $401,633) ...................... 404,656 ------------- TOTAL INVESTMENTS--127.7% (Cost $177,028,745) .................. 146,117,363 ------------- TBA SALE COMMITMENTS--(15.8%) FANNIE MAE--(9.3%) 6.500% 09/14/39 TBA Aaa/AAA (10,000) (10,693,750) ------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--(6.5%) 6.00% 09/01/31 TBA Aaa/AAA (7,000) (7,378,434) ------------- TOTAL TBA SALE COMMITMENTS (Proceeds $18,029,531) ............... (18,072,184) ------------- LIABILITIES IN EXCESS OF OTHER ASSETS (d)--(11.9)% .................. (13,605,268) ------------- NET ASSETS--100.0% ...................... $ 114,439,911 =============
- ---------- CWALT Countrywide Alternative Loan Trust 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) Where Moody's or S&P rating is not available, Fitch rating is substituted, if available. (Unaudited) (c) All or a portion of this security has been pledged as collateral in connection with open swap contracts. (d) Security was purchased prior to the Portfolio's affiliation with JPMorgan Chase & Co. 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, 2009 (c) All or a portion of the security held as collateral for the following Futures contracts open at August 31, 2009:
NUMBER VALUE VALUE UNREALIZED OF EXPIRATION AT TRADE AT APPRECIATION CONTRACTS TYPE MONTH DATE 08/31/09 (DEPRECIATION) - --------- -------------------------- ---------- ----------- ----------- -------------- Long Positions: 25 90 Day Euro 12/2009 $12,358,285 $12,442,500 $ 84,215 50 90 Day Euro 03/2010 6,127,580 6,205,313 77,733 109 U.S. Treasury 10 Year Note 12/2009 12,705,618 12,776,844 71,226 Short Positions: 37 U.S. Treasury 2 Year Note 12/2009 8,025,729 8,004,719 (21,010) 22 U.S. Treasury 5 Year Note 12/2009 2,551,913 2,535,500 (16,413) -------- $195,751 ========
(d) Liabilities in excess of other assets include interest rate swaps as follows:
NOTIONAL TERMINATION AMOUNT FIXED FLOATING VALUE AT UNREALIZED COUNTERPARTY DATE (000) RATE RATE 08/31/2009 (DEPRECIATION) - ------------ ----------- -------- ----- ------------- ----------- -------------- Deutsche Bank* 09/17/2013 $20,000 4.520% 3 MONTH LIBOR $(2,008,897) $(2,008,897) =========== ===========
* Portfolio pays the fixed rate and receives the floating rate. The following is a summary of the inputs used, as of August 31, 2009, in valuing the Portfolio's investments carried at market value (see Note 1 in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL MARKET LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31. 2009 PRICE INPUTS INPUTS --------------- -------- ------------ ------------ GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES $ 76,117,150 $ -- $ 76,117,150 $-- MORTGAGE DERIVATIVES 18,250,699 -- 18,250,699 -- COLLATERALIZED MORTGAGE OBLIGATIONS 51,344,858 -- 51,344,858 -- U.S. TREASURY OBLIGATION 404,656 -- 404,656 -- INVESTMENTS IN OTHER FINANCIAL INSTRUMENTS* 233,174 233,174 -- -- ------------ -------- ------------ --- TOTAL ASSETS $146,350,537 $233,174 $146,117,363 $-- ============ ======== ============ ===
LEVEL 2 LEVEL 3 TOTAL MARKET LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31. 2009 PRICE INPUTS INPUTS --------------- -------- ------------ ------------ TBA SALE COMMITMENTS $(18,072,184) $ -- $(18,072,184) $-- INVESTMENTS IN OTHER FINANCIAL INSTRUMENTS* (2,046,320) (37,423) (2,008,897) ------------ -------- ------------ --- TOTAL LIABILITIES $(20,118,504) $(37,423) $(20,081,081) $-- ============ ======== ============ ===
* Other financial instruments include open futures contracts and swap contracts. The accompanying notes are an integral part of the financial statements. 7 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2009 ASSETS Investments, at value+ ...................................................... $146,117,363 Cash and cash equivalents ................................................... 6,428,077 Receivables Investments sold ......................................................... 79,284,645 Dividends and interest ................................................... 678,824 Variation margin due from broker ......................................... 40,813 Prepaid expenses and other assets ........................................... 9,527 ------------ Total assets .......................................................... 232,559,249 ------------ LIABILITIES TBA sale commitments, at value++ ............................................ 18,072,184 Unrealized depreciation on swap agreements .................................. 2,008,897 Payables Investments purchased .................................................... 97,583,191 Distributions to shareholders ............................................ 351,339 Professional fees ........................................................ 36,768 Investment adviser ....................................................... 30,811 Other accrued expenses and liabilities ...................................... 36,148 ------------ Total liabilities ..................................................... 118,119,338 ------------ Net Assets ............................................................... $114,439,911 ============ NET ASSETS CONSIST OF: Par value ................................................................... $ 14,919 Paid-in capital ............................................................. 148,995,803 Undistributed net investment income ......................................... 384,783 Accumulated net realized loss from investments, futures transactions, TBA sale commitments, swap agreements and purchased options .................. (2,188,413) Net unrealized depreciation from investments, futures transactions, TBA sale commitments and swap agreements ..................................... (32,767,181) ------------ Net Assets ............................................................... $114,439,911 ============ Shares outstanding ($0.001 par value, 100,000,000 shares authorized) ........ 14,919,250 ------------ Net asset value, offering and redemption price per share .................... $ 7.67 ============ + Investment in securities, at cost ......................................... $177,028,745 ++ TBA sale commitments, proceeds ........................................... $ 18,029,531
The accompanying notes are an integral part of the financial statements. 8 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2009 INVESTMENT INCOME Interest .................................................................... $ 8,588,499 ------------ Total investment income .................................................. 8,588,499 ------------ EXPENSES Advisory fees ............................................................... 525,036 Administration and accounting fees .......................................... 183,622 Professional fees ........................................................... 58,245 Directors' and officers' fees ............................................... 50,174 Transfer agent fees ......................................................... 46,237 Custodian fees .............................................................. 31,133 Printing and shareholder reporting fees ..................................... 20,421 Registration and filing fees ................................................ 19,998 Insurance fees .............................................................. 16,513 Other expenses .............................................................. 2,246 ------------ Total expenses before waivers ............................................ 953,625 Less: waivers ............................................................ (301,613) ------------ Net expenses after waivers ............................................... 652,012 ------------ Net investment income ....................................................... 7,936,487 ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS, FUTURES TRANSACTIONS, TBA SALE COMMITMENTS, SWAP AGREEMENTS AND PURCHASED OPTIONS NET REALIZED GAIN/(LOSS) FROM: Investments .............................................................. 1,082,929 Futures* ................................................................. (1,344,606) Swap agreements* ......................................................... (148,817) Purchased options* ....................................................... (114,435) ------------ Total realized gain/(loss) from investments, futures transactions, swap agreements and purchased options ......................................... (524,929) ------------ NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments .............................................................. (16,592,493) Futures* ................................................................. 208,089 TBA sale commitments ..................................................... (42,653) Swap agreements* ......................................................... (1,577,616) ------------ Total net changes in unrealized appreciation/(depreciation) on investments, futures transactions, TBA sale commitments and swap agreements ........... (18,004,673) ------------ Net realized and unrealized gain/(loss) on investments, futures transactions, TBA sale commitments, swap agreements and purchased options .............. (18,529,602) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........................... $(10,593,115) ============
- ---------- * Primary risk exposure is interest rate contracts. The accompanying notes are an integral part of the financial statements. 9 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income ....................................... $ 7,936,487 $ 8,332,359 Net realized loss from investments, futures transactions, swap agreements and purchased options .................... (524,929) (923,672) Net change in unrealized depreciation from investments, futures transactions, TBA sale commitments and swap agreements .......................................... (18,004,673) (13,711,608) ------------ ------------- Net decrease in net assets resulting from operations ........... (10,593,115) (6,302,921) ------------ ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ....................................... (7,602,997) (8,440,223) ------------ ------------- Net decrease in net assets from dividends and distributions to shareholders ................................................ (7,602,997) (8,440,223) ------------ ------------- CAPITAL TRANSACTIONS: Reinvestment of distributions ............................... 2,748,132 4,001,676 Redemptions ................................................. -- (20,648,191) ------------ ------------- Net increase/(decrease) in net assets from capital share transactions ................................................ 2,748,132 (16,646,515) ------------ ------------- Total decrease in net assets ................................... (15,447,980) (31,389,659) ------------ ------------- NET ASSETS: Beginning of year ........................................... 129,887,891 161,277,550 ------------ ------------- End of year ................................................. $114,439,911 $ 129,887,891 ============ ============= Undistributed/(overdistributed) net investment income, end of year ..................................................... $ 384,783 $ (3,187) ============ ============= SHARE TRANSACTIONS: Shares reinvested ........................................... 374,570 413,514 Shares redeemed ............................................. -- (2,119,938) ------------ ------------- Total share transactions .................................... 374,570 (1,706,424) ============ =============
The accompanying notes are an integral part of the financial statements. 10 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share outstanding during each period, 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 PERIOD FOR THE YEAR FOR THE YEAR DECEMBER 19, 2006* ENDED ENDED TO AUGUST 31, 2009 AUGUST 31, 2008 AUGUST 31, 2007 --------------- --------------- ------------------ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year ............... $ 8.93 $ 9.92 $ 10.00 -------- -------- -------- Net investment income ............................ 0.54 0.54 0.38 Net realized and unrealized gain/(loss) on investments, futures transactions, TBA sale commitments, swap agreements and options ...... (1.28) (0.98) (0.08) -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ..................... (0.74) (0.44) 0.30 -------- -------- -------- Dividends to shareholders from: Net investment income ............................ (0.52) (0.55) (0.38) Net realized capital gains ....................... -- -- -- -------- -------- -------- Net asset value, end of year ..................... $ 7.67 $ 8.93 $ 9.92 ======== ======== ======== Total investment return(1) ....................... (7.82)% (4.76)% 3.10% ======== ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted) ........ $114,440 $129,888 $161,278 Ratio of expenses to average net assets with waivers and expense reimbursements (excluding interest expense) .................. 0.60% 0.60% 0.60%(2) Ratio of expenses to average net assets with waivers and expense reimbursements (including interest expense) .................. 0.60% 0.60% 0.78%(2) Ratio of expenses to average net assets without waivers and expense reimbursements (including interest expense) .................. 0.88% 0.80% 0.95%(2) Ratio of net investment income to average net assets .................................... 7.30% 5.56% 5.58%(2) Portfolio turnover rate(3) ....................... 410.52% 190.88% 259.47%
- ---------- * 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 35.58% for the year ended August 31, 2009, 32.83% for the year ended August 31, 2008 and 125.15% for the period December 19, 2006 to August 31, 2007, respectively. The accompanying notes are an integral part of the financial statements. 11 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2009 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 nineteen active investment portfolios, including the Bear Stearns CUFS(R) 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 78.973 billion shares are currently classified into one hundred and twenty-nine classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten 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. These fixed income securities are valued by pricing services approved by the Board of Directors based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available are valued at an over-the-counter or exchange bid quotation. Certain debt securities, which tend to be more thinly traded and of lesser quality, are priced based on fundamental analysis of the financial condition of the issuer and the estimated value of any collateral. Valuations developed through pricing techniques may materially vary from the actual amounts realized upon sale of the securities, and the potential material variation may be greater for those securities valued using fundamental analysis. 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. Effective September 1, 2008, the Portfolio adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) In April 2009, FASB issued FASB Staff Position No. 157-4, Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, ("FSP 157-4"). FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs and valuation techniques used to measure fair value and changes in those techniques and related inputs during the period. FSP 157-4 expands the three-level hierarchy disclosure and the level three-roll forward disclosure for each major security type as described in paragraph 19 of FAS No. 115, Accounting for Certain Investments in Debt and Equity Securities. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Portfolio's investments as of August 31, 2009 is included with the Portfolio of 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 12 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 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 and these differences could be significant. 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. 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. CASH AND CASH EQUIVALENTS -- The Fund considers liquid assets deposited with a bank, money market funds, and certain short term debt instruments with maturities of 3 months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. 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. MORTGAGE-RELATED SECURITIES -- 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 its initial investment in IO securities. For PO securities, accelerated payments of principal will cause a faster than 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. The Portfolio is subject to risks associated with securities with contractual cash flows including mortgage related securities such as collateralized mortgage obligations, mortgage pass through securities and commercial mortgage backed securities, including some securities that are backed by sub-prime mortgages. The value, liquidity and related income of these securities are sensitive to changes in economic conditions, including real estate value, pre-payments, delinquencies and/or defaults, and 13 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 may be adversely affected by shifts in the market's perception of the issuers and changes in interest rates. A significant portion of the Portfolio's investments are comprised of mortgage related securities, including some securities that are backed by sub-prime mortgages. TBAS COMMITMENTS -- 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. MORTGAGE DOLLAR ROLLS -- During the period ended August 31, 2009, the Portfolio entered into dollar roll transactions, pursuant to which it sells a mortgage-backed TBA or security and simultaneously purchase a similar, but not identical, TBA with the same issuer, rate and terms. The Portfolio may execute a "roll" to obtain better underlying mortgage securities or to increase yield. The Portfolio accounts for dollar roll transactions as purchases and sales, which has the effect of increasing it's portfolio turnover rates. Risks associated with dollar rolls are that actual mortgages received by the Portfolio may be less favorable than those anticipated or that counterparties may fail to perform under the terms of the contracts. FINANCIAL FUTURES CONTRACTS -- The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. 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. For open futures contracts, see the Portfolio of Investments, which is also indicative of activity for the year ended August 31, 2009. OPTIONS CONTRACTS -- The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. 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 (CONTINUED) AUGUST 31, 2009 SWAP AGREEMENTS -- The Portfolio is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. 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 principal. 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. The Portfolio is also subject to counterparty credit risk, which is the risk that a counterparty fails to perform on agreements with the Portfolio such as swap contracts, option contracts, and TBA securities. The Portfolio is party to various derivative contracts governed by International Swaps and Derivatives Association Master Agreements (ISDA agreements). The Portfolio's ISDA agreements, which are separately negotiated with each dealer counterparty, typically contain provisions allowing, absent other considerations, a counterparty to exercise rights, to the extent not otherwise waived, against the Portfolio in the event the Portfolio's net assets decline over time by a pre-determined percentage or fall below a pre-determined floor. Such rights often include the ability to terminate (i.e., close out) open contracts at prices which may favor the counterparty, which could have an adverse impact on the Portfolio. For open swap contracts, see the Portfolio of Investments, which is also indicative of activity for the year ended August 31, 2009. 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. 2. INVESTMENT ADVISER AND OTHER SERVICES Bear Stearns Asset Management Inc. ("BSAM" or the "Adviser"), an indirect wholly-owned subsidiary of JPMorgan Chase & Co., 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 year ended August 31, 2009, investment advisory fees were $525,036, of which $301,613 was waived by the Adviser. PNC Global Investment Servicing (U.S.) Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as administrator for the Portfolio. For providing administration and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Portfolio's average daily net assets, subject to certain minimum monthly fees. Included in the administration and accounting fees, are fees for providing regulatory administration services to RBB. For providing these services, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to each portfolio in proportion to its net assets of the RBB Funds. For providing transfer agent services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets, subject to certain minimum monthly fees. PFPC Trust Company ("PFPC Trust") is a member of The PNC Financial Services Group, Inc. and provides certain custodial services to the Fund. PFPC Trust is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets, subject to certain minimum monthly fees. 15 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 PFPC Distributors, Inc. ("PFPC Distributors"), an affiliate of PNC, serves as the principal underwriter and distributor of the Portfolio's shares pursuant to a Distribution Agreement with RBB. The Portfolio will not pay PNC or PNC's affiliates at a later time for any amounts waived or any amounts assumed. 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Portfolio or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding short-term investments and including TBA securities) of the Portfolio were as follows:
PURCHASES SALES ------------ ------------ Investments in U.S. Government Securities ... $559,688,851 $526,499,260
5. CAPITAL STOCK TRANSACTIONS As of August 31, 2009, the Portfolio had individual shareholder accounts, which individually amounted to more than 10% of the total shares outstanding of the Portfolio as detailed below.
% OF SHARES NUMBER OF OUTSTANDING ACCOUNTS - ----------- --------- 100% 5
Significant shareholder transactions, if any, may impact the Portfolio's performance. 6. FEDERAL INCOME TAX INFORMATION FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Portfolio's tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2006-2009) and has concluded that no provision for income tax is required in the Portfolio's financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). At August 31, 2009, 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 - ------------ ------------ ------------ -------------- $177,034,995 $2,739,172 $(33,656,804) $(30,917,632)
Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. The following permanent differences as of August 31, 2009, attributable to swap and paydown adjustments, were reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED NET NET INVESTMENT INCOME REALIZED GAIN (LOSS) - --------------------- -------------------- $54,480 $(54,480)
16 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2009 As of August 31, 2009, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS - --------------- --------------- $736,122 $--
The difference between the book and tax basis components of distributable earnings relate to 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. The federal income tax character of dividends and distributions paid during the last two fiscal years were as follows:
AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- Ordinary income $7,602,997 $8,440,223 Long-term capital gains -- --
Dividends from net investment income and short-term capital gains are treated as ordinary income dividend for federal income tax purposes. As of August 31, 2009, the Portfolio had capital loss carryforwards of $1,315,504 available to offset future capital gains. The capital loss carryforwards will expire in 2015 $(483,278) and 2016 $(832,226) if they are not utilized by future capital gains. During the year ended August 31, 2009, the Portfolio utilized capital loss carryforwards of $202,595 to offset 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, 2009, the Portfolio deferred post-October capital losses of $670,908. 7. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Portfolio through October 22, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements. 17 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO 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 Bear Stearns CUFS MLP Mortgage Portfolio, a separately managed portfolio of The RBB Fund, Inc. (the "Fund") at August 31, 2009, 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 two 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion. The financial highlights for the period December 19, 2006 (commencement of operations) through August 31, 2007 were audited by other independent accountants whose report dated October 21, 2007 expressed an unqualified opinion on those statements. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 22, 2009 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 Bear Stearns CUFS(R) MLP Mortgage Portfolio at (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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENT As required by the Investment Company 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 Investment Company Act (the "Independent Directors"), considered the renewal of and approval of the investment advisory agreement between BASM and the Company (the "Advisory Agreement") on behalf of the Bear Stearns CUFS MLP Mortgage Portfolio at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 BSAM 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of BSAM's services 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 trade allocation policies; (vi) BSAM's current advisory fee arrangement with the Company and other similarly managed clients; (vii) BSAM's compliance procedures; (viii) BSAM'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 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. As part of their review, the Board considered the nature, extent and quality of the services provided by BSAM. The Board concluded that BSAM had substantial resources to provide services to the Portfolio and that BSAM's services had been acceptable. The Board also considered the investment performance of the Portfolio and BSAM. The Board considered the Portfolio's investment performance in light of its investment objective and investment strategies. The Board concluded that the investment performance of the Portfolio as compared to its benchmark and Lipper peer group was acceptable. In reaching this conclusion, the Board considered the recent extraordinary market conditions and noted that the Portfolio was part of a pilot program authorized by the National Credit Union Administration. The Board also considered the advisory fee rate payable by the Portfolio under the Advisory Agreement. In this regard, information on the fees paid by the Portfolio and the Portfolio's total operating expense ratio (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that advisory fees, before and after waivers, and actual total expenses of the Portfolio were all slightly lower than the peer group median. In addition, the Board noted that BSAM was voluntarily waiving management fees and reimbursing expenses to limit total annual operating expenses of the Portfolio to 0.60% of its average daily net assets and that BSAM expects to continue these fee waivers and expense reimbursements. After reviewing the information regarding BSAM's costs, profitability and economies of scale, and after considering BSAM's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Portfolio were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 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. The federal income tax character of distributions paid during the year ended August 31, 2009 was as follows: Ordinary income $7,602,997 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 2009. 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 2010. 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) MANAGEMENT OF THE COMPANY 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 information about the Directors and is available without charge, upon request, by calling 1-800-519-CUFS (2837) ext. 9.
NUMBER OF PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH HELD WITH FUND TIME SERVED(1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - ---------------------------- -------------- --------------- ------------------------------- ------------- ---------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services 19 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to Investment Wilmington, DE 19809 present. Trust; DOB: 3/43 (registered investment company) WT Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox 19 None 103 Bellevue Parkway Chase Cancer Center (biomedical Wilmington, DE 19809 research and medical care) DOB: 12/35 (2000-2004). Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 19 None 103 Bellevue Parkway Partners, L.P. (an investment Wilmington, DE 19809 Director 1991 to present partnership) from 2000 to DOB: 5/48 2006. Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 19 MTI Holding 103 Bellevue Parkway and President, MTI Holding Group, Inc. Wilmington, DE 19809 Group, Inc. (formerly known as (formerly known DOB: 3/34 Moyco Technologies, Inc.) as Moyco (manufacturer of precision Technologies, coated and industrial Inc.) abrasives). Robert A. Straniere Director 2006 to present Since 2009, Administrative Law 19 Reich and Tang 103 Bellevue Parkway Judge, New York City. Founding Group (asset Wilmington, DE 19809 Partner, Straniere Law Firm management); The DOB: 3/41 (1980 to date); Partner, Gotham SPARX Asia Funds Strategies (consulting firm) Group (2005 to date); Partner, The (registered Gotham Global Group (consulting investment firm) (2005 to date); company) President, The New York City Hot Dog Company (2005 to date); Partner, Kanter-Davidoff (law firm) (2006 to present).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH HELD WITH FUND TIME SERVED(1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - ---------------------------- -------------- --------------- ------------------------------- ------------- ---------------- INTERESTED DIRECTORS (2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 19 Comcast 103 Bellevue Parkway Chairman, Comcast Corporation Corporation; Wilmington, DE 19809 (cable television and AMDOCS Limited DOB: 7/33 communications). (service provider to tele- communications companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 19 Kensington Funds 103 Bellevue Parkway President and prior thereto, (registered Wilmington, DE 19809 Executive Vice President of investment DOB: 4/38 Oppenheimer & Co., Inc., company) 6 formerly Fahnestock & Co., Inc. Portfolios (a registered broker-dealer). Since November 2004, Director of Kensington Funds. J. Richard Carnall Director 2002 to present Director of Haydon Bolts, Inc. 19 Cornerstone Bank 103 Bellevue Parkway (bolt manufacturer) and Parkway Wilmington, DE 19809 Real Estate Company (subsidiary DOB: 9/38 of Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the Investment Company Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. (JPMorgan Chase) The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 22 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH HELD WITH FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR - ---------------------------- -------------- --------------- ------------------------------- ------------- ---------------- OFFICERS Salvatore Faia, Esquire, CPA President and President June President, Vigilant Compliance N/A N/A Vigilant Compliance Chief 2009 to present Services since 2004; Senior Services Compliance and Chief Legal Counsel, PNC Global 713 Chelsea Road Officer Compliance Investment Servicing (U.S.), Mullica Hill, NJ 08062 Officer 2004 to Inc. from 2002 to 2004; and DOB: 12/62 present Director of Energy Income Partnership since 2005. Joel Weiss Treasurer June 2009 to Vice President and Managing N/A N/A 103 Bellevue Parkway present Director, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.) Inc. since DOB: 1/63 1993 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and N/A N/A 103 Bellevue Parkway Counsel, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.), Inc. DOB: 7/74 (financial services company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of N/A N/A 103 Bellevue Parkway Treasurer PNC Global Investment Servicing Wilmington, DE 19809 (U.S.) Inc. (financial services DOB: 10/60 company) Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath N/A N/A One Logan Square Secretary LLP (law firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 7/59
23 BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO PRIVACY NOTICE THE BEAR STEARNS CUFS(R) 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: - 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 - 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 866-414-2837. 24 [THIS PAGE INTENTIONALLY LEFT BLANK] BEAR STEARNS CUFS(R) MLP MORTGAGE PORTFOLIO INVESTMENT ADVISER Bear Stearns Asset Management c/o JP Morgan Asset Management 245 Park Avenue New York, NY 10167 ADMINISTRATOR PNC Global Investment Servicing (U.S.) Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.) 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 LEGAL COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103 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: - 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 - Information about your transactions with the Portfolio. We restrict access to your personal 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) 430-9618. 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, 2009 through August 31, 2009 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, 2009 AUGUST 31, 2009 PERIOD* ------------- --------------- ------------- Actual $1,000.00 $1,001.00 $2.72 Hypothetical (5% return before expenses) 1,000.00 1,022.45 2.76
MONEY MARKET PORTFOLIO - SANSOM STREET CLASS ----------------------------------------------- BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING MARCH 1, 2009 AUGUST 31, 2009 PERIOD* ------------- --------------- ------------- Actual $1,000.00 $1,002.50 $1.26 Hypothetical (5% return before expenses) 1,000.00 1,023.93 1.28
* Expenses are equal to the Portfolio's annualized six month expense ratio of 0.54% for the Bedford Class shares and 0.25% 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 0.10% for the Bedford Class shares and 0.25% for the Sansom Street Class shares. 2 THE RBB FUND, INC. MONEY MARKET PORTFOLIO PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2009 (UNAUDITED)
% OF NET SECURITY TYPE ASSETS VALUE - ---------------------------------------- -------- ------------ Short Term Investments: Commercial Paper 42.5% $245,683,308 Certificates of Deposit 30.8 178,055,300 Agency Obligations 12.0 69,291,554 Repurchase Agreement 6.5 37,371,000 Variable Rate Obligations 4.7 27,180,000 Municipal Bonds 2.1 12,300,000 Master Note 0.7 4,000,000 U.S. Treasury Obligations 0.7 3,795,629 Other Assets in Excess of Liabilities -- 13,826 ----- ------------ NET ASSETS 100.0% $577,690,617 ===== ============
Portfolio holdings are subject to change at any time. 3 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS AUGUST 31, 2009
PAR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--30.8% DOMESTIC CERTIFICATES OF DEPOSIT--3.1% State Street Bank & Trust Co. 0.340%, 10/07/09 ................................... $ 5,000 $ 5,000,000 0.290%, 10/27/09 ................................... 13,000 13,000,000 ------------ 18,000,000 ------------ YANKEE DOLLAR CERTIFICATES OF DEPOSIT--27.7% (a) Abbey National Treasury Service, Connecticut(b) 0.760%, 07/20/10 ................................... 3,555 3,555,000 Banco Bilbao Vizcaya Argentaria S.A., New York 1.070%, 10/29/09 ................................... 4,000 4,000,064 0.525%, 12/30/09 ................................... 2,000 2,000,033 Barclays Bank PLC, New York 0.320%, 11/02/09 ................................... 10,000 10,000,000 0.330%, 11/09/09 ................................... 5,000 5,000,000 0.650%, 02/26/10 ................................... 5,000 5,000,000 BNP Paribas SA, New York 0.650%, 11/20/09 ................................... 3,000 3,000,000 0.470%, 01/08/10 ................................... 5,000 5,000,000 0.450%, 01/19/10 ................................... 6,000 6,000,000 Deutsche Bank AG, New York 0.300%, 11/12/09 ................................... 5,000 5,000,000 Dexia Credit Local, New York(b)(d) 0.514%, 09/17/09 ................................... 6,000 6,000,000 DnB NOR BANK ASA, New York 0.670%, 12/10/09 ................................... 3,000 3,000,000 0.500%, 01/07/10 ................................... 7,000 7,000,000 0.460%, 01/08/10 ................................... 6,000 6,000,000 Lloyds TSB Bank PLC, New York 0.440%, 10/23/09 ................................... 5,000 5,000,000 0.440%, 10/26/09 ................................... 10,000 10,000,000 0.420%, 11/04/09 ................................... 6,000 6,000,000 Rabobank Nederland NV, New York 0.400%, 02/05/10 ................................... 5,000 5,000,000 Royal Bank of Scotland, Connecticut 0.630%, 09/18/09 ................................... 5,000 5,000,024 0.630%, 09/30/09 ................................... 8,000 8,000,000 0.500%, 10/19/09 ................................... 3,000 3,000,000 Royal Bank of Scotland, New York 0.500%, 10/13/09 ................................... 5,000 5,000,000
PAR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--(CONTINUED) YANKEE DOLLAR CERTIFICATES OF DEPOSIT--(CONTINUED) Societe Generale, New York 0.800%, 11/06/09 ................................... $10,000 $ 10,000,000 0.520%, 01/08/10 ................................... 5,000 5,000,000 0.440%, 01/11/10 ................................... 4,000 4,000,000 Svenska Handelsbanken, New York 0.570%, 12/14/09 ................................... 4,000 4,000,115 Toronto Dominion Bank, New York 0.440%, 09/15/09 ................................... 4,000 4,000,008 UBS AG, Stamford 0.710%, 09/04/09 ................................... 1,000 1,000,000 0.700%, 09/28/09 ................................... 1,500 1,500,056 0.600%, 10/08/09 ................................... 8,000 8,000,000 Westpac Banking Corp., New York 0.400%, 01/28/10 ................................... 5,000 5,000,000 ------------ 160,055,300 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $178,055,300) ............................. 178,055,300 ------------ COMMERCIAL PAPER--42.5% (e) ASSET BACKED--25.0% Antalis US Funding Corp. 0.280%, 09/14/09 ................................... 8,000 7,999,191 0.400%, 10/08/09 ................................... 9,500 9,496,094 0.400%, 10/09/09 ................................... 9,000 8,996,200 Atlantis One Funding Corp. 0.370%, 09/10/09 ................................... 10,000 9,999,068 0.380%, 09/10/09 ................................... 4,000 3,999,627 0.360%, 10/02/09 ................................... 5,000 4,998,450 0.310%, 11/06/09 ................................... 8,000 7,995,453 0.270%, 11/23/09 ................................... 1,501 1,500,066 Cancara Asset Securitisation LLC 0.300%, 09/14/09 ................................... 5,000 4,999,458 Fairway Finance Co. LLC 0.350%, 10/09/09 ................................... 5,078 5,076,124 0.330%, 10/13/09 ................................... 2,000 1,999,230 0.290%, 11/06/09 ................................... 15,000 14,992,025 Kitty Hawk Funding Corp. 0.320%, 10/16/09 ................................... 5,000 4,998,000 Liberty Street Funding LLC 0.230%, 09/01/09 ................................... 5,000 5,000,000 Nieuw Amsterdam Receivables Corp. 0.470%, 09/15/09 ................................... 3,000 2,999,452
See Accompanying Notes to Financial Statements. 4 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (CONTINUED) AUGUST 31, 2009
PAR (000) VALUE ------- ------------ COMMERCIAL PAPER--(CONTINUED) ASSET BACKED--(CONTINUED) Regency Markets No. 1 LLC 0.200%, 09/04/09 ................................... $ 5,219 $ 5,218,913 Romulus Funding Corp. 0.600%, 09/09/09 ................................... 5,000 4,999,333 Scaldis Capital LLC 0.300%, 09/02/09 ................................... 7,000 6,999,942 0.300%, 09/08/09 ................................... 5,000 4,999,708 Solitaire Funding LLC 0.320%, 09/01/09 ................................... 5,000 5,000,000 0.350%, 10/09/09 ................................... 2,000 1,999,261 Straight-A Funding LLC 0.370%, 09/08/09 ................................... 2,000 1,999,856 0.370%, 09/10/09 ................................... 3,000 2,999,723 0.330%, 10/13/09 ................................... 5,000 4,998,075 Thunder Bay Funding LLC 0.320%, 09/14/09 ................................... 10,000 9,998,844 ------------ 144,262,093 ------------ BANKS--17.5% Banco Bilbao Vizcaya Argentaria S.A., London 1.005%, 11/13/09 ................................... 6,500 6,486,819 Citigroup Funding, Inc. 0.400%, 09/01/09 ................................... 5,000 5,000,000 0.400%, 09/02/09 ................................... 5,000 4,999,945 0.400%, 09/09/09 ................................... 4,000 3,999,645 Danske Corp. 0.740%, 11/05/09 ................................... 9,000 8,987,975 0.240%, 11/30/09 ................................... 6,000 5,996,400 Deutsche Bank Financial LLC 0.300%, 11/03/09 ................................... 15,000 14,992,125 DnB NOR BANK ASA 1.600%, 10/08/09 ................................... 5,000 4,991,778 ING US Funding LLC 0.290%, 11/09/09 ................................... 5,000 4,997,221 JPMorgan Chase Funding, Inc. 0.280%, 11/04/09 ................................... 12,000 11,994,027 0.280%, 11/13/09 ................................... 6,000 5,996,593 Societe Generale North America, Inc. 0.300%, 11/16/09 ................................... 5,000 4,996,833 0.420%, 01/27/10 ................................... 4,000 3,993,093
PAR (000) VALUE ------- ------------ COMMERCIAL PAPER--(CONTINUED) BANKS--(CONTINUED) UBS Finance (Delaware) LLC 0.700%, 09/02/09 ................................... $ 2,000 $ 1,999,961 0.525%, 11/04/09 ................................... 12,000 11,988,800 ------------ 101,421,215 ------------ TOTAL COMMERCIAL PAPER (Cost $245,683,308) ............................. 245,683,308 ------------ MUNICIPAL BONDS--2.1% North Carolina Housing Finance Agency, Home Ownership, Series 15, Class C, RB(b)(d) 0.500%, 09/02/09 ................................... 12,300 12,300,000 ------------ TOTAL MUNICIPAL BONDS (Cost $12,300,000) .............................. 12,300,000 ------------ VARIABLE RATE OBLIGATIONS--4.7% BANKS--2.8% Bank of Montreal, Chicago(a)(b)(c) 0.796%, 10/05/09 ................................... 2,850 2,850,000 HSBC USA Inc.(b) 0.925%, 10/15/09 ................................... 525 525,000 ING USA Global Funding Trust VI(b) 1.080%, 09/18/09 ................................... 855 855,000 Nordea Bank(b)(c) 0.872%, 10/24/09 ................................... 2,050 2,050,000 Rabobank Nederland NV 0.259%, 10/07/09(b)(c)(d) .......................... 4,900 4,900,000 0.479%, 05/04/10(b) ................................ 5,000 5,000,000 ------------ 16,180,000 ------------ COSMETICS-TOILETRY--1.9% Procter & Gamble International Funding SCA(b) 0.478%, 05/07/10 ................................... 11,000 11,000,000 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $27,180,000) .............................. 27,180,000 ------------
See Accompanying Notes to Financial Statements. 5 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (CONTINUED) AUGUST 31, 2009
PAR (000) VALUE ------- ------------ AGENCY OBLIGATIONS--12.0% Federal Home Loan Bank 0.580%, 09/02/09 ................................... $ 3,000 $ 2,999,952 0.590%, 09/09/09 ................................... 10,000 9,998,689 0.300%, 01/20/10 ................................... 2,000 1,997,650 0.700%, 02/05/10(b) ................................ 2,385 2,385,000 0.785%, 02/26/10(b) ................................ 2,385 2,385,000 0.388%, 07/09/10(b) ................................ 4,265 4,264,270 0.498%, 10/08/10(b) ................................ 3,100 3,098,972 Federal Home Loan Mortgage Corp. 0.510%, 07/06/10 ................................... 4,800 4,779,056 0.405%, 07/14/10(b) ................................ 2,500 2,499,244 0.387%, 08/24/10(b) ................................ 1,895 1,895,080 0.630%, 09/03/10(b) ................................ 2,865 2,864,423 0.344%, 02/14/11(b) ................................ 12,825 12,822,063 0.657%, 04/01/11(b) ................................ 5,000 5,007,983 0.352%, 05/05/11(b) ................................ 10,000 9,994,948 Federal National Mortgage Assoc.(b) 0.422%, 08/05/10 ................................... 2,300 2,299,224 ------------ TOTAL AGENCY OBLIGATIONS (Cost $69,291,554) .............................. 69,291,554 ------------ U.S. TREASURY OBLIGATIONS--0.7% U.S. Treasury Bills 0.321%, 09/03/09 ................................... 2,800 2,799,950 0.472%, 07/29/10 ................................... 1,000 995,679 ------------ TOTAL U.S. TREASURY OBLIGATIONS (Cost $3,795,629) ............................... 3,795,629 ------------ MASTER NOTE--0.7% Bank of America Securities LLC(b)(d) 0.480%, 09/01/09 ................................... 4,000 4,000,000 ------------ TOTAL MASTER NOTE (Cost $4,000,000) ............................... 4,000,000 ------------
PAR (000) VALUE ------- ------------ REPURCHASE AGREEMENT--6.5% Deutsche Bank Securities Inc. (Tri-Party Agreement dated 08/31/09 to be repurchased at $37,371,208, collateralized by $38,130,000 par value, Federal Home Loan Bank, 0.00%, due 02/17/12, Fair Value of the collateral is $38,121,188) 0.200%, 09/01/09 ................................... $37,371 $ 37,371,000 ------------ TOTAL REPURCHASE AGREEMENT (Cost $37,371,000) ........................... 37,371,000 ------------ TOTAL INVESTMENTS AT VALUE--100.0% (Cost $577,676,791)* ............................... 577,676,791 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--0.0% .................................. 13,826 ------------ NET ASSETS (APPLICABLE TO 545,130,028 BEDFORD SHARES AND 32,493,632 SANSOM STREET SHARES )--100.0% ...... $577,690,617 ============
* Aggregate cost is the same for financial reporting and Federal tax purposes. (a) Issuer is a US branch of a foreign domiciled bank. (b) Variable Rate Security. Rate shown is as of report date. (c) 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. At August 31, 2009, these securities amounted to $9,800,000 or 1.7% of net assets. These securities have been determined by the Adviser to be liquid securities. (d) Rate shown is as of report date and the date shown is date on which principal and accrued interest may be recovered through demand. (e) Discount Note. Rate disclosed represents the yield at the time of purchase. RB Revenue Bond See Accompanying Notes to Financial Statements. 6 THE RBB FUND, INC. MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (CONCLUDED) AUGUST 31, 2009 The following is a summary of the inputs used, as of August 31, 2009, in valuing the Portfolio's investments carried at value (See Note 1 in Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUTS INPUTS --------------- ------- ------------ ------------ Investments in Securities* $577,676,791 $-- $577,676,791 $-- ============ === ============ ===
* Please refer to the Schedule of Investments for industry and security type breakouts. See Accompanying Notes to Financial Statements. 7 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2009 ASSETS Investments, at value (Cost $540,305,791) ............................... $540,305,791 Repurchase agreement, at value (Cost $37,371,000) ....................... 37,371,000 Cash .................................................................... 134 Receivables Interest receivable .................................................. 195,835 Prepaid expenses and other assets ....................................... 39,265 ------------ Total assets ...................................................... 577,912,025 ------------ LIABILITIES Payables Distribution to shareholders ......................................... 6,703 Distribution fees .................................................... 76,175 Investment advisory and administration fees .......................... 67,506 Professional fees .................................................... 27,428 Custodian fees ....................................................... 16,023 Directors' and officers' fees ........................................ 3,255 Service organization fees (Sansom Street Class) ...................... 2,123 Other accrued expenses and liabilities .................................. 22,195 ------------ Total liabilities ................................................. 221,408 ------------ Net Assets .............................................................. $577,690,617 ============ NET ASSETS CONSIST OF Par Value ............................................................... $ 577,624 Paid-in Capital ......................................................... 577,046,035 Undistributed net investment income ..................................... 66,958 ------------ Net Assets .............................................................. $577,690,617 ============ BEDFORD CLASS Net assets .............................................................. $545,194,219 ------------ Shares outstanding ($0.001 par value, 1,500,000,000 shares authorized) .. 545,130,028 ------------ Net asset value, offering and redemption price per share ................ $ 1.00 ============ SANSOM STREET CLASS Net assets .............................................................. $ 32,496,398 ------------ Shares outstanding ($0.001 par value, 1,500,000,000 shares authorized) .. 32,493,632 ------------ Net asset value, offering and redemption price per share ................ $ 1.00 ============
See Accompanying Notes to Financial Statements. 8 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2009 INVESTMENT INCOME Interest .............................................. $ 5,998,841 ----------- Total investment income ............................ 5,998,841 ----------- EXPENSES Distribution fees(1) .................................. 2,691,995 Investment advisory and administration fees ........... 1,916,449 Directors' and officers' fees ......................... 155,648 Temporary Guarantee Program Participation fees(2) ..... 136,809 Custodian fees ........................................ 106,189 Professional fees ..................................... 96,262 Printing and shareholder reporting fees ............... 55,695 Transfer agent fees ................................... 53,364 Regulatory administration fees ........................ 48,889 Insurance fees ........................................ 48,603 Registration and filing fees .......................... 31,149 Service organization fees (Sansom Street Class) ....... 3,454 Other expenses ........................................ 15,813 ----------- Total expenses before waivers ...................... 5,360,319 Less: waivers ...................................... (2,394,102) ----------- Net expenses after waivers ............................ 2,966,217 ----------- Net investment income ................................. 3,032,624 ----------- Net realized gain from investments .................... 52,978 ----------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ..... $ 3,085,602 ===========
(1) See Note 2 in Notes to Financial Statements (2) See Note 5 in Notes to Financial Statements See Accompanying Notes to Financial Statements. 9 THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE (DECREASE) IN NET ASSETS: FROM OPERATIONS: Net investment income ................................... $ 3,032,624 $ 9,100,028 Net realized gain from investments ...................... 52,978 20,643 -------------- ------------- Net increase in net assets resulting from operations .......... 3,085,602 9,120,671 -------------- ------------- DIVIDENDS TO SHAREHOLDERS FROM: Net investment income: Bedford Class ........................................... (2,706,207) (8,433,248) Sansom Street Class ..................................... (326,417) (666,780) -------------- ------------- Net decrease in net assets from dividends to shareholders ..... (3,032,624) (9,100,028) -------------- ------------- CAPITAL TRANSACTIONS (AT $1.00 PER SHARE): Proceeds from shares sold: Bedford Class ........................................... 1,083,664,728 693,423,026 Sansom Street Class ..................................... 163,775,264 154,552,391 Shares issued on reinvestment of distributions: Bedford Class ........................................... 2,689,574 8,739,785 Sansom Street Class ..................................... 40,581 147,473 Shares repurchased: Bedford Class ........................................... (860,595,942) (601,709,451) Sansom Street Class ..................................... (160,072,689) (141,303,481) -------------- ------------- Net increase in net assets derived from capital transactions .. 229,501,516 113,849,743 -------------- ------------- Total increase in net assets .................................. 229,554,494 113,870,386 NET ASSETS: Beginning of year .......................................... 348,136,123 234,265,737 -------------- ------------- End of year ................................................ $ 577,690,617 $ 348,136,123 ============== ============= Undistributed net investment income, end of year .............. $ 66,958 $ 831 ============== ============= SHARE TRANSACTIONS: Shares sold Bedford Class ........................................... 1,083,664,728 693,423,026 Sansom Street Class ..................................... 163,775,264 154,552,391 Shares reinvested Bedford Class ........................................... 2,689,574 8,739,785 Sansom Street Class ..................................... 40,581 147,473 Shares repurchased Bedford Class ........................................... (860,595,942) (601,709,451) Sansom Street Class ..................................... (160,072,689) (141,303,481) -------------- ------------- Total Share Activity .......................................... 229,501,516 113,849,743 ============== =============
See Accompanying Notes to Financial Statements. 10 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, 2009 AUGUST 31, 2008 AUGUST 31, 2007 AUGUST 31, 2006 AUGUST 31, 2005 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ............. 0.0074 0.0307 0.0447 0.0388 0.0162 Net gains (losses) on securities .. --(b) --(b) --(b) --(b) --(b) -------- -------- -------- -------- -------- Total net income from investment operations .................. 0.0074 0.0307 0.0447 0.0388 0.0162 -------- -------- -------- -------- -------- Less dividends and distributions: Dividends (from net investment income) ........................ (0.0074) (0.0307) (0.0447) (0.0388) (0.0162) -------- -------- -------- -------- -------- Net asset value, end of year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ...................... 0.74% 3.12% 4.56% 3.95% 1.63% Ratios/Supplemental Data Net assets, end of year (000's omitted) ................ $545,194 $319,387 $218,914 $150,657 $109,495 Ratios of expenses to average net assets(a) .................. 0.69% 0.90% 0.90% 0.85% 0.97% Ratios of net investment income to average net assets .......... 0.65% 2.94% 4.47% 3.81% 1.68%
(a) Without the waiver of advisory fees, distribution fees, and/or 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 1.24%, 1.23%, 1.29%, 1.34% and 1.23% for the years ended August 31, 2009, 2008, 2007, 2006 and 2005, respectively. (b) Amount is less than $0.00005 per share. See Accompanying Notes to Financial Statements. 11 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, 2009 AUGUST 31, 2008 AUGUST 31, 2007 AUGUST 31, 2006 AUGUST 31, 2005 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ............. 0.0121 0.0365 0.0502 0.0434 0.0239 Net gains (losses) on securities .. --(b) --(b) --(b) --(b) --(b) -------- -------- -------- -------- -------- Total net income from investment operations .................. 0.0121 0.0365 0.0502 0.0434 0.0239 -------- -------- -------- -------- -------- Less dividends and distributions: Dividends (from net investment income) ........................ (0.0121) (0.0365) (0.0502) (0.0434) (0.0239) -------- -------- -------- -------- -------- Net asset value, end of year ......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ...................... 1.21% 3.71% 5.14% 4.42% 2.41% Ratios/Supplemental Data Net assets, end of year (000's omitted) ................ $ 32,496 $ 28,749 $ 15,352 $ 15,525 $ 87,304 Ratios of expenses to average net assets(a) .................. 0.25% 0.31% 0.35% 0.26% 0.20% Ratios of net investment income to average net assets ............. 0.93% 3.64% 5.02% 4.25% 2.39%
(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 0.60%, 0.60%, 0.69%, 0.67% and 0.67% for the years ended August 31, 2009, 2008, 2007, 2006 and 2005, respectively. (b) Amount is less than $0.00005 per share. See Accompanying Notes to Financial Statements. 12 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2009 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 nineteen 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 78.973 billion shares are currently classified into one hundred and twenty-nine 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 ten separate "families." SECURITY VALUATION -- Securities held in the Portfolio are valued under the amortized cost method, which approximates fair 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 fair value and to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain net asset value per share at $1.00. Effective September 1, 2008, the Portfolio adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"), Fair Value Measurements. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 -- significant unobservable inputs (including the Portfolio's own assumptions in determining the fair value of investments) In April 2009, FASB issued FASB Staff Position No. 157-4, ("FSP 157-4") Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs and valuation techniques used to measure fair value and changes in those techniques and related inputs during the period. FSP 157-4 expands the three-level hierarchy disclosure and the level three roll-forward disclosure for each major security type as described in paragraph 19 of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Portfolio's investments as of August 31, 2009 is included with the Portfolio's Schedule of Investments. 13 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. REPURCHASE AGREEMENTS -- Money market instruments may be purchased from financial institutions, such as banks and non-bank dealers, subject to the seller's agreement to repurchase them at an agreed upon date and price. Collateral for repurchase agreements may have longer maturities than the maximum permissible remaining maturity of portfolio investments, provided the repurchase agreements themselves mature in 13 months or less. The seller is required on a daily basis to maintain the value of the securities subject to the agreement at no less than the repurchase price. The agreements are conditioned upon the collateral being deposited under the Federal Reserve book entry system or held in a separate account by the Portfolio's custodian or an authorized securities depository. In the event the counterparty defaults and the fair value of the collateral declines, the Portfolio could experience losses, delays and costs in liquidating the collateral. 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 and those differences could be significant. 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. 14 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 2. INVESTMENT ADVISER AND OTHER SERVICES 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 PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., entered into a delegation agreement on behalf of the Portfolio, wherein PNC 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. BIMC may, at its discretion, voluntarily waive and/or reimburse 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, 2009, advisory fees and waivers were as follows:
GROSS ADVISORY NET ADVISORY AND AND ADMINISTRATION ADMINISTRATION FEE WAIVER FEE - -------------- ------------ -------------- $1,916,449 $(1,543,988) $372,461
As of August 31, 2009, the Portfolio owed BIMC $67,506 in advisory and administration fees. PNC and PFPC Distributors, Inc. ("PFPC Distributors"), an affiliate of PNC, may also voluntarily waive a portion of their fees and/or reimburse expenses. The Portfolio will not pay BIMC, PNC or PFPC Distributors at a later time for any amounts waived or assumed. For providing regulatory administration services to RBB, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to each portfolio of the Company in proportion to its net assets. PNC serves as the transfer and dividend disbursing agent for each class. For providing transfer agent services, PNC is entitled to receive fees from the Portfolio. PNC may, at its discretion, voluntarily waive all or any portion of its transfer agency fee for any class of shares. PFPC Trust Company, an affiliate of PNC, 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. 15 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 2. INVESTMENT ADVISER AND OTHER SERVICES (CONTINUED) The Portfolio, on behalf of the Bedford Class of shares of the Portfolio, has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act (the "Plan"). The Portfolio has entered into a Distribution Agreement with PFPC Distributors. The Plan provides for the Bedford Class to make monthly payments, based on average net assets, to PFPC Distributors of up to 0.65% on an annualized basis. PFPC Distributors may voluntarily waive these fees at its discretion. For the year ended August 31, 2009, distribution fees paid to PFPC Distributors for the Bedford Class were as follows:
GROSS NET DISTRIBUTION DISTRIBUTION FEE WAIVER FEE ------------ --------- ------------ Bedford Class $2,691,995 $(850,114) $1,841,881
The Portfolio has entered into service agreements with banks affiliated with PNC which 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, 2009, service organization fees were $3,454 for the Portfolio. 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Portfolio or the Company. 4. FEDERAL INCOME TAX INFORMATION The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Therefore, no federal tax provision is required. FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Portfolio's tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2006-2009) and has concluded that no provision for income tax is required in the Portfolio's financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. 16 THE RBB FUND, INC. MONEY MARKET PORTFOLIO NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2009 4. FEDERAL INCOME TAX INFORMATION (CONTINUED) The following permanent differences as of August 31, 2009, attributable to the redesignation of dividends paid, were reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME/(LOSS) GAIN/(LOSS) CAPITAL - -------------- ------------ ------- $66,127 $(66,127) $--
As of August 31, 2009 the Portfolio had $73,661 of undistributed ordinary income for federal tax purposes. 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 income tax purposes. The tax character of dividends and distributions paid during the last two fiscal years were as follows:
ORDINARY LONG-TERM INCOME GAINS ---------- ---------- 2009 $3,031,192 $1,432 2008 $9,100,028 --
Dividends paid from net investment income and short-term capital gains are treated as ordinary income distributions for federal income tax purposes. For federal income tax purposes, realized capital losses may be carried forward and applied against future realized gains. At August 31, 2009, the Portfolio had no capital loss carryforwards. Under federal tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as having arisen on the first day of the following fiscal year. For the year ended August 31, 2009, the Portfolio incurred no post-October capital losses. 5. U.S. DEPARTMENT OF THE TREASURY'S GUARANTEE PROGRAM FOR MONEY MARKET FUNDS On October 1, 2008, the Board of Directors of the Company approved the Portfolio's participation in the Guarantee Program for Money Market Funds (the "Guarantee Program") established by the U.S. Department of the Treasury (the "Treasury"). The Guarantee Program provided coverage to shareholders of record in the Portfolio as of the close of business on September 19, 2008 and would be triggered if the Portfolio's NAV falls below $0.9950. On October 6, 2008, the Portfolio paid $35,923 to participate in the Guarantee Program, which amount was amortized through December 18, 2008. The initial term of the Guarantee Program expired on December 18, 2008. On December 5, 2008, the Portfolio paid $53,882 to participate in the first extension of the Guarantee Program which extended the Guarantee Program through April 30, 2009. This amount was amortized through April 30, 2009. On April 9, 2009, the Portfolio paid $53,882 to participate in the second extension of the Guarantee Program. This amount will be amortized through September 18, 2009, the date the Guarantee Program expires. 6. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Portfolio through October 26, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements. 17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders of the 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 the Money Market Portfolio, one of the portfolios constituting The RBB Fund, Inc. (the "Portfolio"), as of August 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our 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 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. 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, 2009, 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. DELOITTE & TOUCHE LLP Philadelphia, Pennsylvania October 26, 2009 18 THE RBB FUND, INC. MONEY MARKET PORTFOLIO 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 (800) 430-9618 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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENT 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 agreement between BIMC and the Company (the "Advisory Agreement") on behalf of the Money Market Portfolio at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 BIMC 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of BIMC's services provided to the Portfolio; (ii) descriptions of the experience and qualifications of BIMC's personnel providing those services; (iii) BIMC's investment philosophies and processes; (iv) BIMC's assets under management and client descriptions; (v) BIMC's trade allocation policies; (vi) BIMC's current advisory fee arrangement with the Company and other similarly managed clients; (vii) BIMC's compliance procedures; (viii) BIMC'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 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. As part of its review, the Board considered the nature, extent and quality of the services provided by BIMC. The Board concluded that BIMC had substantial resources to provide services to the Portfolio and that BIMC's services had been acceptable. 19 THE RBB FUND, INC. MONEY MARKET PORTFOLIO ADDITIONAL INFORMATION (UNAUDITED) The Board also considered the investment performance of the Portfolio and BIMC. Information on the Portfolio's investment performance was provided for one, three, and five year periods. The Board considered the Portfolio's investment performance in light of its investment objective and investment strategies. The Board concluded that the investment performance of the Portfolio as compared to its benchmark and Lipper peer group was acceptable. In reaching this conclusion, the Board noted the performance of the Portfolio's Bedford Class shares ranked above the peer group median for all periods. The Board also considered the advisory fee rate payable by the Portfolio under the Advisory Agreement. In this regard, information on the fees paid by the Portfolio and the Portfolio's total operating expense ratio (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that although the contractual advisory fee ranked below the peer group median, actual advisory fees of the Portfolio and actual total expenses of the Portfolio were both lower than the peer group median. In addition, the Board noted that BIMC was voluntarily waiving management fees and reimbursing expenses to limit total annual operating expenses and that BIMC expects to continue these fee waivers and expense reimbursements. After reviewing the information regarding BIMC's costs, profitability and economies of scale, and after considering BIMC's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Portfolio were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 20 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The statement of additional information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (800) 430-9618.
NUMBER OF PORTFOLIOS IN FUND COMPLEX POSITION(S) TERM OF OFFICE OVERSEEN OTHER NAME, ADDRESS, HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) BY DIRECTORSHIPS AND DATE OF BIRTH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR ----------------- ----------- -------------------- --------------------------------------------- ---------- ----------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services organizations 19 Kalmar Pooled 103 Bellevue Parkway from 1997 to present. Investment Trust; Wilmington, DE 19809 (registered DOB: 3/43 investment company) WT Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox Chase Cancer 19 None 103 Bellevue Parkway Center (biomedical research and medical Wilmington, DE 19809 care) (2000-2004). DOB: 12/35 Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital Partners, 19 None 103 Bellevue Parkway Director 1991 to present L.P. (an investment partnership) from 2000 Wilmington, DE 19809 to 2006. DOB: 5/48
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX POSITION(S) TERM OF OFFICE OVERSEEN OTHER NAME, ADDRESS, HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) BY DIRECTORSHIPS AND DATE OF BIRTH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR ----------------- ----------- -------------------- --------------------------------------------- ---------- ----------------- DISINTERESTED DIRECTORS Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 19 MTI Holding 103 Bellevue Parkway President, MTI Holding Group, Inc. (formerly Group, Inc. Wilmington, DE 19809 known as Moyco Technologies, Inc.) (formerly known DOB: 3/34 (manufacturer of precision coated and as Moyco industrial abrasives). Technologies, Inc.) Robert A. Straniere Director 2006 to present Since 2009, Administrative Law Judge, New 19 Reich and Tang 103 Bellevue Parkway York City. Founding Partner, Straniere Law Group (asset Wilmington, DE 19809 Firm (1980 to date); Partner, Gotham management); DOB: 3/41 Strategies (consulting firm) (2005 to date); The SPARX Asia Partner, The Gotham Global Group Funds Group (consulting firm) (2005 to date); President, (registered The New York City Hot Dog Company (2005 investment to date); Partner, Kanter-Davidoff (law firm) company) (2006 to present).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX POSITION(S) TERM OF OFFICE OVERSEEN OTHER NAME, ADDRESS, HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) BY DIRECTORSHIPS AND DATE OF BIRTH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR ----------------- ----------- -------------------- --------------------------------------------- ---------- ----------------- INTERESTED DIRECTORS(2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice Chairman, 19 Comcast 103 Bellevue Parkway Comcast Corporation (cable television and Corporation; Wilmington, DE 19809 communications). AMDOCS Limited DOB: 7/33 (service provider to telecommunication s companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice President and 19 Kensington 103 Bellevue Parkway prior thereto, Executive Vice President of Funds Wilmington, DE 19809 Oppenheimer & Co., Inc., formerly Fahnestock (registered DOB: 4/38 & Co., Inc. (a registered broker-dealer). investment Since November 2004, Director of Kensington company) 6 Funds. Portfolios J. Richard Carnall Director 2002 to present Director of Haydon Bolts, Inc. (bolt 19 Cornerstone 103 Bellevue Parkway manufacturer) and Parkway Real Estate Bank Wilmington, DE 19809 Company (subsidiary of Haydon Bolts, Inc.) DOB: 9/38 since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 23 THE RBB FUND, INC. MONEY MARKET PORTFOLIO FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN FUND COMPLEX POSITION(S) TERM OF OFFICE OVERSEEN OTHER NAME, ADDRESS, HELD WITH AND LENGTH OF PRINCIPAL OCCUPATION(S) BY DIRECTORSHIPS AND DATE OF BIRTH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR ----------------- ----------- -------------------- --------------------------------------------- ---------- ----------------- OFFICERS Salvatore Faia, Esquire, President President June 2009 President, Vigilant Compliance Services since N/A N/A CPA and Chief to present and Chief 2004; Senior Legal Counsel, PNC Global Vigilant Compliance Compliance Compliance Officer Investment Servicing (U.S.), Inc. from 2002 Services Officer 2004 to present to 2004; and Director of Energy Income 713 Chelsea Road Partnership since 2005. Mullica Hill, NJ 08062 DOB: 12/62 Joel Weiss Treasurer June 2009 to present Vice President and Managing Director, PNC N/A N/A 103 Bellevue Parkway Global Investment Servicing (U.S.) Inc. since Wilmington, DE 19809 1993 DOB: 1/63 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and Counsel, PNC N/A N/A 103 Bellevue Parkway Global Investment Servicing (U.S.), Inc. Wilmington, DE 19809 (financial services company); Associate, DOB: 7/74 Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of PNC Global N/A N/A 103 Bellevue Parkway Treasurer Investment Servicing (U.S.) Inc. (financial Wilmington, DE 19809 services company) DOB: 10/60 Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath LLP (law N/A N/A One Logan Square Secretary firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 7/59
(1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. 24 [THIS PAGE INTENTIONALLY LEFT BLANK.] [THIS PAGE INTENTIONALLY LEFT BLANK.] [THIS PAGE INTENTIONALLY LEFT BLANK.] INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.), 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 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 ================================================================================ THE BEDFORD CLASS OF THE RBB FUND, INC. MONEY MARKET PORTFOLIO ANNUAL REPORT AUGUST 31, 2009 AN INVESTMENT IN THE PORTFOLIO IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT'S POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO. 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 PORTFOLIO. ================================================================================ 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: - 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 - 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: The Bogle Small Cap Growth Fund posted robust relative performance from late-November 2008 through the end of the fiscal year, lifting Fund performance over the benchmark for the twelve months ended August 31, 2009. U.S. equity markets rallied strongly in the second half of the fiscal year; however, the rally reversed only about 70% of the extreme market losses experienced in the first half of the period. For the twelve months ended August 31, 2009, the Fund's Investor shares fell -19.14% (net of fees), the Institutional shares lost - -19.08%, and the unmanaged Russell 2000(R) Index of small cap stocks dropped - -21.29%. Our investment models, designed to measure different characteristics of a stock's level of attractiveness (likelihood of outperforming our benchmark), successfully identified outperforming stocks, after a dismal, protracted and embarrassing run of notably poor performance. 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 pages six and seven. The balance of this letter covers the market environment, performance attribution, Fund characteristics, and an update on our research and the mutual fund business at Bogle Investment Management, L.P. MARKET ENVIRONMENT. The first half of the most recent fiscal year saw equity markets lose roughly half their value, in an environment marked by major commercial and investment bank failures and bailouts, a breakdown in the functioning of the global financial system, a plague of distrust among lenders and other capital providers that caused a massive increase in funding costs (if borrowers could get funding at all), unprecedented central bank intervention, a severe economic contraction, and widespread investor risk aversion (other than that, how was the play, Mrs. Lincoln?). These conditions were discussed in detail in our semiannual letter in February. Market performance turned positive in March, in dramatic fashion, as bottom fishers moved in and were quickly joined by other value players. Investors became persuaded that the government was making strides, if slowly, in stabilizing the economy, and that aggressive corporate restructuring would bode well for future earnings. This outlook was supported by Federal Reserve statements, government bailout plans and programs, changes to mark-to-market accounting rules, and first quarter earnings announcements that generally exceeded (low) expectations. The rally was tested in May and June when both Chrysler and General Motors filed for bankruptcy, but markets generally moved sideways through this period as the news had largely been expected and was already discounted in vehicle manufacturer and other stock prices. Indeed, the equity market's upward march was reignited in mid-July as second quarter earnings season got underway and reports were again generally better than expectations. Investors also reacted favorably to economic data that remained negative but showed improvement relative to prior periods. By the end of our fiscal year (August 31st), markets had recouped roughly 70% of their dollar losses incurred during the severe market downturn. In small cap stocks specifically, the Russell 2000(R) dropped -53% from September through March 9th and rebounded +68% from March 10th through August 31st, remaining down -21% (the tyranny of compounding) for the fiscal year period. The market rally was led by stocks that had previously underperformed the market and peers, stocks that had a low absolute share price (a factor that receives little attention, but is important at market turning points), and stocks with above average risk (as measured by price variability and other similar information). 2 The performance advantage enjoyed by oversold and low priced stocks represented a significant reversal of previous underperformance to these factors. In fact, these stocks recouped much of their dramatic fall from the previous six months. The shift in the market in March toward riskier stocks was so powerful (the riskiest stocks outperformed the least risky by more than +62% from March through August) that most of these stocks fully recouped their previous collapse. With these factors having such extreme performance it is important to note that, due to our risk control process, the Fund does not have any meaningful exposure to these factors relative to the benchmark. Having said that, when volatile, low price stocks rally strongly it is an indication of a speculative market environment, which can be a challenge to our investment process. The reason for this is that speculative rallies tend to be characterized by the performance of broad themes, with little regard to individual companies' specific virtues, the latter being what we look for to add value in your portfolio. In fact, two other characteristics of the stocks that tend to rally in these environments, poor fundamentals and worsening earnings, are factors that we try to avoid when picking stocks. That we were able to add value to portfolio returns in this recent speculative rally leads us to believe that (i) there were some fundamental underpinnings to the rally, and (ii) our investment process can be wrong for only so long, or to such a negative degree, before we get paid off. Within small cap stocks, the market's growth/value orientation oscillated during the fiscal year, with growth stocks generally selling off more than value stocks from September through December, then reversing as growth outperformed value from January through June, then shifting back to value in July and August. Not unusually, all this frenetic activity resulted in little difference between the two as the Russell 2000(R) Growth Index (down -22.02%) and the Russell 2000(R) Value Index (down -20.68%) ended with similar fiscal year returns at the end of August. Thus was provided another lesson on the virtues of patience, and a cautionary note to those who try to market time. As measured by cap-weighted Russell indices, small caps lost more than large caps during last fall's financial crisis, gained more during the market rally, and ended up slightly worse off than large cap stocks for the fiscal year overall. The rally's preference for low absolute share price stocks was reflected in a surge in performance for the equal-weighted Russell 2000(R), which strongly outperformed its cap-weighted counterpart for the fiscal year. For the fiscal year period, the Russell 2000(R) Index fell -21.29%, the larger cap Russell 1000(R) declined - -18.41%, and the equal-weighted Russell 2000(R) fell just -5.67%. PERFORMANCE ATTRIBUTION. For the fiscal year, the Fund's Investor Class shares beat the benchmark Russell 2000(R) by +2.15%, net of all fees, and the Institutional Class shares outperformed by +2.21%, net of all fees. The Fund underperformed its benchmark by a wide margin for the first three months of the period, from September through November, as our composite model (and specifically elements of our financial quality and relative valuation models) failed during the market panic and flight to quality that was characterized by aggressive liquidation and unwinding of even the most attractively priced investments. Market-relative performance began to rebound in late-November, and the Fund outperformed the Russell 2000(R) in seven out of the last nine months of the period. On a standalone basis, all models produced positive performance for the fiscal year with the exception of the earnings expectations model. The relative valuation and short interest models produced notably robust results. The Fund's roughly equal-weighted construction scheme also contributed positively to performance. Stock selection was positive in consumer cyclical, consumer growth, financial and utility stocks. As of the end of the fiscal year, the Fund was well diversified, holding 146 stocks, with the largest holding representing just 1.2% of portfolio assets. This diversification limits the impact any single stock can have on total Fund performance. In the stock specific examples that follow, we look at two situations where Fund holdings significantly outperformed the benchmark for the fiscal year and one Fund investment that lagged the benchmark. One of the Fund's winners, Tenneco, Inc., a supplier to the automotive industry, was discussed in our last semiannual report as one of our worst performers over that period. This stock has since bounced back strongly (rising over 2000% from its March 2009 low), erasing losses from the semiannual period and accumulating gains to become one of our strongest performers for the fiscal year. This holding not 3 only illustrates that the environment has been favorable for stocks that were beaten down, but also illustrates (at least in this case and according to our metrics) the benefits of being patient and not selling a position simply because it has fallen, even dramatically. It was largely the stock's strong valuation that caused us to hang on. As of the end of August, the stock's earnings expectations metrics were improving. Another winner was Carter's, Inc., the infant/children's apparel company. We established this position in the summer of 2008 based on investment signals that suggested the company had relatively clean financials and an attractive valuation relative to peers. A year later, the stock continues to show high financial quality, the level of short interest in the stock has declined (a good sign), relative valuation is neutral, and earnings expectations have turned positive. Finally, one of our underperformers was Penson Worldwide, Inc., a firm that provides clearing and execution services to the financial industry. We began to build this position at the start of the fiscal year period as the company looked attractive based on both our earnings expectations and relative valuation signals. The stock price took a big hit during the financial crisis, falling from about $17 at the end of August 2008 to a low of $4 in early March. The stock has since bounced back up to $10 as of the end of August 2009, still down about -40% for the fiscal year. While the stock continues to have attractive relative valuation, most of its other fundamentals have deteriorated according to our measures and we have been deliberately reducing this position. FUND CHARACTERISTICS. We have maintained Fund characteristics in line with the benchmark, as shown in the table. As of the end of August, the Fund's median market capitalization was modestly below the benchmark. The Fund continued to have a small bias toward companies with somewhat higher long-term earnings growth rates. The Fund's median price-to-earnings and price-to-sales ratios were below benchmark, reflecting the influence of our relative valuation model. In fact, the spreads between the Fund's and the benchmark's median price-to-earnings ratios remained at historically attractive levels. The Fund's fiscal-year period active risk (the volatility of Fund performance relative to benchmark), at 11.0%, was above the Fund's long-term average of 7.1%, annualized, reflecting primarily a more volatile overall market environment. Indeed, both Fund and Russell 2000(R) annualized standard deviations, at over 50%, were well above their long-term averages of 25.8% and 26.6%, respectively, since inception. Note that as the market has rallied, volatility has declined significantly and standard deviation measures were back down to near long-term average levels, based on trailing three months of daily data ended August 31, 2009. FUNDAMENTAL CHARACTERISTICS AUGUST 31, 2009
RUSSELL 2000(R) BOGLX* INDEX ----- -------- MEDIAN Median Market Cap ($mil.) $ 711 $ 798 Long-Term Estimated Earnings Growth Rate 14.5% 13.5% Price/Historical Earnings 16.2x 18.9x Price/Forward Earnings 13.8x 16.7x Price/Sales 0.8x 1.3x RISK STATISTICS** - FISCAL YEAR PERIOD Annualized Standard Dev. 50.8% 53.2% Annualized Active Risk 11.0% Beta with Russell 2000(R) 0.93 Cash 0.5%
* THE BOGLE SMALL CAP GROWTH FUND INVESTOR SHARES. MEDIAN CHARACTERISTICS REFER TO THE FUND'S HOLDINGS, NOT THE FUND ITSELF. ** RISK STATISTICS APPLY TO THE FUND AND BECHMARK. STANDARD DEVIATION IS A STATISTICAL MEASURE OF THE RANGE OF PERFORMANCE. ACTIVE RISK IS THE STANDARD DEVIATION OF THE DIFFERENCE BETWEEN THE FUND AND BENCHMARK PERFORMANCE. BETA IS A MEASURE OF A PORTFOLIO'S SENSITIVITY TO MARKET MOVEMENTS. REPORT CARD. In this year's self-evaluation of our firm and investment performance we give ourselves a C+. We outperformed our benchmark, but (i) we did not meet our long-term outperformance objective and (ii) we still have ground to make up to recoup our underperformance in the previous fiscal year. We are pleased 4 with recent progress but we have further to go. We continue to look for ways to improve the investment process, but heretofore have been hesitant to significantly alter our models and miss the gratifying recent performance rebound. With the recent strong relative Fund performance, we are likely to start to add new investment insights to our stock selection process, while maintaining exposure to the longer-term fundamental stock selection insights with which you are familiar. We believe these new research insights represent a meaningful improvement to the investment process and position us a bit further away from the investment ideas of many other managers, resulting in less competition for market liquidity, especially in our smallest cap investment ideas. These enhancements include signals that capitalize on institutional and individual investors' behavioral biases, somewhat similar to how we have historically taken advantage of analyst and company management behavioral biases. As we add these new signals to the investment process, you should expect to see some increase in the Fund's turnover rate. 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 PNC Global Investment Servicing (U.S.), 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. At the end of August 2009, net assets in the Fund were $89 million, a significant decrease over the last couple of years, and, in all likelihood, another headwind to our ability to add value, as we had to unwind positions to meet redemptions. (Fortunately, those wanting to redeem seem to have already done so, creating a better environment for our patient investors. And we sincerely thank you for this patience!) Fund assets are now below the asset level at which we closed to new investors in March 2002, when the Fund had about $150 million in assets. After long and careful consideration, we have decided to reopen the Fund on November 1, 2009 to new shareholders (the Fund has always remained open to existing shareholders). Our assets under management in both the Fund and the firm overall have declined to a level that allows for us to take on some additional capacity while maintaining our ability to nimbly invest in smaller stocks. In addition, there has been a significant reduction in competitive capital over the last year, which we believe further improves the backdrop for adding value. We will, as always, continually monitor capacity constraints and our assets under management and will reclose the Fund when we think it is in the best interest of the shareholders. Finally, our investment team remains committed to the firm, and we are pleased and proud of the fact that we have not lost a single investment professional since inception of the firm ten years ago, a level of turnover that is almost unheard of in our industry. More 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. Fund information is also available on Morningstar.com and other internet-based financial data providers. As always, we thank you for your ongoing support. Respectfully, Bogle Investment Management, L.P. Management Office: 781-283-5000 Shareholder Services Toll Free: 1-877-BOGLEIM (264-5346) PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE PERFORMANCE. THE INVESTMENT RETURN AND PRINCIPAL VALUE OF AN INVESTMENT IN THE FUND WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. THIS MATERIAL MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. THE RUSSELL 2000(R) IS AN INDEX OF STOCKS 1001 THROUGH 3000 IN THE RUSSELL 3000(R) INDEX AS RANKED BY TOTAL MARKET CAPITALIZATION. A DIRECT INVESTMENT IN THE INDEX IS NOT POSSIBLE. INVESTING IN SMALL COMPANIES CAN INVOLVE MORE VOLATILITY, LESS LIQUIDITY, AND LESS PUBLICLY AVAILABLE INFORMATION THAN INVESTING IN LARGE COMPANIES. 5 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) (PERFORMANCE GRAPH)
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2009 ------------------------------------------ GROWTH ONE FIVE SINCE OF $10,000 YEAR YEARS INCEPTION(3) ---------- ------ ----- ------------ BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND -- INSTITUTIONAL CLASS $22,217 -19.08% 0.61% 8.38% RUSSELL 2000(R) INDEX $15,227 -21.29% 2.20% 4.33%
Bogle Russell Institutional 2000(R) Shares Index ------------- ------- 9/30/1999 $ 10,000 $ 10,000 12/31/1999 $ 13,017 $ 11,844 3/31/2000 $ 15,100 $ 12,683 6/30/2000 $ 15,933 $ 12,204 9/30/2000 $ 17,117 $ 12,339 12/31/2000 $ 16,506 $ 11,486 3/31/2001 $ 15,075 $ 10,739 6/30/2001 $ 17,550 $ 12,274 9/30/2001 $ 15,187 $ 9,722 12/31/2001 $ 17,369 $ 11,772 3/31/2002 $ 18,516 $ 12,241 6/30/2002 $ 17,524 $ 11,218 9/30/2002 $ 14,212 $ 8,818 12/31/2002 $ 14,316 $ 9,361 3/31/2003 $ 13,859 $ 8,941 6/30/2003 $ 17,239 $ 11,035 9/30/2003 $ 19,395 $ 12,036 12/31/2003 $ 22,733 $ 13,784 3/31/2004 $ 23,992 $ 14,647 6/30/2004 $ 23,707 $ 14,716 9/30/2004 $ 22,914 $ 14,296 12/31/2004 $ 25,200 $ 16,310 3/31/2005 $ 24,532 $ 15,440 6/30/2005 $ 25,629 $ 16,106 9/30/2005 $ 28,079 $ 16,862 12/31/2005 $ 29,581 $ 17,052 3/31/2006 $ 34,209 $ 19,429 6/30/2006 $ 32,073 $ 18,453 9/30/2006 $ 31,328 $ 18,534 12/31/2006 $ 34,163 $ 20,184 3/31/2007 $ 34,924 $ 20,577 6/30/2007 $ 37,317 $ 21,486 9/30/2007 $ 35,118 $ 20,822 12/31/2007 $ 32,284 $ 19,868 3/31/2008 $ 27,368 $ 17,902 6/30/2008 $ 26,197 $ 18,006 9/30/2008 $ 23,450 $ 17,806 12/31/2008 $ 16,735 $ 13,155 3/31/2009 $ 14,709 $ 11,188 6/30/2009 $ 19,613 $ 13,503 8/31/2009 $ 22,217 $ 15,227
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 DATED DECEMBER 31, 2008, IS 1.44% 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 either unmanaged and does not incur expenses and/or 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. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) For the period October 1, 1999 (commencement of operations) through August 31, 2009. 6 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) (PERFORMANCE GRAPH)
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2009 ------------------------------------------ GROWTH ONE FIVE SINCE OF $10,000 YEAR YEARS INCEPTION(3) ---------- ------ ----- ------------ BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND -- INVESTOR CLASS $22,034 -19.14% 0.50% 8.29% RUSSELL 2000(R) INDEX $15,227 -21.29% 2.20% 4.33%
Bogle Russell Investor 2000(R) Shares Index -------- ------- 9/30/1999 $ 10,000 $ 10,000 12/31/1999 $ 13,008 $ 11,844 3/31/2000 $ 15,100 $ 12,683 6/30/2000 $ 15,925 $ 12,204 9/30/2000 $ 17,100 $ 12,339 12/31/2000 $ 16,498 $ 11,486 3/31/2001 $ 15,058 $ 10,739 6/30/2001 $ 17,524 $ 12,274 9/30/2001 $ 15,170 $ 9,722 12/31/2001 $ 17,334 $ 11,772 3/31/2002 $ 18,499 $ 12,241 6/30/2002 $ 17,498 $ 11,218 9/30/2002 $ 14,187 $ 8,818 12/31/2002 $ 14,290 $ 9,361 3/31/2003 $ 13,833 $ 8,941 6/30/2003 $ 17,196 $ 11,035 9/30/2003 $ 19,344 $ 12,036 12/31/2003 $ 22,673 $ 13,784 3/31/2004 $ 23,923 $ 14,647 6/30/2004 $ 23,630 $ 14,716 9/30/2004 $ 22,837 $ 14,296 12/31/2004 $ 25,114 $ 16,310 3/31/2005 $ 24,437 $ 15,440 6/30/2005 $ 25,524 $ 16,106 9/30/2005 $ 27,947 $ 16,862 12/31/2005 $ 29,449 $ 17,052 3/31/2006 $ 34,049 $ 19,429 6/30/2006 $ 31,899 $ 18,453 9/30/2006 $ 31,153 $ 18,534 12/31/2006 $ 33,955 $ 20,184 3/31/2007 $ 34,718 $ 20,577 6/30/2007 $ 37,090 $ 21,486 9/30/2007 $ 34,898 $ 20,822 12/31/2007 $ 32,061 $ 19,868 3/31/2008 $ 27,165 $ 17,902 6/30/2008 $ 26,005 $ 18,006 9/30/2008 $ 23,270 $ 17,806 12/31/2008 $ 16,603 $ 13,155 3/31/2009 $ 14,594 $ 11,188 6/30/2009 $ 19,456 $ 13,503 8/31/2009 $ 22,034 $ 15,227
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 DATED DECEMBER 31, 2008, IS 1.54% 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 either unmanaged and does not incur expenses and/or 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. Past performance is not predictive of future performance. Investment return and principal value will fluctuate, so that your shares, when redeemed, may be worth more or less than their original cost. (3) For the period October 1, 1999 (commencement of operations) through August 31, 2009. 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, 2009 through August 31, 2009, 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, 2009 AUGUST 31, 2009 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $1,623.10 $8.26 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, 2009 AUGUST 31, 2009 PERIOD* ----------------------- -------------------- -------------------- Actual $1,000.00 $1,623.00 $8.93 Hypothetical (5% return before expenses) 1,000.00 1,018.31 6.89
- ---------- * Expenses are equal to the Fund's annualized six-month 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 62.31% for the Institutional Class and 62.30% for the Investor Class. 9 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2009 (UNAUDITED)
% OF NET SECURITY TYPE & SECTOR CLASSIFICATION ASSETS VALUE - ------------------------------------- -------- ----------- COMMON STOCKS: Consumer Growth 25.7% $22,836,316 Technology 21.7 19,301,755 Financial 19.5 17,343,566 Consumer Cyclical 13.3 11,886,760 Industrial 13.2 11,773,025 Basic Industry 2.9 2,568,466 Energy 1.7 1,509,940 Utility 1.5 1,310,965 SHORT-TERM INVESTMENTS 0.2 185,772 OTHER ASSETS IN EXCESS OF LIABILITIES 0.3 232,890 ----- ----------- NET ASSETS 100.0% $88,949,455 ===== ===========
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, 2009
NUMBER OF SHARES VALUE --------- ----------- COMMON STOCKS--99.5% BASIC INDUSTRY--2.9% Innophos Holdings, Inc. ........................... 28,800 $ 549,792 NewMarket Corp. ................................... 7,900 656,648 Schulman (A.), Inc. ............................... 28,200 566,538 Stillwater Mining Co. * ........................... 103,800 665,358 Xerium Technologies, Inc. * ....................... 118,300 130,130 ----------- 2,568,466 ----------- CONSUMER CYCLICAL--13.3% ATC Technology Corp. * ............................ 34,100 713,372 Avis Budget Group, Inc. * ......................... 102,100 993,433 BJ's Wholesale Club, Inc. * ....................... 12,900 420,540 Carter's, Inc. * .................................. 34,000 855,440 Core-Mark Holding Co., Inc. * ..................... 18,400 528,264 Hawaiian Holdings, Inc. * ......................... 79,200 579,744 Kirkland's, Inc. * ................................ 65,700 930,312 Pantry, Inc., (The) * ............................. 42,600 645,390 Papa John's International, Inc. * ................. 18,000 419,940 RC2 Corp. * ....................................... 43,400 681,380 Smith & Wesson Holding Corp. * .................... 62,200 334,636 Stage Stores, Inc. ................................ 22,900 305,715 Standard Motor Products, Inc. ..................... 67,100 830,698 Sturm Ruger & Co., Inc. ........................... 40,200 555,162 Tenneco, Inc. * ................................... 53,000 832,100 THQ Inc. * ........................................ 89,600 493,696 Ticketmaster Entertainment, Inc. * ................ 82,300 803,248 TRW Automotive Holdings Corp. * ................... 54,600 963,690 ----------- 11,886,760 ----------- CONSUMER GROWTH--25.7% America Service Group, Inc. ....................... 38,200 696,768 American Medical Systems Holdings, Inc. * ......... 39,700 605,028 AMN Healthcare Services, Inc. * ................... 21,400 211,218 BioScrip, Inc. * .................................. 164,815 969,112 Cantel Medical Corp. * ............................ 33,200 446,208 Cardiac Science Corp. * ........................... 32,800 103,320 Corinthian Colleges, Inc. * ....................... 43,200 828,144 Cott Corp. * ...................................... 107,100 682,227 Coventry Health Care, Inc. * ...................... 32,700 713,841 Cubist Pharmaceuticals, Inc. * .................... 22,400 463,232
NUMBER OF SHARES VALUE --------- ----------- CONSUMER GROWTH--(CONTINUED) Depomed, Inc. * ................................... 168,600 $ 526,032 Emergency Medical Services Corp., Class A * ....... 13,300 603,155 Endo Pharmaceuticals Holdings, Inc. * ............. 22,800 514,596 HEALTHSOUTH Corp. * ............................... 39,800 621,278 Hi-Tech Pharmacal Co., Inc. * ..................... 58,600 885,446 J&J Snack Foods Corp. ............................. 13,400 585,580 Kendle International Inc. * ....................... 28,000 367,920 King Pharmaceuticals, Inc. * ...................... 61,500 638,370 Lancaster Colony Corp. ............................ 11,400 572,964 Lincoln Educational Services Corp. * .............. 33,800 749,684 MAP Pharmaceuticals Inc. * ........................ 50,400 445,536 Medicines Co., (The) * ............................ 78,200 595,884 Medifast, Inc. * .................................. 35,700 670,446 Orthofix International, N.V. * .................... 23,800 651,406 Par Pharmaceutical Cos., Inc. * ................... 53,800 1,100,210 PerkinElmer, Inc. ................................. 27,800 507,350 Prestige Brands Holdings Inc. * ................... 101,000 748,410 Providence Service Corp. * ........................ 53,600 608,896 Questcor Pharmaceuticals, Inc. * .................. 112,200 651,882 RehabCare Group, Inc. * ........................... 27,900 585,621 Scholastic Corp. .................................. 25,800 628,488 SXC Health Solutions Corp. * ...................... 26,300 1,070,673 Symmetry Medical Inc. * ........................... 71,400 786,828 Tyson Foods, Inc., Class A ........................ 33,200 398,068 Valeant Pharmaceuticals International * ........... 20,700 535,923 Winn-Dixie Stores, Inc. * ......................... 32,800 451,656 Zoll Medical Corp. * .............................. 34,200 614,916 ----------- 22,836,316 ----------- ENERGY--1.7% Dresser-Rand Group, Inc. * ........................ 23,800 706,860 Rosetta Resources, Inc. * ......................... 68,000 803,080 ----------- 1,509,940 ----------- FINANCIAL--19.5% Allied World Assurance Co. Holdings Ltd. .......... 17,000 787,610
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, 2009
NUMBER OF SHARES VALUE --------- ----------- FINANCIAL--(CONTINUED) American Financial Group, Inc. .................... 35,500 $ 910,575 Arch Capital Group Ltd. * ......................... 11,600 753,652 Assurant, Inc. .................................... 9,300 278,535 Bancolumbia SA, SP ADR ............................ 16,900 600,626 Bank Mutual Corp. ................................. 72,900 640,791 BGC Partners, Inc. ................................ 143,800 649,976 Calamos Asset Management, Inc., Class A ........... 65,700 741,096 Center Financial Corp. ............................ 128,000 611,840 Coinstar, Inc. * .................................. 18,600 613,986 Conseco, Inc. * ................................... 164,000 703,560 Delphi Financial Group, Inc., Class A ............. 27,800 649,686 Duff & Phelps Corp., Class A ...................... 7,200 122,688 First Mercury Financial Corp. ..................... 36,700 531,783 Hanover Insurance Group, Inc. (The) ............... 9,200 376,188 Investment Technology Group, Inc. * ............... 22,700 559,328 Lender Processing Services, Inc. .................. 19,800 678,744 Maiden Holdings Ltd. .............................. 88,800 678,432 Nelnet, Inc., Class A * ........................... 63,100 931,356 Penson Worldwide, Inc. * .......................... 23,098 234,214 Piper Jaffray Cos., Inc. * ........................ 14,900 755,132 Pzena Investment Management, Inc., Class A ........ 87,700 601,622 Raymond James Financial, Inc. ..................... 27,900 634,725 Transatlantic Holdings, Inc. ...................... 14,900 728,014 Tree.Com, Inc. * .................................. 17,100 120,555 Unitrin, Inc. ..................................... 45,200 855,636 White Mountains Insurance Group Ltd. .............. 2,500 780,000 Wright Express Corp. * ............................ 25,800 813,216 ----------- 17,343,566 ----------- INDUSTRIAL--13.2% Carlisle Cos., Inc. ............................... 19,900 656,501 Chart Industries, Inc. * .......................... 27,700 516,882 Diebold, Inc. ..................................... 21,600 651,672 Dycom Industries, Inc. * .......................... 61,100 685,542
NUMBER OF SHARES VALUE --------- ----------- INDUSTRIAL--(CONTINUED) DynCorp International, Inc., Class A * ............ 43,000 $ 738,740 Ingram Micro, Inc., Class A * ..................... 39,900 668,724 LSB Industries, Inc. * ............................ 37,200 574,368 Manpower, Inc. .................................... 13,900 718,630 Navistar International Corp. * .................... 19,400 838,856 PHH Corp. * ....................................... 33,400 710,084 Powell Industries, Inc. * ......................... 18,900 714,798 R.R. Donnelley & Sons Co. ......................... 40,200 717,168 SPX Corp. ......................................... 7,400 412,032 Tech Data Corp. * ................................. 20,500 781,050 TeleTech Holdings, Inc. * ......................... 39,200 668,752 Timken Co. ........................................ 23,900 504,529 UniFirst Corp. .................................... 17,400 694,086 WABCO Holdings, Inc. .............................. 27,300 520,611 ----------- 11,773,025 ----------- TECHNOLOGY--21.7% 3Com Corp. * ...................................... 159,800 695,130 Acxiom Corp. ...................................... 45,600 415,872 Alvarion Ltd. * ................................... 87,450 340,181 Art Technology Group, Inc. * ...................... 134,900 544,996 Checkpoint Systems, Inc. * ........................ 36,800 613,456 Cirrus Logic, Inc. * .............................. 91,100 451,856 ClickSoftware Technologies Ltd. * ................. 78,950 494,227 Conexant Systems, Inc. * .......................... 93,100 254,163 Cray, Inc. * ...................................... 76,400 558,484 Fairchild Semiconductor International, Inc. * ..... 80,400 808,824 Himax Technologies, Inc. ADR ...................... 84,200 293,858 i2 Technologies, Inc. * ........................... 66,500 997,500 Insight Enterprises, Inc. * ....................... 38,800 445,036 Integrated Device Technology, Inc. * .............. 93,500 638,605 JDA Software Group, Inc. * ........................ 42,100 814,214 JDS Uniphase Corp. * .............................. 80,700 554,409 MIPS Technologies, Inc. * ......................... 106,900 375,219 NCR Corp. * ....................................... 40,700 542,531 Novellus Systems, Inc. * .......................... 26,700 511,572 Oplink Communications, Inc. * ..................... 48,100 667,628 OSI Systems, Inc. * ............................... 31,000 522,970
The accompanying notes are an integral part of the financial statements. 12 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2009
NUMBER OF SHARES VALUE --------- ----------- TECHNOLOGY--(CONTINUED) Pegasystems, Inc. ................................. 15,800 $ 483,954 Photronics, Inc. * ................................ 46,800 213,408 RealNetworks, Inc. * .............................. 156,500 554,010 RightNow Technologies, Inc. * ..................... 43,400 545,972 S1 Corp. * ........................................ 102,200 642,838 Sierra Wireless, Inc. * ........................... 43,600 360,572 SonicWALL, Inc. * ................................. 86,100 644,889 SYNNEX Corp. * .................................... 21,100 625,615 Tessera Technologies, Inc. * ...................... 30,400 763,952 TIBCO Software, Inc. * ............................ 63,700 565,019 TNS, Inc. * ....................................... 27,800 721,688 USA Mobility, Inc. ................................ 45,600 580,488 Vishay Intertechnology, Inc. * .................... 36,700 296,169 Zoran Corp. * ..................................... 69,000 762,450 ----------- 19,301,755 ----------- UTILITY--1.5% IPCS, Inc. * ...................................... 35,400 558,966 Net Servicos de Comunicacao SA - ADR .............. 40,200 424,512 Unisource Energy Corp. ............................ 11,200 327,487 ----------- 1,310,965 ----------- TOTAL COMMON STOCKS (Cost $74,975,220) .......................... 88,530,793 -----------
NUMBER OF SHARES VALUE --------- ----------- SHORT-TERM INVESTMENTS--0.2% Columbia Prime Reserves Fund ...................... 185,772 $ 185,772 ----------- TOTAL SHORT-TERM INVESTMENTS (Cost $185,772) ............................. 185,772 ----------- TOTAL INVESTMENTS--99.7% (Cost $75,160,992) ................................ 88,716,565 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES--0.3% .......... 232,890 ----------- NET ASSETS--100.0% ................................... $88,949,455 ===========
- ---------- * Non-income producing. ADR-- American Depositary Receipt. SP ADR-- Sponsored American Depositary Receipt. The following is a summary of inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (see note 1 in the Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL FAIR LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUTS INPUTS --------------- ----------- ----------- ------------ TOTAL INVESTMENTS * $88,716,565 $88,716,565 $-- $-- ----------- ----------- --- --- TOTAL: $88,716,565 $88,716,565 $-- $-- =========== =========== === ===
* See Portfolio of Investments detail for security type and sector classification breakout. The accompanying notes are an integral part of the financial statements. 13 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2009 ASSETS Investments, at value (cost $75,160,992) ............................... $ 88,716,565 Receivable for: Investments sold ....................................................... 1,819,452 Capital shares sold .................................................... 373,703 Dividends and interest ................................................. 56,756 Prepaid expenses and other assets ...................................... 18,964 ------------- Total assets ........................................................ 90,985,440 ------------- LIABILITIES Payable for: Capital shares redeemed ................................................ 969,641 Investments purchased .................................................. 899,979 Other accrued expenses and liabilities ................................. 90,928 Investment advisory fees and shareholder servicing fees ................ 75,437 ------------- Total liabilities ................................................... 2,035,985 ------------- Net assets ............................................................. $ 88,949,455 ============= NET ASSETS CONSIST OF Capital stock, $0.001 par value ........................................ 6,385 Paid-in capital ........................................................ 161,407,879 Accumulated net realized loss from investments ......................... (86,020,382) Net unrealized appreciation on investments ............................. 13,555,573 ------------- Net assets ............................................................. $ 88,949,455 ============= INSTITUTIONAL CLASS Net assets ............................................................. $ 35,570,762 ------------- Shares outstanding ($0.001 par value, 100,000,000 shares authorized) ... 2,534,450 ------------- Net asset value, offering and redemption price per share ............... $ 14.03 ============= INVESTOR CLASS Net assets ............................................................. $ 53,378,693 ------------- Shares outstanding ($0.001 par value, 100,000,000 shares authorized) ... 3,850,687 ------------- Net asset value, offering and redemption price per share ............... $ 13.86 =============
The accompanying notes are an integral part of the financial statements. 14 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FOR THE YEAR ENDED AUGUST 31, 2009 STATEMENT OF OPERATIONS INVESTMENT INCOME Dividends (net of foreign withholding taxes of $2,200) ................. $ 680,373 ------------- Total investment income .......................................... 680,373 ------------- EXPENSES Advisory fees .......................................................... 850,901 Administration and accounting fees ..................................... 154,119 Transfer agent fees .................................................... 139,523 Shareholder servicing fees ............................................. 47,212 Professional fees ...................................................... 44,054 Directors' and officers' fees .......................................... 37,516 Custodian fees ......................................................... 30,676 Printing and shareholder reporting fees ................................ 30,116 Registration and filing fees ........................................... 25,969 Insurance fees ......................................................... 19,440 Other expenses ......................................................... 3,471 ------------- Total expenses before waivers .................................... 1,382,997 Less: waivers .................................................... (272,159) ------------- Net expenses after waivers ............................................. 1,110,838 ------------- Net investment loss .................................................... (430,465) ------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS Net realized loss from investments .................................. (57,964,843) Net change in unrealized appreciation/(depreciation) on investments ...................................................... 17,425,741 ------------- Net realized and unrealized loss from investments ...................... (40,539,102) ------------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ...................... $ (40,969,567) =============
The accompanying notes are an integral part of the financial statements. 15 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment loss ................................................. $ (430,465) $ (1,640,130) Net realized loss from investments .................................. (57,964,843) (25,550,402) Net change in unrealized appreciation/(depreciation) on investments ................................................... 17,425,741 (28,210,112) ------------- ------------- Net decrease in net assets resulting from operations ................... (40,969,567) (55,400,644) ------------- ------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Net realized capital gains-Institutional Class ................... -- (24,591,377) Net realized capital gains-Investor Class ........................ -- (16,794,653) ------------- ------------- Net decrease in net assets from distributions to shareholders .......... -- (41,386,030) ------------- ------------- INCREASE/(DECREASE) IN NET ASSETS DERIVED FROM CAPITAL TRANSACTIONS: Institutional Class Proceeds from shares sold ........................................ 6,194,651 14,498,333 Reinvestment of distributions .................................... -- 23,830,362 Distributions for shares redeemed ................................ (32,754,100) (94,829,530) ------------- ------------- Total Institutional Class ........................................ (26,559,449) (56,500,835) Investor Class Proceeds from shares sold ........................................ 2,931,980 3,624,195 Reinvestment of distributions .................................... -- 16,043,279 Distributions for shares redeemed ................................ (13,476,265) (32,524,059) ------------- ------------- Total Investor Class ............................................. (10,544,285) (12,856,585) ------------- ------------- Net decrease in net assets from capital share transactions ............. (37,103,734) (69,357,420) ------------- ------------- Total decrease in net assets ........................................... (78,073,301) (166,144,094) NET ASSETS Beginning of year ................................................... 167,022,756 333,166,850 ------------- ------------- End of year ......................................................... $ 88,949,455 $ 167,022,756 ============= =============
The accompanying notes are an integral part of the financial statements. 16 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE/(DECREASE) IN SHARES OUTSTANDING DERIVED FROM SHARE TRANSACTIONS: Institutional Class Shares sold ...................................................... 550,481 753,671 Shares reinvested ................................................ -- 1,096,153 Shares redeemed .................................................. (2,890,397) (4,997,050) ---------- ---------- Total Institutional Class ........................................ (2,339,916) (3,147,226) Investor Class Shares sold ...................................................... 272,329 190,305 Shares reinvested ................................................ -- 745,852 Shares redeemed .................................................. (1,233,242) (1,691,787) ---------- ---------- Total Investor Class ............................................. (960,913) (755,630) ---------- ---------- Total share transactions ............................................ (3,300,829) (3,902,856) ========== ==========
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 8/31/09 8/31/08 8/31/07 8/31/06 8/31/05 ------- ------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year .......... $ 17.35 $ 24.61 $ 27.74 $ 28.78 $ 24.99 ------- ------- -------- -------- -------- Net investment loss ......................... (0.05)* (0.13)* (0.08)* (0.16)* (0.22) Net realized and unrealized gain/(loss) from investments ......................... (3.27) (3.99) 2.74 3.08 6.49 ------- ------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ................ (3.32) (4.12) 2.66 2.92 6.27 ------- ------- -------- -------- -------- Distributions to shareholders from: Net realized capital gains .................. -- (3.14) (5.79) (3.96) (2.48) ------- ------- -------- -------- -------- Net asset value, end of year ................ $ 14.03 $ 17.35 $ 24.61 $ 27.74 $ 28.78 ======= ======= ======== ======== ======== Total investment return(1) .................. (19.08)% (19.33)% 10.29% 12.46% 27.34% ======= ======= ======== ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) ..... $35,571 $84,546 $197,415 $189,920 $177,359 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 ....... 1.57% 1.44% 1.43% 1.43% 1.46% Ratio of net investment loss to average net assets ............................... (0.44)% (0.64)% (0.30)% (0.55)% (0.73)% Portfolio turnover rate ..................... 159.14% 162.10% 142.45% 126.64% 129.18%
- ---------- * Calculated based on average shares outstanding for the period. (1) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. 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 8/31/09 8/31/08 8/31/07 8/31/06 8/31/05 ------- ------- -------- -------- -------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year .......... $ 17.14 $ 24.38 $ 27.56 $ 28.65 $ 24.91 ------- ------- -------- -------- -------- Net investment loss ......................... (0.06)* (0.14)* (0.10)* (0.18)* (0.23) Net realized and unrealized gain/(loss) from investments ......................... (3.22) (3.96) 2.71 3.05 6.45 ------- ------- -------- -------- -------- Net increase/(decrease) in net assets resulting from operations ................ (3.28) (4.10) 2.61 2.87 6.22 ------- ------- -------- -------- -------- Distributions to shareholders from: Net realized capital gains .................. -- (3.14) (5.79) (3.96) (2.48) ------- ------- -------- -------- -------- Net asset value, end of year ................ $ 13.86 $ 17.14 $ 24.38 $ 27.56 $ 28.65 ======= ======= ======== ======== ======== Total investment return(1) .................. (19.14)% (19.45)% 10.15% 12.33% 27.22% ======= ======= ======== ======== ======== RATIOS/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) ..... $53,379 $82,477 $135,752 $147,471 $134,054 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 ....... 1.67% 1.54% 1.53% 1.53% 1.56% Ratio of net investment loss to average net assets ............................... (0.56)% (0.74)% (0.40)% (0.65)% (0.83)% Portfolio turnover rate ..................... 159.14% 162.10% 142.45% 126.64% 129.18%
- ---------- * Calculated based on average shares outstanding for the period. (1) Total investment return is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. 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 nineteen 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 78,973 billion shares are currently classified into one hundred and twenty-nine classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten 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. Effective September 1, 2008, the Fund adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) 20 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) In April 2009, FASB issued FASB Staff Position No. 157-4, "Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly", ("FSP 157-4"). FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 expands the three-level hierarchy disclosure and the level three roll-forward disclosure for each major security type as described in paragraph 19 of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Fund's investments as of August 31, 2009 is included with the Fund's Portfolio of 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 and those differences could be significant. 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 the ex-dividend 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. 21 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 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. INVESTMENT ADVISER AND OTHER SERVICES 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 reimbursed. For the year ended August 31, 2009, investment advisory fees and waivers of the Fund were as follows:
GROSS NET ADVISORY FEES WAIVERS ADVISORY FEES - ------------- ---------- ------------- $850,901 $(261,522) $589,379
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. PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of the PNC Financial Services Group, Inc., serves as administrator for the Fund. For providing administrative and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets, subject to certain minimum monthly fees. 22 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) PNC has voluntarily agreed to waive a portion of its administration and accounting fees for the Fund. For the year ended August 31, 2009, administration and accounting fees and waivers of the Fund were as follows:
GROSS ADMINISTRATION NET ADMINISTRATION AND ACCOUNTING AND ACCOUNTING FEES WAIVERS FEES - -------------------- --------- ------------------ $154,119 $(10,637) $143,482
For providing regulatory administration services to RBB, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to each portfolio in proportion to its net assets of the Company. In addition, PNC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agent services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets and is subject to certain minimum monthly fees. For providing custodial services to the Fund, PFPC Trust Company, an affiliate of PNC, is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets subject to certain minimum monthly fees. PFPC Distributors, Inc., an affiliate of PNC, serves as the principal underwriter and distributor of the Fund's shares pursuant to a Distribution Agreement with RBB. The Fund will not pay PNC or PNC's affiliates at a later time for any amounts waived or any amounts assumed. 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer and reimbursement of fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Fund or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding short-term investments) of the Fund were as follows:
INVESTMENT SECURITIES - --------------------------- PURCHASES SALES - ------------ ------------ $141,613,756 $177,985,857
23 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. CAPITAL SHARE TRANSACTIONS As of August 31, 2009, 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. As of August 31, 2009, the Fund had two shareholder accounts and/or omnibus accounts (comprised of a group of individual shareholders) that amounted to 31% of the total shares outstanding of the Fund. 6. FEDERAL INCOME TAX INFORMATION FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2006-2009) and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). Each of the Fund's federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service. At August 31, 2009, 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 - ----------- ------------ ------------ -------------- $76,713,131 $17,623,726 $(5,620,292) $12,003,434
Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. The following permanent differences as of August 31, 2009, primarily attributable to a net operating loss, were reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME/(LOSS) GAIN/(LOSS) CAPITAL - -------------- ------------ ---------- $430,465 $-- $(430,465)
24 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) As of August 31, 2009, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY LONG-TERM INCOME GAINS - ------------- ------------- $-- $--
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 income 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 --------------- --------------- ----------- August 31,2009 $ -- $ -- $ -- August 31,2008 2,094,133 39,291,897 41,386,030
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. At August 31, 2009, the Fund had capital loss carryforwards of $39,229,442 available to offset future capital gains. This capital loss carryforward will expire on August 31, 2016 ($2,386,627) and 2017 ($36,842,815). 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, 2009, the Fund deferred post-October capital losses of $45,238,801. 7. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through October 22, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the 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, 2009, 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 22, 2009 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, 2009, 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 2009. 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 2010. 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. 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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENT As required by the Investment Company 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 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 Bogle Investment Management Small Cap Growth Fund at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 Board 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. Among other things, the Board 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 advisory fee arrangement 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. 28 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND OTHER INFORMATION (CONCLUDED) (UNAUDITED) As part of their review, the Board considered the nature, extent and quality of the services provided by the Adviser. The Board concluded that the Adviser had substantial resources to provide services to the Fund and that the Adviser's services had been acceptable. The Board also considered the investment performance of the Fund and the Adviser. Information on the Fund's investment performance was provided for one, three, and five year periods. The Board considered the Fund's investment performance in light of its investment objective and investment strategies. The Board concluded that the investment performance of the Fund as compared to its benchmark and Lipper peer group was acceptable. In reaching this conclusion, the Board also considered the recent extraordinary market conditions. The Board also considered the advisory fee rate payable by the Fund under the Advisory Agreement. In this regard, information on the fees paid by the Fund and the Fund's total operating expense ratio (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that although the contractual advisory fees of the Fund were higher than the peer group median, the actual advisory fees of the Fund and the actual total expenses of the Fund were both lower than the peer group median. The Board also noted the Adviser's commitment to shareholders to limit the asset base of the Fund in an effort to maximize long-term returns for its shareholders. In addition, the Board noted that the Adviser has contractually agreed to limit total annual operating expenses to agreed upon levels for each class of the Fund through at least December 31, 2009 and that the Adviser expects to continue these fee waivers and expense reimbursements. After reviewing the information regarding the Adviser's costs, profitability and economies of scale, and after considering the Adviser's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Fund were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 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 (877) 264-5346.
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- ------------------------------------- ------------- --------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services 19 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to present. Investment Wilmington, DE 19809 Trust; DOB: 3/43 (registered investment company) WT Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox Chase 19 None 103 Bellevue Parkway Cancer Center (biomedical research and Wilmington, DE 19809 medical care) (2000-2004). DOB: 12/35 Arnold M. Reichman Chairman 2005 to Director, Gabelli Group Capital 19 None 103 Bellevue Parkway Director present 1991 Partners, L.P. (an investment Wilmington, DE 19809 to present partnership) from 2000 to 2006. DOB: 5/48
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- ------------------------------------- ------------- ------------------ DISINTERESTED DIRECTORS Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 19 MTI Holding 103 Bellevue Parkway President, MTI Holding Group, Inc. Group, Inc. Wilmington, DE 19809 (formerly known as Moyco (formerly known DOB: 3/34 Technologies, Inc.) (manufacturer of as Moyco precision coated and industrial Technologies, abrasives). Inc.) Robert A. Straniere Director 2006 to present Since 2009, Administrative Law 19 Reich and Tang 103 Bellevue Parkway Judge,New York City. Founding Group (asset Wilmington, DE 19809 Partner,Straniere Law Firm (1980 to management); The DOB: 3/41 date);Partner, Gotham Strategies SPARX Asia (consulting firm) (2005 to date); Funds Group Partner, The Gotham Global Group (registered (consulting firm) (2005 to date); investment President, The New York City Hot Dog company) Company (2005 to date); Partner, Kanter-Davidoff (law firm) (2006 to present). INTERESTED DIRECTORS (2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice Chairman, 19 Comcast 103 Bellevue Parkway Comcast Corporation (cable television Corporation; Wilmington, DE 19809 and communications). AMDOCS Limited DOB: 7/33 (service provider to telecommunications companies)
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the Investment Company Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 31 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- -------------------------------------- ------------- ------------------ INTERESTED DIRECTORS (2) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice President 19 Kensington Funds 103 Bellevue Parkway and prior thereto, Executive Vice (registered Wilmington, DE 19809 President of Oppenheimer & Co., Inc., investment DOB: 4/38 formerly Fahnestock & Co., Inc. (a company) 6 registered broker-dealer). Since Portfolios November 2004, Director of Kensington Funds. J. Richard Carnall Director 2002 to present Director of Haydon Bolts, Inc. (bolt 19 Cornerstone Bank 103 Bellevue Parkway manufacturer) and Parkway Real Estate Wilmington, DE 19809 Company (subsidiary of Haydon DOB: 9/38 Bolts,Inc.) since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the Investment Company Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 32 BOGLE INVESTMENT MANAGEMENT SMALL CAP GROWTH FUND FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR ----------------- ---------------- --------------- -------------------------------------- ------------- ------------- OFFICERS Salvatore Faia, President and President June President, Vigilant Compliance N/A N/A Esquire, CPA Chief Compliance 2009 to present Services since 2004; Senior Legal Vigilant Compliance Officer and Chief Counsel, PNC Global Investment Services Compliance Servicing (U.S.), Inc.from 2002 to 713 Chelsea Road Officer 2004 to 2004; and Director of Energy Income Mullica Hill, NJ 08062 present Partnership since 2005. DOB: 12/62 Joel Weiss Treasurer June 2009 to Vice President and Managing Director, N/A N/A 103 Bellevue Parkway present PNC Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. since 1993 DOB: 1/63 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and N/A N/A 103 Bellevue Parkway Counsel,PNC Global Investment Wilmington, DE 19809 Servicing (U.S.), Inc. (financial DOB: 7/74 services company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of PNC N/A N/A 103 Bellevue Parkway Treasurer Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. (financial services company) DOB: 10/60 Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath LLP N/A N/A One Logan Square Secretary (law firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 7/59
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. 33 [THIS PAGE INTENTIONALLY LEFT BLANK] INVESTMENT ADVISER Bogle Investment Management, L.P. 2310 Washington Street Suite 310 Newton Lower Falls, MA 02462 ADMINISTRATOR PNC Global Investment Servicing (U.S.), Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.), 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 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, 2009 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. (MARVIN & PALMER(R) ASSOCIATES, INC. LOGO) GLOBAL EQUITY MANAGEMENT Marvin & Palmer Large Cap Growth Fund of The RBB Fund, Inc. Annual Report August 31, 2009 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, 2009 (UNAUDITED) DEAR FELLOW SHAREHOLDER: During the period from September 1, 2008 through August 31, 2009 the Fund declined 28.51%. It underperformed the Russell 1000 Growth Index which was down 16.76% for the same period. INVESTMENT CLIMATE AND OUTLOOK The financial crisis which permeated markets from mid-September last year has ended. We are now suffering from the after effects of the economic contraction which began at the same time. Major stimulus measures around the world have led to resumption in growth in the leading emerging countries and a leveling off of the economic decline in the major Western countries. The sharp inventory correction which began last September appears to be over. Since March 9, 2009, there has been an explosive move in the small capitalization and lower quality stocks around the world. This stock market rally has continued as the economic outlook has shown signs of improvement. We believe the economy should continue to improve and have positioned the portfolio to reflect this. At present, we are emphasizing companies that can best weather the global recession and lead the ultimate recovery. We are focused on market share winners in the financial, technology and consumer discretionary sectors, as well as producers for the rapidly growing developing economies of the world, such as the energy and materials sectors. INVESTMENT REVIEW AND PORTFOLIO STRATEGY The Marvin & Palmer Large Cap Growth Fund underperformed the Russell 1000 Growth Index and the broader S&P 500 Index during the one year ended August 31, 2009. The Fund's underperformance was driven by stock selection, which was a negative contributor in all sectors. Industrials, information technology, energy and consumer discretionary were particularly bad. Consumer staples and telecommunications were the only positive contributing sectors to the Fund. The Fund's best performing stocks were Goldman Sachs, Cognizant Technology and Freeport-McMoRan Copper & Gold. The worst contributing stocks were Amazon.com, Celgene and Monsanto. As you know, Marvin & Palmer Associates concentrates its investments in large capitalization, high quality leadership companies in sectors which are reflecting improving or sustainable relative strength. We have identified the technology sector as the leading candidate for sustainable market leadership. As such, we anticipate the Fund will remain overweight in information technology. The Fund's primary underweights are in the consumer staples and health care sectors. We understand your concerns about our performance during this turmoil. When small capitalization and weak balance sheet companies are leading the markets, our process is challenged. We believe it is reasonable for us to assert, however, that the likelihood of small and financially questionable companies leading the market for very long is quite small. There should be a reversion to higher quality investments in the not too distant future. Thank you for your patience and understanding. David F. Marvin, CFA Chairman Marvin & Palmer Associates, Inc. 1 MARVIN & PALMER LARGE CAP GROWTH FUND ANNUAL REPORT AUGUST 31, 2009 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Marvin & Palmer vs. Russell 1000(R) Growth IndeX (PERFORMANCE GRAPH) 06/29/2007 10000 10000 08/31/2007 10200 10001.5 02/29/2008 9782 9344.69 08/31/2008 9322 9325.34 02/28/2009 5320 5605.26 08/31/2009 6665 7763.59
This chart assumes a hypothetical $10,000 initial investment in the Fund made on June 29, 2007 (inception) and reflects Fund expenses. Investors should note that the Fund is a professionally managed mutual fund while the Russell 1000(R) Growth Index is unmanaged, does not incur sales charges and/or expenses and is not available for investment. Average Annual Total Returns for the Year Ended August 31, 2009
SINCE ONE YEAR INCEPTION* -------- ---------- LARGE CAP GROWTH FUND -28.51% -17.04% RUSSELL 1000(R) GROWTH INDEX -16.76% -11.07%
* INCEPTION DATE JUNE 29, 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 (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 PERFORMANCE QUOTED REFLECTS FEE WAIVERS IN EFFECT AND WOULD HAVE BEEN LESS IN THEIR ABSENCE. THE FUND'S GROSS ANNUAL OPERATING EXPENSE RATIO, AS STATED IN THE CURRENT PROSPECTUS, IS 2.10% AND THE FUND'S NET OPERATING EXPENSE RATIO IS 0.81%. THE EXPENSE RATIO IS CONTRACTUALLY CAPPED AT 0.80% THROUGH DECEMBER 31, 2009, WITHOUT WHICH PERFORMANCE WOULD HAVE BEEN LESS. THIS CAP CAN BE DISCONTINUED AT ANY TIME AFTER DECEMBER 31, 2009. THE FUND'S TOTAL RETURNS SINCE INCEPTION ARE BASED ON A CHANGE IN NET ASSET VALUE FROM $10.00 PER SHARE ON JUNE 29, 2007 (INCEPTION) TO $6.64 PER SHARE ON AUGUST 31, 2009. PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE. 2 MARVIN & PALMER LARGE CAP GROWTH FUND FUND EXPENSE DISCLOSURE AUGUST 31, 2009 (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 six-month period from March 1, 2009 through August 31, 2009, 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 MARCH 1, 2009 AUGUST 31, 2009 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,252.80 $4.54 Hypothetical (5% return before expenses) 1,000.00 1,021.12 4.08
- ---------- * 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 (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 the Fund of 25.28%. 3 MARVIN & PALMER LARGE CAP GROWTH FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2009 (UNAUDITED)
% of Net Assets Value -------- ----------- Domestic Common Stocks: Technology Hardware & Equipment......... 16.8% $ 3,249,269 Software & Services..................... 14.7 2,835,915 Semiconductors & Semiconductors......... Equipment............................ 8.3 1,613,771 Retailing............................... 7.9 1,534,523 Pharmaceuticals, Biotechnology & Life Sciences........................ 7.5 1,444,897 Diversified Financials.................. 7.3 1,407,102 Materials............................... 6.8 1,321,635 Energy.................................. 6.1 1,185,824 Capital Goods........................... 4.8 924,897 Food, Beverage & Tobacco................ 3.5 686,315 Transportation.......................... 3.4 665,971 Health Care Equipment & Services........ 3.2 615,288 Household Products...................... 2.0 378,040 Insurance............................... 1.7 323,712 Consumer Durables & Apparel............. 1.1 215,636 Food & Staples Retailing................ 1.0 198,393 Banking................................. 1.0 194,532 Media................................... 0.9 165,456 Other Assets In Excess of Liabilities...... 2.0 382,076 ----- ----------- NET ASSETS................................. 100.0% $19,343,252 ===== ===========
- ---------- 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, 2009
Shares Value ------ ----------- DOMESTIC COMMON STOCKS -- 98.0% BANKING -- 1.0% U.S. Bancorp ............................................ 8,600 $ 194,532 ----------- CAPITAL GOODS -- 4.8% Cummins, Inc. ........................................... 3,500 158,620 Danaher Corp. ........................................... 2,900 176,059 Fluor Corp. ............................................. 3,300 174,570 McDermott International, Inc.* .......................... 5,200 123,552 Precision Castparts Corp. ............................... 3,200 292,096 ----------- 924,897 ----------- CONSUMER DURABLES & Apparel -- 1.1% VF Corp. ................................................ 3,100 215,636 ----------- DIVERSIFIED FINANCIALS -- 7.3% CME Group, Inc. ......................................... 700 203,728 Goldman Sachs Group, Inc., (The) ........................ 4,700 777,662 Morgan Stanley .......................................... 14,700 425,712 ----------- 1,407,102 ----------- ENERGY -- 6.1% National Oilwell Varco, Inc.* ........................... 7,100 258,085 Schlumberger Ltd. ....................................... 5,500 309,100 Transocean Ltd.* ........................................ 2,100 159,264 Weatherford International Ltd.* ......................... 14,900 297,255 XTO Energy, Inc. ........................................ 4,200 162,120 ----------- 1,185,824 ----------- FOOD & STAPLES RETAILING -- 1.0% Wal-Mart Stores, Inc. ................................... 3,900 198,393 ----------- FOOD, BEVERAGES & TOBACCO -- 3.5% Bunge Ltd. .............................................. 3,700 247,937 Coca-Cola Co., (The) .................................... 3,300 160,941 Coca-Cola Enterprises, Inc. ............................. 8,400 169,764 PepsiCo, Inc. ........................................... 1,900 107,673 ----------- 686,315 ----------- HEALTH CARE EQUIPMENT & SERVICES -- 3.2% Medco Health Solutions, Inc.* ........................... 5,400 298,188 WellPoint, Inc.* ........................................ 6,000 317,100 ----------- 615,288 ----------- HOUSEHOLD PRODUCTS -- 2.0% Colgate-Palmolive Co. ................................... 5,200 378,040 ----------- INSURANCE -- 1.7% Prudential Financial, Inc. .............................. 6,400 323,712 -----------
Shares Value ------ ----------- MATERIALS -- 6.8% Air Products & Chemicals, Inc. .......................... 1,300 $ 97,539 Freeport-McMoRan Copper & Gold, Inc. .................... 7,100 447,158 Monsanto Co. ............................................ 4,400 369,072 Mosaic Co., (The) ....................................... 1,800 87,246 Owens-Illinois, Inc.* ................................... 3,900 132,366 United States Steel Corp. ............................... 4,300 188,254 ----------- 1,321,635 ----------- MEDIA -- 0.9% Comcast Corp., Class A .................................. 10,800 165,456 ----------- PHARMACEUTICALS, BIOTECHNOLOGY & LIFE SCIENCES -- 7.5% Abbott Laboratories ..................................... 3,500 158,305 Amgen, Inc.* ............................................ 3,100 185,194 Celgene Corp.* .......................................... 2,900 151,293 Gilead Sciences, Inc.* .................................. 8,040 362,282 Johnson & Johnson ....................................... 4,200 253,848 Life Technologies Corp.* ................................ 7,500 333,975 ----------- 1,444,897 ----------- RETAILING -- 7.9% Amazon.com, Inc.* ....................................... 4,500 365,355 Home Depot, Inc. ........................................ 6,700 182,843 Kohl's Corp.* ........................................... 12,500 644,875 Lowe's Cos., Inc. ....................................... 6,700 144,050 Target Corp. ............................................ 4,200 197,400 ----------- 1,534,523 ----------- SEMICONDUCTORS & SEMICONDUCTORS EQUIPMENT -- 8.3% Broadcom Corp., Class A* ................................ 16,400 466,580 Micron Technology, Inc.* ................................ 47,700 351,549 NVIDIA Corp.* ........................................... 17,200 249,744 Texas Instruments, Inc. ................................. 22,200 545,898 ----------- 1,613,771 ----------- SOFTWARE & SERVICES -- 14.7% Activision Blizzard, Inc.* .............................. 17,200 199,692 Autodesk, Inc.* ......................................... 10,400 243,672 Cognizant Technology Solutions Corp., Class A* ............................ 26,200 913,856 Google, Inc., Class A* .................................. 1,440 664,805 Microsoft Corp. ......................................... 5,800 142,970 Salesforce.com, Inc.* ................................... 8,000 414,960 Visa, Inc., Class A ..................................... 3,600 255,960 ----------- 2,835,915 -----------
The accompanying notes are an integral part of the financial statements. 5 MARVIN & PALMER LARGE CAP GROWTH FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2009
Shares Value ------ ----------- TECHNOLOGY HARDWARE & EQUIPMENT -- 16.8% Apple, Inc.* ............................................ 4,600 $ 773,766 Cisco Systems, Inc.* .................................... 10,100 218,160 Corning, Inc. ........................................... 22,200 334,776 EMC Corp.* .............................................. 18,500 294,150 International Business Machines Corp. ................... 1,900 224,295 Juniper Networks, Inc.* ................................. 18,100 417,567 NetApp, Inc.* ........................................... 19,900 452,725 QUALCOMM, Inc. .......................................... 11,500 533,830 ----------- 3,249,269 ----------- TRANSPORTATION -- 3.4% CSX Corp. ............................................... 9,900 420,750 Union Pacific Corp. ..................................... 4,100 245,221 ----------- 665,971 ----------- TOTAL DOMESTIC COMMON STOCKS (Cost $15,935,725) ................................... 18,961,176 ----------- TOTAL INVESTMENTS - 98.0% (Cost $15,935,725) ................................... 18,961,176 ----------- OTHER ASSETS IN EXCESS OF LIABILITIES - 2.0% ...................................... 382,076 ----------- NET ASSETS - 100.0% ..................................... $19,343,252 ===========
- ---------- * Non-income producing. The following is a summary of the inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (See Note 1 in Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUTS INPUTS --------------- ----------- ----------- ------------ Investments in Securities* $18,961,176 $18,961,176 $-- $-- =========== =========== === ===
* Please refer to the Portfolio of Investments for industry and security type breakouts. The accompanying notes are an integral part of the financial statements. 6 MARVIN & PALMER LARGE CAP GROWTH FUND STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 2009 ASSETS Investments, at value (Cost $15,935,725) ................................. $ 18,961,176 Cash and cash equivalents ................................................ 461,612 Receivables Investments sold ...................................................... 501,227 Dividends and interest ................................................ 16,790 Investment adviser .................................................... 12,157 Prepaid expenses and other assets ........................................ 13,523 ------------ Total assets ....................................................... 19,966,485 ------------ LIABILITIES Payable for investments purchased ........................................ 568,174 Other accrued expenses and liabilities ................................... 55,059 ------------ Total liabilities .................................................. 623,233 ------------ Net Assets ............................................................... $ 19,343,252 ============ NET ASSETS CONSIST OF Par value ................................................................ $ 2,913 Paid-in capital .......................................................... 30,756,564 Undistributed net investment income ...................................... 31,922 Accumulated net realized loss from investments ........................... (14,473,598) Net unrealized appreciation on investments ............................... 3,025,451 ------------ Net Assets ............................................................... $ 19,343,252 ------------ Shares outstanding ($0.001 par value, 100,000,000 shares authorized) ..... 2,913,248 ------------ Net asset value, offering and redemption price per share ................. $ 6.64 ============
The accompanying notes are an integral part of the financial statements. 7 MARVIN & PALMER LARGE CAP GROWTH FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2009 INVESTMENT INCOME Dividends ................................................ $ 213,449 ------------ Total investment income ............................... 213,449 ------------ EXPENSES Administration and accounting fees ....................... 150,987 Advisory fees ............................................ 118,743 Transfer agent fees ...................................... 42,400 Professional fees ........................................ 35,702 Registration and filing fees ............................. 20,745 Directors' and officers' fees ............................ 19,137 Printing and shareholder reporting fees .................. 16,728 Custodian fees ........................................... 5,756 Insurance ................................................ 2,723 Other expenses ........................................... 2,088 ------------ Total expenses before waivers and reimbursements ... 415,009 ------------ Less: waivers and reimbursements ................... (268,864) ------------ Net expenses after waivers and reimbursements ...... 146,145 ------------ Net investment income .................................... 67,304 ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS NET REALIZED GAIN/(LOSS) FROM: Investments ........................................... (10,342,051) NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments ........................................... 1,991,618 ------------ Net realized and unrealized loss from investments ........ (8,350,433) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ (8,283,129) ============
The accompanying notes are an integral part of the financial statements. 8 MARVIN & PALMER LARGE CAP GROWTH FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income .......................................... $ 67,304 $ 27,731 Net realized loss from investments ............................. (10,342,051) (3,802,964) Net change in unrealized appreciation from investments ......... 1,991,618 335,586 ------------ ----------- Net decrease in net assets resulting from operations .............. (8,283,129) (3,439,647) ------------ ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .......................................... (63,113) (3,604) ------------ ----------- Net decrease in net assets from dividends and distributions to shareholders .................................. (63,113) (3,604) ------------ ----------- CAPITAL TRANSACTIONS: Proceeds from shares sold ...................................... 2,752,950 22,756,642 Reinvestment of distributions .................................. 62,459 3,604 Shares redeemed ................................................ (3,906,142) (5,820,152) ------------ ----------- Net increase/(decrease) in net assets from capital transactions ... (1,090,733) 16,940,094 ------------ ----------- Total increase/(decrease) in net assets ........................... (9,436,975) 13,496,843 NET ASSETS Beginning of year .............................................. 28,780,227 15,283,384 ------------ ----------- End of year .................................................... $ 19,343,252 $28,780,227 ============ =========== Undistributed net investment income, end of year .................. $ 31,922 $ 27,731 ============ =========== SHARE TRANSACTIONS: Shares sold .................................................... 449,528 2,133,206 Shares reinvested .............................................. 10,324 309 Shares redeemed ................................................ (633,123) (544,841) ------------ ----------- Total share transactions ....................................... (173,271) 1,588,674 ============ ===========
The accompanying notes are an integral part of the financial statements. 9 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 periods. This information has been derived from information provided in the financial statements.
FOR THE YEAR FOR THE YEAR FOR THE PERIOD ENDED ENDED JUNE 29, 2007* TO AUGUST 31, 2009 AUGUST 31, 2008 AUGUST 31, 2007 --------------- --------------- ----------------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of period ................... $ 9.32 $ 10.20 $ 10.00 ------- ------- ------- Net investment income .................................. 0.02 0.01 --(1) Net realized and unrealized gain/(loss) on investments ...................................... (2.68) (0.89) 0.20 ------- ------- ------- Net increase/(decrease) in net assets resulting from operations ........................... (2.66) (0.88) 0.20 ------- ------- ------- DIVIDENDS TO SHAREHOLDERS FROM: Net investment income .................................. (0.02) --(1) -- ------- ------- ------- Net asset value, end of period ......................... $ 6.64 $ 9.32 $ 10.20 ======= ======= ======= Total investment return(2) ............................. (28.51)% (8.61)% 2.00% RATIO/SUPPLEMENTAL DATA Net assets, end of period (000~s omitted) .............. $19,343 $28,780 $15,283 Ratio of expenses to average net assets ................ 0.80% 0.80% 0.80%(3) Ratio of expenses to average net assets without waivers and expense reimbursements .................. 2.27% 2.09% 3.93%(3) Ratio of net investment income to average net assets ... 0.37% 0.12% 0.21%(3) Portfolio turnover rate ................................ 237.91% 252.37% 28.70%
- ---------- * Commencement of Operations. (1) Less than $0.005 per share. (2) 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. (3) Annualized. The accompanying notes are an integral part of the financial statements. 10 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2009 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 nineteen active investment portfolios, including the Marvin & Palmer Large Cap Growth Fund (the "Fund"), which commenced investment operations on June 29, 2007. RBB has authorized capital of one hundred billion shares of common stock of which 78.973 billion are currently classified into one hundred and twenty-nine classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten 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. Effective September 1, 2008, the Fund adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 - quoted prices in active markets for identical securities - Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 - significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) In April 2009, FASB issued FASB Staff Position No. 157-4, ("FSP 157-4") Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs and valuation techniques used to measure fair value and changes in those techniques and related inputs during the period. FSP 157-4 expands the three-level hierarchy disclosure and the level three-roll forward disclosure for each major security type as described in paragraph 19 of SFAS 115, Accounting for Certain Investments in Debt and Equity Securities. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Fund's investments as of August 31, 2009 is included with the Fund's Schedule of 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 and those differences could be significant. 11 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 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 the ex-dividend 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. 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. CASH AND CASH EQUIVALENTS -- The Fund considers liquid assets deposited with a bank, money market funds, and certain short term debt instruments with maturities of 3 months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. 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. INVESTMENT ADVISER AND OTHER SERVICES Marvin & Palmer Associates, Inc. ("Marvin & Palmer" 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 through December 31, 2009 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 year ended August 31, 2009, investment advisory fees accrued and waived were $118,743 and expenses reimbursed or to be reimbursed by the Adviser were $150,121. PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as administrator for the Fund. Administration and accounting fees accrued also include certain Transfer Agent and custodian fees. For providing administrative and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets, subject to certain minimum monthly fees. Included in the administration and accounting fees are fees for providing regulatory administration services to RBB. For providing these services, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to each portfolio in proportion to its net assets of the RBB Funds. In addition, PNC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agent services, PNC is entitled to receive out of pocket expenses. 12 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 For providing custodial services to the Fund, PFPC Trust Company, an affiliate of PNC, is entitled to receive out of pocket expenses. PFPC Distributors, Inc., an affiliate of PNC, serves as the principal underwriter and distributor of the Fund's shares pursuant to a Distribution Agreement with RBB. 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Fund or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding short-term investments) of the Fund were as follows:
PURCHASES SALES ----------- ----------- Investment Securities ..... $43,451,409 $43,881,201
5. SIGNIFICANT SHAREHOLDERS As of August 31, 2009, the Fund had 4 shareholder accounts and/or omnibus accounts (comprised of a group of individual shareholders) that amounted to 71% of the total shares outstanding of the Fund. 6. FEDERAL TAX INFORMATION FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2007-2009) and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation of guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). At August 31, 2009, 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 - ----------- ------------ ------------ -------------- $16,106,627 $3,089,661 $(235,112) $2,854,549
Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. As of August 31, 2009, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED UNDISTRIBUTED ORDINARY INCOME LONG-TERM GAINS - --------------- --------------- $31,922 $--
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 income tax purposes. 13 MARVIN & PALMER LARGE CAP GROWTH FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2009 The tax character of distributions paid during the years ended August 31, 2009 and August 31, 2008, were as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 ----------------- ----------------- Ordinary income ............ $63,113 $3,604 Long-term capital gains .... -- -- ------- ------ Total distributions ........ $63,113 $3,604 ======= ======
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. For federal income tax purposes, capital loss carryforwards are available to offset future capital gains. As of August 31, 2009, the Fund had a capital loss carryforward of $7,767,007 which will expire on August 31, 2016 ($328,738) and August 31, 2017 ($7,438,269). 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, 2009, the Fund expects to elect to treat post-October capital losses of $6,535,689 as having been incurred in the following fiscal year. 7. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through October 22, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements. 14 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, 2009, 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 years or period presented, 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion. (PRICEWATERHOUSECOOPERS LLP) Philadelphia, Pennsylvania October 22, 2009 15 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. The tax character of distributions paid during the years ended August 31, 2009 and August 31, 2008, were as follows:
FISCAL YEAR ENDED FISCAL YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 ----------------- ----------------- Ordinary Income............... $63,113 $3,604 Long-term capital gains....... -- -- ------- ------ Total Distributions........... $63,113 $3,604 ======= ======
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal tax purposes. For the fiscal year ended August 31, 2009, certain dividends may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. For individual shareholders, a percentage of their ordinary income dividends for the Fund may qualify for a maximum tax rate of 15%. The percentage of ordinary income dividends that qualify is 100%. For the fiscal year ended August 31, 2009, certain dividends qualify for the dividends-received deduction ("DRD") for corporate shareholders. The percentage of ordinary income dividends that qualify is 100%. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2009. 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 2010. 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. 16 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 Marvin and Palmer at (877) 821-2117 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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENT As required by the Investment Company 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 Investment Company Act (the "Independent Directors"), considered the renewal of the investment advisory agreement between Marvin & Palmer and the Company (the "Advisory Agreement") on behalf of the Marvin & Palmer Large Cap Growth Fund at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 Marvin & Palmer 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of Marvin & Palmer's services provided to the Fund; (ii) descriptions of the experience and qualifications of Marvin & Palmer's personnel providing those services; (iii) Marvin & Palmer's investment philosophies and processes; (iv) Marvin & Palmer's assets under management and client descriptions; (v) Marvin & Palmer'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) Marvin & Palmer's current advisory fee arrangement with the Company and other similarly managed clients; (vii) Marvin & Palmer's compliance procedures; (viii) Marvin & Palmer'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; (xi) a report comparing the performance of the Fund to the performance of its benchmark; and (xii) a report on the historical performance of Marvin & Palmer's U.S. Equity Strategy. As part of their review, the Board considered the nature, extent and quality of the services provided by Marvin & Palmer. The Board concluded that Marvin & Palmer had substantial resources to provide services to the Fund and that Marvin & Palmer's services had been acceptable. The Board also considered the investment performance of the Fund and Marvin & Palmer. The Board considered the Fund's investment performance in light of its investment objective and investment strategies. The Board concluded that the investment performance of the Fund as compared to its benchmark and Lipper peer group was acceptable. In reaching this conclusion, the Board also considered the recent extraordinary market conditions and the historic performance of Marvin & Palmer's U.S. Equity Strategy. The Board also considered the advisory fee rate payable by the Fund under the Advisory Agreement. In this regard, information on the fees paid by the Fund and the Fund's total operating expense ratio (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that the advisory fees of the Fund, before and after waivers, and the actual total expenses of the Fund were all lower than the peer group median. In addition, the Board noted that Marvin & Palmer has contractually agreed to limit total annual operating expenses to 0.80% of the Fund's average daily net assets through at least December 31, 2009 and that Marvin & Palmer expects to continue these fee waivers and expense reimbursements. After reviewing the information regarding the Marvin & Palmer's costs, profitability and economies of scale, and after considering Marvin & Palmer's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Fund were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 17 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 PORTFOLIOS IN POSITION(S) TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR ----------------- ----------- --------------- ------------------------------- ------------- ----------------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 006 to present Consultant, financial services 19 Kalmar Pooled 103 Bellevue Parkway organizations from 1997 to Investment Trust; Wilmington, DE 19809 present. (registered investment DOB: 3/43 company) WT Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox 19 None 103 Bellevue Parkway Chase Cancer Center (biomedical Wilmington, DE 19809 research and medical care) DOB: 12/35 (2000-2004). Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 19 None 103 Bellevue Parkway Director 1991 to present Partners, L.P. (an investment Wilmington, DE 19809 partnership) from 2000 to DOB: 5/48 2006. Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director 19 MTI Holding Group, Inc. 103 Bellevue Parkway and President, MTI Holding (formerly known as Wilmington, DE 19809 Group, Inc. (formerly known as Moyco Technologies, DOB: 3/34 Moyco Technologies, Inc.) Inc.) (manufacturer of precision coated and industrial abra- sives). Robert A. Straniere Director 2006 to present Since 2009, Administrative Law 19 Reich and Tang Group 103 Bellevue Parkway Judge, New York City. Founding (asset management); Wilmington, DE 19809 Partner, Straniere Law Firm The SPARX Asia Funds DOB: 3/41 (1980 to date); Partner, Gotham Group (registered Strategies (consulting firm) investment company) (2005 to date); Partner, The Gotham Global Group (consulting firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Partner, KanterDavidoff (law firm) (2006 to present).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. 18 MARVIN & PALMER LARGE CAP GROWTH FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN POSITION(S) TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR ----------------- ----------- --------------- ------------------------------- ------------- ----------------------- INTERESTED DIRECTORS (2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 19 Comcast Corporation; 103 Bellevue Parkway Chairman, Comcast Corporation AMDOCS Limited Wilmington, DE 19809 (cable television and (service provider to DOB: 7/33 communications). telecommunications companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 19 Kensington Funds 103 Bellevue Parkway President and prior thereto, (registered investment Wilmington, DE 19809 Executive Vice President of company) 6 Portfolios DOB: 4/38 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 Haydon Bolts, Inc. 19 Cornerstone Bank 103 Bellevue Parkway (bolt manufacturer) and Parkway Wilmington, DE 19809 Real Estate Company (subsidiary DOB: 9/38 of Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the Investment Company Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 19 MARVIN & PALMER LARGE CAP GROWTH FUND FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN POSITION(S) TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR ----------------- ----------- --------------- ------------------------------- ------------- ----------------------- OFFICERS Salvatore Faia, President President June President, Vigilant Compliance N/A N/A Esquire, CPA and Chief 2009 to present Services since 2004; Senior Vigilant Compliance Compliance and Chief Legal Counsel, PNC Global Services Officer Compliance Investment Servicing (U.S.), 713 Chelsea Road Officer 2004 to Inc. from 2002 to 2004; and Mullica Hill, present Director of Energy Income NJ 08062 Partnership since 2005. DOB: 12/62 Joel Weiss Treasurer June 2009 to Vice President and Managing N/A N/A 103 Bellevue Parkway present Director, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.) Inc. since DOB: 1/63 1993 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and N/A N/A 103 Bellevue Parkway Counsel, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.), Inc. DOB: 7/74 (financial services company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of N/A N/A 103 Bellevue Parkway Treasurer PNC Global Investment Servicing Wilmington, DE 19809 (U.S.) Inc. (financial services DOB: 10/60 company) Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath N/A N/A One Logan Square Secretary LLP (law firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 07/59
(1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 MARVIN & PALMER LARGE CAP GROWTH FUND PRIVACY NOTICE (UNAUDITED) 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: - 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 - 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. 21 Investment Adviser Marvin & Palmer Associates, Inc. 1201 N. Market Street Suite 2300 Wilmington, DE 19801-1165 Administrator PNC Global Investment Servicing (U.S.), Inc. 301 Bellevue Parkway Wilmington, DE 19809 Transfer Agent PNC Global Investment Servicing (U.S.), 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 (ROBECO LOGO) ROBECO INVESTMENT FUNDS OF THE RBB FUND, INC. ANNUAL REPORT AUGUST 31, 2009 ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND ROBECO BOSTON PARTNERS MID CAP VALUE FUND ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND ROBECO WPG SMALL CAP VALUE FUND SAM SUSTAINABLE CLIMATE FUND SAM SUSTAINABLE WATER FUND SAM SUSTAINABLE GLOBAL ACTIVE 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 MID CAP VALUE FUND ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND ROBECO WPG SMALL CAP VALUE FUND SAM SUSTAINABLE CLIMATE FUND SAM SUSTAINABLE WATER FUND SAM SUSTAINABLE GLOBAL ACTIVE FUND (THE "ROBECO INVESTMENT FUNDS") The Robeco Investment 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: - 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 - 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 non-public 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 2009 | 1 ROBECO INVESTMENT FUNDS GENERAL MARKET COMMENTARY Dear Shareholder: The U.S. economy has put itself on the path to recovery, and in all likelihood the U.S. recession ended in the third quarter of the 2009 calendar year. Economic data has progressed better than expected. In fact, approximately 70% of economic releases surpassed consensus expectations over the past few months before easing-up toward the end of the quarter.(1) The housing market showed signs of stabilizing, with the S&P 500(R)/Case-Shiller Home Price Indices reporting the sixth month of improved readings on a month-over-month basis that included 17 of the 20 metropolitan areas posting gains for July on a seasonally adjusted basis.(2) Although job losses continued, the Bureau of Labor Statistics' nonfarm payroll data showed that the rate of decline has improved significantly from the multi-decade nadir last January.(3) History would suggest that if this trend continues, the economy could be in a position in a year or so of adding jobs on a net basis. The arbiter of recessions (the National Bureau of Economic Research) has historically waited for all the dust to settle before announcing that a recession has ended. Stay tuned. In the meantime, corporate America has continued to do an effective job controlling costs and maintaining profits. In fact, 76% percent of firms in the S&P 500(R) reported a positive earnings surprise for the second quarter of 2009. There was not much revenue growth in the mix as only one quarter of companies reported a positive surprise and grew sales.(4) It doesn't appear, however, that much growth was needed to continue the strong market rally that began in March. From March 10th through the end of the third quarter of 2009, the S&P 500(R) Index gained 58% while the Russell 1000(R) Index climbed 60%, the Russell Midcap(R) Index rose 75% and the Russell 2000(R) Index returned 78%. As reflected by the outperformance of the smaller cap indices, riskier assets tended to do best across all investment asset classes. Along these lines, the equity market's biggest winners during this rally have been those stocks that were on the brink of extinction. Based on the U.S. exchange-traded universe, stocks that were priced under $2.50 per share at the outset of the rally climbed an average of 196% through September 30th. Those under $5 per share gained 177% on average, whereas stocks greater than $20 per share posted an average return of 54%. Thus, the stock market rally off of the March lows has largely restored price differentials within the U.S. equity market to more normal ranges. The latest snapshot of valuation spreads is within one standard deviation of the historical norm. Earlier this year, the price discrepancy between the market's average stock and the most inexpensive quintile of stocks had become exceptionally severe, ranking more than three standard deviations from the norm. When the market rallied and spreads tightened, the lower quality distressed businesses confederated at the edges did best. Our portfolios' grounding in sound businesses at attractive valuations drove returns during this period and, in our opinion, provides more solid prospects going forward. As valuation spreads settle into normal straits, we believe getting the analysis right on the fundamental merits of a business' valuation and earnings power will resume as the differentiating factor for performance going forward. That said, the U.S. economy most likely faces a long, slow recovery, especially given the strains on the consumer. This is the consensus thinking. A contrarian view would be that it is too conservative because history has shown that, in general, the bigger the recession, the stronger the recovery in its first year. Of the eleven recessions since 1948, this recession's severity is tied for worst, as measured by the 3.7 percentage-point decline in Gross Domestic Product ("GDP") from the peak. The approximate consensus view of a 2.5% recovery in GDP twelve months from now would rank it among the three weakest recoveries, placing it significantly below historical trends as well as below the historical median of 6.8%. As markets have developed over the past eighty years, there has been no shortage of challenges. Since 1926, there has been: 1 great depression, 1 world war, the Korean War, the Vietnam War, the Cold War, 1 national housing bubble (2002-2007), 2 Iraqi wars, 2 oil shocks, 2 periods with double-digit unemployment (1931-1940 & 1982-1983), 2 stock market crashes (1929, 1987), 3 market bubbles (1929, 1972, 2000), 4 periods with double digit inflation (1942,1947,1974,1980), and 14 recessions. Over this time, the S&P 500(R) Index has produced a 9.7% annualized return. With risk has come opportunity, and we look forward to keeping you informed of what we're finding for your portfolio. Sincerely, Robeco Investment Funds - ---------- (1) ISI Research, September 2009 (2) S&P 500(R)/Case-Shiller Home Prices Indices, September 29, 2009 Press Release (3) Bureau of Labor Statistics, Bloomberg U.S. Employees on Nonfarm Payrolls total month-over-month net change. (4) HOLT ValueSearch, September 2009 2 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (unaudited) Dear Shareholder: The Robeco Boston Partners Small Cap Value Fund II outperformed the Russell 2000(R) Value Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned -8.97% and the Investor share class returned -9.20%. The Index returned -20.68%. In sum, the Fund outperformed the Index by 11.71% for the Institutional share class and by 11.48% for the Investor share class. The last year has been a trying time for investors, to say the least, but the rebound has been significant as illustrated by the Index returning some 72.80% since March 10, 2009. For the one-year period, the Fund outperformed its benchmark during this volatile market due to strong stock selection across a diverse mix of positions, led by Finance, REITs, Capital Goods and Energy. Within Finance, the portfolio's combination of insurance, bank and financial services holdings drove the overall position's 5.6 percentage point contribution to relative performance. The portfolio's underweight to regional banks added value as this category under-performed by about 23% since August 2008. At that time, and coming into 2009, the return versus risk trade-off was not attractive in our view. More recently, however, we have added to our bank positions as certain companies have raised sufficient capital, decreased their balance sheet risk and have finally become more attractive stocks. The Fund has been more conservatively positioned in terms of credit-sensitive stocks, and within the REIT sector, the agency mortgage REIT area has provided stock-specific opportunities offering attractive value without credit risk. The Fund's REIT holdings have returned 31% for the one-year period; in contrast, the index's REIT sector has lost some 23%. An area to note on the negative side was both our overweight and stock selection in the Health Care sector, which detracted for the period. The market seems to have left these companies behind in the recent rally as health care reform - and the uncertainty surrounding it - has negatively affected stock prices in the sector. However, we continue to find attractive valuations in this space and, while spreading our exposures, believe that many of these companies can do well even in an unfriendly environment, as they have in the past. As we look ahead, we believe the Fund's construction in terms of our three-circle stock selection discipline (attractive valuation, sound fundamentals and a catalyst for change) has positioned it well for favorable performance over time. Sincerely, David Dabora Portfolio Manager, RBP Small-Cap Value Fund II - ---------- 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 8/31/09) % OF NET ASSETS - -------------------------------------- --------------- Jones Lang LaSalle, Inc. 1.96% MFA Financial, Inc. 1.89% Anworth Mortgage Asset Corp. 1.83% Service Corp. International 1.80% Max Capital Group Ltd. 1.75% Schweitzer-Mauduit International, Inc. 1.49% Bristow Group, Inc. 1.37% Live Nation, Inc. 1.36% Bowne & Co., Inc. 1.35% PHH Corp. 1.32%
PORTFOLIO REVIEW (AS OF 8/31/09) - -------------------------------------- P/E: Price/Earnings 13.2x P/B: Price/Book 1.2x Holdings 164 Wtd.Average Mkt. Cap. (mil) $ 975 ROE: Return on Equity 4.5 OROA: Operating Return on Operating Assets 29.4
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 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 vs. Russell Indices (PERFORMANCE CHART)
Small Cap Value Small Cap Value Fund II -- Institutional Fund II -- Investor Russell 2000(R) Russell 2000(R) Class Class Value Index Index(1) ------------------------ ------------------- --------------- --------------- 08/31/1999 10000 10000 10000 10000 08/31/2000 13143 13132.9 11367.8 12714.6 08/31/2001 20315.2 20259.8 13416 11236.8 08/31/2002 18814.8 18732.5 12665.6 9502.67 08/31/2003 24186.8 24007.3 15091.4 11728.3 08/31/2004 27562.8 27293.6 18718.9 13658.2 08/31/2005 33806.2 33384.8 22950.2 16814.7 08/31/2006 35966.1 35427.5 25867.9 18385 08/31/2007 39754.3 39062.7 29729.5 20475.7 08/31/2008 35718.6 35000.7 27493.3 19352.5 08/31/2009 32515.4 31779.1 21805.1 15232.1
The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1999 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, 2009
AVERAGE ANNUAL TOTAL RETURN GROSS NET ---------------------------------- EXPENSE EXPENSE 1 YEAR 3 YEAR 5 YEAR 10 YEAR RATIO RATIO ------ ------ ------ ------- ------- ------- Small Cap Value Fund II -- Institutional Class -8.97% -3.31% 3.36% 12.51% 1.39% 1.30% Small Cap Value Fund II -- Investor Class -9.20% -3.56% 3.09% 12.26% 1.64% 1.55% Russell 2000(R) Value Index -20.68% -7.86% 1.57% 7.31% n/a n/a Russell 2000(R) Index (1) -21.29% -6.08% 2.21% 4.30% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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 benchmark of the Fund. Results of index performance are presented for general comparative purposes. The Russell 2000(R) Value Index is an unmanaged index considered representative of small-cap value stocks. The Russell 2000(R) Index measures the performance of the 2,000 smallest companies in the Russell 3000(R) Index, which represents approximately 8% of the total market capitalization of the Russell 3000(R) Index and is considered representative of small-cap stocks. 4 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (unaudited) Dear Shareholder: The Robeco Boston Partners Long/Short Equity Fund outperformed the S&P 500(R) Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned 30.02% and the Investor share class returned 29.63%. The S&P 500(R) Index returned -18.25%. In sum, the Fund outperformed the Index by 48.27% for the Institutional share class and by 47.88% for the Investor share class. As you are aware, we build both the long and short portfolios in a bottom-up fashion seeking to create two independent return streams for the overall fund. For the fiscal year, strong performance in the long portfolio drove returns, while our short exposure, albeit slight, negatively effected returns for the period. Returns in the long portfolio were driven by strong stock selection across most sectors of the market. The most meaningful returns were gathered in the Finance and Technology sectors where we maintained an overweight position relative to the Index and in Healthcare, where we were roughly evenly exposed relative to the Index, but achieved vastly superior returns. By the end of August the short exposure had risen off of the historic lows of last fall and earlier this spring to approximately 19% as a percentage of the overall portfolio. While the market has experienced a strong move off of the early March '09 lows, the development of attractive short selling opportunities, at least in absolute terms, has been slow to develop, so we remain positioned with a considerable net long overall position. As of August 31, 2009, the overall portfolio had a net long exposure of approximately 76% and a net beta of 1.06 (predicted). From a capitalization perspective, the long portfolio had a median market capitalization of $488 million compared to $412 million on the short portfolio. The Fund is well diversified with approximately 130 positions on the long side and 78 positions on the short side. Our bottom-up value discipline has yielded a portfolio that is attractively positioned relative to the short portfolio from both a valuation and profitability standpoint. The long portfolio trades at 17.8x price-to-earnings and 1.4x price-to-book value, and the short portfolio trades at 20.1x price-to-earnings and 3.4x price-to-book value. We believe that consistently positioning the overall portfolio with these general characteristics increases the probability of success over the long term and it continues to be the focus of our efforts. We appreciate the confidence you have placed in our team and your support of the Fund. Sincerely, Robert Jones Portfolio Manager, RBP Long/Short Equity Fund - ---------- 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 LONG POSITIONS (AS OF 8/31/09) % OF NET ASSETS - -------------------------------------- --------------- Alpha PRO Tech Ltd. 3.64% Maiden Holdings Ltd. 2.30% Telular Corp. 2.18% JPMorgan Chase & Co. 2.11% PLATO Learning, Inc. 1.69% Varian Medical Systems, Inc. 1.65% AFC Enterprises, Inc. 1.64% MedQuist, Inc. 1.61% Casual Male Retail Group, Inc. 1.49% Skechers U.S.A., Inc., Class A 1.41%
PORTFOLIO REVIEW (AS OF 8/31/09) LONG SHORT - -------------------------------- ------- ------ P/E: Price/Earnings 17.8x 20.1x P/B: Price/Book 1.4x 3.4x Holdings 130 78 Wtd. Average Mkt. Cap. (mil) $10,134 $1,887 ROE: Return on Equity -3 -16.4 OROA: Operating Return on Operating Assets 30.9 -3.2
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 5 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 vs. S&P 500(R) Index (PERFORMANCE CHART)
Long/Short Equity Long/Short Equity Fund -- Institutional Fund -- Investor S&P 500(R) Class Class Index -------------------- ----------------- ---------- 08/31/1999 10000 10000 10000 08/31/2000 11373.9 11386.6 11633.4 08/31/2001 17271.2 17251.4 8796.52 08/31/2002 17069 17002.6 7214.14 08/31/2003 16875.6 16777.8 7929.86 08/31/2004 17335.5 17189.4 9010.03 08/31/2005 21097.5 20857.7 10140.4 08/31/2006 23825.7 23503.8 11040.1 08/31/2007 24446.4 24055.8 12711.2 08/31/2008 24719.4 24267.8 11295 08/31/2009 32140.4 31457.3 9233.19
The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1999 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, 2009
AVERAGE ANNUAL TOTAL RETURN GROSS NET ---------------------------------- EXPENSE EXPENSE 1 YEAR 3 YEAR 5 YEAR 10 YEAR RATIO RATIO ------ ------ ------ ------- ------- ------ Long/Short Equity Fund -- Institutional Class 30.02% 10.49% 13.14% 12.38% 4.39% 4.01% Long/Short Equity Fund -- Investor Class 29.63% 10.20% 12.85% 12.14% 4.64% 4.26% S&P 500(R) Index -18.25% -5.78% 0.49% -0.79% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE (INCLUDING INTEREST AND DIVIDEND EXPENSE ON SHORT SALES) ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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. The S&P 500(R) Index is an unmanaged index that measures the performance of 500 large-cap stocks. 6 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS ROBECO BOSTON PARTNERS MID CAP VALUE FUND (unaudited) Dear Shareholder: The Robeco Boston Partners Mid Cap Value Fund outperformed the Russell Midcap(R) Value Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned -9.50% and the Investor share class returned -9.79%. The Index returned -20.00%. In sum, the Fund outperformed the Index by 10.50% for the Institutional share class and by 10.21% for the Investor share class. Despite the volatile market conditions over the past year, the Fund outperformed the index due to strong stock selection across a diverse range of industries, including Basic Industries, Finance, REITs and the Consumer areas. Within Finance, we have gradually increased exposure to credit-sensitive financials as conditions have stabilized during 2009. Within the REIT sector, the Fund holds positions in traditional equity REIT and mortgage REIT areas, both of which contributed to relative performance. Overall, the Fund's positions contributed to relative performance in 11 of 13 major economic sectors, or an average of 93% of the Fund's market weight for the period. The Fund's Health Care and Transportation positions detracted approximately 0.3 percentage points from relative performance over the period. As we look ahead, we believe the Fund's construction in terms of our three-circle stock selection discipline (attractive valuation, sound fundamentals and a catalyst for change) has positioned it well for favorable performance over time. Sincerely, Steven Pollack Portfolio Manager, RBP Mid Cap Value Fund - ---------- 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 8/31/09) % OF NET ASSETS - --------------------------------- --------------- Lubrizol Corp., (The) 1.89% Manpower, Inc. 1.85% Marsh & McLennan Cos., Inc. 1.58% Annaly Capital Management, Inc. 1.58% Assurant, Inc. 1.52% Equifax, Inc. 1.51% Noble Energy, Inc. 1.49% Symantec Corp. 1.43% PPG Industries, Inc. 1.37% Alleghany Corp. 1.35%
PORTFOLIO REVIEW (AS OF 8/31/09) P/E: Price/Earnings 15.3x P/B: Price/Book 1.6x Holdings 118 Wtd. Average Mkt. Cap. (mil) $6,931 ROE: Return on Equity 13.4 OROA: Operating Return on Operating Assets 30.5
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 7 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 vs. Russell Indices (PERFORMANCE CHART)
Mid Cap Value Mid Cap Value Fund -- Institutional Fund -- Investor Russell Midcap(R) Russell 2500(R) Russell 2500(R) Class Class Value Index Value Index(1) Index(1) --------------------- ---------------- ----------------- --------------- --------------- 08/31/1999 10000 10000 10000 10000 10000 08/31/2000 10320.7 10290.5 12952 11277.5 13187.9 08/31/2001 11170 11109.1 14452.1 12927.6 11903.9 08/31/2002 10167.8 10080.4 13748.3 12440.3 10416.8 08/31/2003 12140.9 12027.1 15433.1 14512.3 12602.7 08/31/2004 13887.8 13720.1 19355.3 18097.8 14855.9 08/31/2005 17494.9 17240.6 24785.4 22624.4 18599.2 08/31/2006 18688.1 18377.2 28727.7 24918.4 20099.1 08/31/2007 22672 22239.4 32293.9 27101.5 22890.8 08/31/2008 21219 20766.7 28921.8 24864.2 21209.2 08/31/2009 19202.6 18733.6 23137.3 20225.4 17030.5
The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1999 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, 2009
AVERAGE ANNUAL TOTAL RETURN GROSS NET ---------------------------------- EXPENSE EXPENSE 1 YEAR 3 YEAR 5 YEAR 10 YEAR RATIO RATIO ------ ------ ------ ------- ------- ------ Mid Cap Value Fund -- Institutional Class -9.50% 0.91% 6.70% 6.74% 1.49% 1.01% Mid Cap Value Fund -- Investor Class -9.79% 0.64% 6.43% 6.48% 1.74% 1.26% Russell Midcap(R) Value Index -20.00% -6.95% 3.00% 6.29% n/a n/a Russell 2500(R) Value Index (1) -18.66% -6.91% 2.12% 7.23% n/a n/a Russell 2500(R) Index (1) -19.71% -5.19% 2.89% 5.53% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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. The Russell Midcap(R) Value Index measures the performance of the mid-cap value segment of the U.S. equity universe. The Russell 2500(R) Value Index is an unmanaged index considered representative of small to mid-cap value stocks. The Russell 2500(R) Index measures the performance of the small to mid-cap segment of the U.S. equity universe, commonly referred to as "smid" cap.The Russell 2500(R) Index is a subset of the Russell 3000(R) Index. It includes approximately 2,500 of the smallest securities based on a combination of their market cap and current index membership. 8 | ANNUAL REPORT 20097 ROBECO INVESTMENT FUNDS ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (unaudited) Dear Shareholder: The Robeco Boston Partners All-Cap Value Fund outperformed the Russell 3000(R) Value Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned -5.88% and the Investor share class returned -6.15%.The Index returned -20.30%. In sum, the Fund outperformed the Index by 14.42% for the Institutional share class and by 14.15% for the Investor share class. Over the past year, the market was characterized by two distinct periods: the Index's 50% decline from September 1st - March 9th and its 61% rally thereafter. The Fund outperformed the Index by 8 percentage points during the downturn through March 9th and kept pace with the Index in a very sharp rally that followed. Our investment discipline's focus on protecting capital in downturns and performing in rising markets underpinned the Fund's relative outperformance for the period. The Fund's leading contributors to relative performance included Finance, where we gradually increased our exposure to banks as conditions stabilized throughout the period; Technology, which has been grounded in blue-chip businesses at attractive valuations; and the Consumer Services areas, where we have found companies demonstrating a favorable combination of balance sheet strength and strong operating leverage. The Fund outperformed the Index in 10 of 13 major economic sectors for the one-year period.The Consumer Durables area, which averaged less than a 2% weighting within the Fund, was the largest detractor from relative performance. As we look ahead, we believe the Fund's construction in terms of our three-circle stock selection discipline (attractive valuation, sound fundamentals and a catalyst for change) has positioned it well for favorable performance over time. Sincerely, Duilio Ramallo Portfolio Manager, RBP All-Cap Value Fund - ---------- 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 8/31/09) % OF NET ASSETS - --------------------------------- --------------- JPMorgan Chase & Co. 4.15% Loews Corp. 2.61% International Business Machines Corp. 2.53% Amgen, Inc. 2.32% Pfizer, Inc. 2.28% Microsoft Corp. 2.14% Total SA - ADR 2.10% eBay, Inc. 2.06% Vodafone Group PLC - Sponsored ADR 2.03% Hewlett-Packard Co. 1.92%
PORTFOLIO REVIEW (AS OF 8/31/09) - ------------------------------- P/E: Price/Earnings 14.5x P/B: Price/Book 1.5x Holdings 119 Wtd. Average Mkt. Cap. (mil) $46,636 ROE: Return on Equity 13.5 OROA: Operating Return on Operating Assets 42.2
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 9 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 vs. Russell Indices (PERFORMANCE CHART)
All-Cap Value All-Cap Value Fund -- Institutional Fund -- Investor Russell 3000(R) Russell 3000(R) Class Class Value Index Index(1) --------------------- ---------------- --------------- --------------- 07/01/2002 10000 10000 10000 10000 08/31/2002 9450 9440 9089.49 9248.26 02/28/2003 8665.51 8636.63 8375.69 8577.32 08/31/2003 10851.9 10820.8 10221.5 10535.6 02/29/2004 13381.6 13324 12042.3 12122 08/31/2004 13401.8 13324 12024.3 11725.8 02/28/2005 15391.5 15296.9 13692.2 13047.2 08/31/2005 16393.7 16262.8 14109.6 13523.2 02/28/2006 17212 17058.8 15269 14691.9 08/31/2006 17697 17518.3 16175 14995.8 02/28/2007 19602.4 19389.3 17771.9 16462.3 08/31/2007 20241.5 19998.6 18166.3 17236.4 02/29/2008 18755.7 18490.8 16223.5 15716.9 08/31/2008 18510.8 18235.3 15603.1 15473.8 02/28/2009 12054.1 11838 11254.7 10956.3 08/31/2009 17422.3 17114.6 16282.4 15538.7
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, 2009
AVERAGE ANNUAL TOTAL RETURN --------------------------------------- GROSS NET SINCE EXPENSE EXPENSE 1 YEAR 3 YEAR 5 YEAR INCEPTION(2) RATIO RATIO ------ ------ ------ ------------ ------- ------- All-Cap Value Fund -- Institutional Class -5.88% -0.52% 5.39% 8.05% 1.70% 0.95% All-Cap Value Fund -- Investor Class -6.15% -0.77% 5.13% 7.78% 1.95% 1.20% Russell 3000(R) Value Index -20.30% -8.39% 0.53% 2.99% n/a n/a Russell 3000(R) Index (1) -18.62% -5.66% 1.04% 2.99% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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 benchmark of the Fund. Results of index performance are presented for general comparative purposes. (2) For the period July 1, 2002 (commencement of operations) through August 31, 2009. The Russell 3000(R) Value Index is an unmanaged index considered representative of broad value stocks. The Russell 3000(R) Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market 10 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS ROBECO WPG SMALL CAP VALUE FUND (unaudited) Dear Shareholder: The Robeco WPG Small Cap Value Fund outperformed the Russell 2000(R) Value Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned -12.93% and the Index returned - -20.68%. In sum, the Fund outperformed the Index by 7.75% for the Institutional share class. Areas of strength for the Fund included Consumer Non-Durables, Capital Goods, and Finance sectors.Areas that detracted from performance were Consumer Durables, Consumer Services, and Technology. We had a solid year picking stocks as asset selection accounted for all of the outperformance during the year while our sector allocation decisions detracted from performance. The fiscal 2009 year began on a difficult note.Within the first two months, the markets and free capitalism had their greatest test of resolve since The Great Depression. Over night bankruptcies, hastily arranged government engineered bailouts, and the cessation of discretionary spending became the norm. But by early March, the government backstops, liquidity institutions, and stimulus spending stabilized financial markets and promoted demand. Once investors got the scent that the economy had been pulled back from the abyss, markets around the world were off to the races. The past fiscal year was a tale of two halves: one of unmitigated doom and gloom followed by unbridled enthusiasm for the recovery.We're happy to have outperformed over this period, especially given the market upheaval. Although we've been pulled back from the brink by Keynesian measures on a global scale, we haven't allayed all of the issues confronting the economy. High levels of public debt, government budget deficits, a weak dollar, and persistent unemployment should be the norm for years to come. After 10 years of managing this strategy though various economic climates, we believe we have the experience to navigate these issues. We strive to continue to outperform over the next 10 years. Sincerely, Richard Shuster Portfolio Manager,WPG Small Cap Value Fund - ---------- 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 8/31/09) % OF NET ASSETS - --------------------------------- --------------- MDC Partners, Inc., Class A 3.68% Meadowbrook Insurance Group, Inc. 3.39% Chiquita Brands International, Inc. 2.26% Princeton Review, Inc. (The) 2.04% CDC Software Corp., ADR 1.88% Delphi Financial Group, Inc., Class A 1.78% Alliance One International, Inc. 1.62% Pantry, Inc. (The) 1.55% FBR Capital Markets Corp. 1.51% Regis Corp. 1.51%
PORTFOLIO REVIEW (AS OF 8/31/09) - -------------------------------- P/E: Price/Earnings 12.8x P/B: Price/Book 1.1x Holdings 113 Wtd. Average Mkt. Cap. (mil) $ 761 ROE: Return on Equity -2.1 OROA: Operating Return on Operating Assets 18.9
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 11 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 vs. Russell Index (PERFORMANCE CHART)
WPG Small Cap Value Fund -- Institutional Russell 2000(R) Class Value Index --------------------- --------------- 08/31/1999 10000 10000 08/31/2000 16840.5 11367.8 08/31/2001 11128.8 13416 08/31/2002 8874.05 12665.6 08/31/2003 11129.5 15664.8 08/31/2004 13073.9 18718.9 08/31/2005 15055.4 22950.2 08/31/2006 16132.8 25867.9 08/31/2007 18436.9 27588 08/31/2008 15636.3 25512.8 08/31/2009 13614.9 20485.9
The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1999 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, 2009
AVERAGE ANNUAL TOTAL RETURN GROSS NET ---------------------------------- EXPENSE EXPENSE 1 YEAR 3 YEAR 5 YEAR 10 YEAR RATIO RATIO ------ ------ ------ ------- ------- ------ WPG Small Cap Value Fund -- Institutional Class -12.93% -5.50% 0.81% 3.13% 1.65% 1.65% Russell 2000(R) Value Index -20.68% -7.86% 1.57% 7.31% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUS. 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. The Russell 2000(R) Value Index is an unmanaged index considered representative of small-cap value stocks. 12 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS SAM SUSTAINABLE CLIMATE FUND (unaudited) Dear Shareholder: The SAM Sustainable Climate Fund underperformed the MSCI World Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned -19.55% and the Investor share class returned - -19.88%. The Index returned -17.21%. In sum, the Fund underperformed the Index by -2.34% for the Institutional share class and by -2.67% for the Investor share class. At the end of 2008, worries about more write-downs in the financial services industry weighed particularly heavily on the markets. In line with the poor macro data, energy prices generally trended lower. The renewable energies sector was also generally slightly weaker.The downstream power generation companies held up better, supported by their relatively stable cash flow situation. Companies in the solar energy sector were generally weaker, suffering from earnings downgrades. Energy infrastructure companies benefited from expectations of big infrastructure spending plans in the U.S. over the coming years. During the first quarter 2009, the renewable energies sector profited from the very surprising announcement of China intending to put in place a very supportive incentive scheme, including upfront payments and locally defined feed-in tariffs.This could mean a significant trigger for the whole sector. In the second quarter 2009, the increasing legislative support for the renewable energies and energy efficiency sector was confirmed by the U.S. House passing a Federal Renewable Electricity Standard (RES), requiring all electric utilities to meet 20% of their demand through renewable sources and energy efficiency by 2020. In addition, new standards for building efficiency and efficiency in industry have been established. At the same time, a carbon cap-and-trade system is proposed, aiming to reduce carbon emissions from major U.S. sources by 17% in 2020, and over 80% by 2050 compared to 2005. In August, companies in the building materials and building efficiency sector received a significant boost as the housing markets worldwide seem to have bottomed out. The renewable energies sector was generally weaker. Notably, the solar sector suffered, as the prices of solar modules continued to decline. The sectors of renewable energies and energy efficiency continue to benefit from strong legislative support worldwide.We are very excited about the prospects of these new programs, which should show a first meaningful impact in the latter part of 2009, and even more in 2010. We are confident that we are well positioned to profit from these initiatives. Sincerely, Dr. Thiemo Lang Senior Portfolio Manager, SAM Sustainable Climate Fund - ---------- 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 Fund is non-diversified.The Fund may invest more of its assets in a smaller number of companies. Gains or losses on a single stock may have a greater impact on the Fund. The Fund focuses its investments in companies that have exposure to trends in climate-related industries. Therefore, the Fund may tend to be more volatile than other mutual funds and its value may tend to rise and fall more rapidly. International investing is subject to currency volatility, political, social or economic instability, taxation, auditing and other financial practices.
TOP TEN POSITIONS (AS OF 8/31/09) % OF NET ASSETS - --------------------------------- --------------- Covanta Holding Corp. 3.77% Smit Internationale NV 3.63% Iberdrola Renovables SA 3.61% Wienerberger AG 3.57% EDP Renovaveis SA 3.56% Gamesa Corp.Tecnologica SA 3.51% Zumtobel AG 3.38% Ram Power Corp. 3.16% ITC Holdings Corp. 3.15% Canadian Solar, Inc. 3.03%
PORTFOLIO REVIEW (AS OF 8/31/09) - -------------------------------- P/E: Price/Earnings 15.1x P/B: Price/Book 1.7x Holdings 64 Wtd. Average Mkt. Cap. (mil) $9,099 ROE: Return on Equity 9.6 OROA: Operating Return on Operating Assets 31.9
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 13 ROBECO INVESTMENT FUNDS SAM SUSTAINABLE CLIMATE FUND (unaudited) (continued) Comparison of Change in Value of $10,000 Investment in SAM Sustainable Climate Fund vs. MSCI World Index (PERFORMANCE CHART)
SAM Sustainable Climate Fund -- SAM Sustainable Institutional Climate Fund -- MSCI World Class Investor Class Index --------------- --------------- ---------- 10/01/2007 10000 10000 10000 02/29/2008 8720 8720 8869 08/31/2008 8360 8360 8308.55 02/28/2009 4278.18 4267.05 4689.9 08/31/2009 6725.74 6698.16 6878.34
The chart assumes a hypothetical $10,000 initial investment in the Fund made on October 1, 2007 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the MSCI World Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2009
AVERAGE ANNUAL TOTAL RETURN --------------------- GROSS NET SINCE EXPENSE EXPENSE 1 YEAR INCEPTION(1) RATIO RATIO ------ ------------ ------- ------- SAM Sustainable Climate Fund -- Institutional Class -19.55% -18.71% 9.19% 1.51% SAM Sustainable Climate Fund -- Investor Class -19.88% -18.88% 9.44% 1.76% MSCI World Index -17.21% -17.30% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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 October 1, 2007 (commencement of operations) through August 31, 2009. The MSCI World Index is an unmanaged index of companies representative of the market structure of 23 developed market countries in North America, Europe, and the Asia/Pacific Region. 14 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS SAM SUSTAINABLE WATER FUND (unaudited) Dear Shareholder: The SAM Sustainable Water Fund underperformed the MSCI World Index for the one-year period ended August 31, 2009. During the reporting period, the Institutional share class returned -22.24% and the Investor share class returned - -22.66%. The Index returned -17.21% during the same period. In sum, the Fund underperformed the Index by -5.03% for the Institutional share class and by - -5.45% for the Investor share class. After the strong rebound, we started to reduce some industrial names due to relative valuations. Engineering companies in particular benefited from the hope of stimulus money and prices were a bit ahead of itself. We increased exposure to U.S. Utilities as the regulatory regimes in California and some other states become more favorable. On the other side of the Atlantic, the outlook is a bit more challenging. OFWAT, the British water authority proposed a reduction of the allowed returns on regulated assets, which will harm the income of British water utilities. British water utilities were underweight in the strategy. Stock selection is very important in this environment as the companies will master this challenging environment differently and will also be positioned differently for the next economic expansion. British water utilities are underweight while International utilities and U.S. water utilities are overweight. Companies which will benefit from the growth opportunities in China and the rest of Asia are overweight. While the past fiscal year was challenging, the outlook for the water industry has not changed. The long-term trends in the water sector remain intact and we believe the water sector will be less impacted by business cycles than others. We consider investments in companies that are part of the water value chain very attractive because water companies benefit from the long-term trends and challenges such as water shortages, water quality issues, aging infrastructure and climate change. All of these trends are intact and will create an attractive environment for companies active in the value water chain. Sincerely, Dieter Kuffer Senior Portfolio Manager, SAM Sustainable Water Fund - ---------- 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 Fund is non-diversified. The Fund may invest more of its assets in a smaller number of companies. Gains or losses on a single stock may have a greater impact on the Fund. The Fund focuses its investments in companies that have exposure to trends in water-related industries. Therefore, the Fund may tend to be more volatile than other mutual funds and its value may tend to rise and fall more rapidly. International investing is subject to currency volatility, political, social or economic instability, taxation, auditing and other financial practices.
TOP TEN POSITIONS (AS OF 8/31/09) % OF NET ASSETS - --------------------------------- --------------- Suez Environnement SA 6.07% ITT Corp. 5.97% Veolia Environnement 5.00% Thermo Fisher Scientific, Inc. 4.87% American Water Works Co., Inc. 4.85% Pall Corp. 4.42% Danaher Corp. 4.27% Chaoda Modern Agriculture 3.99% Guangdong Investment Ltd. 3.62% Wavin N.V. 3.55%
PORTFOLIO REVIEW (AS OF 8/31/09) - -------------------------------- P/E: Price/Earnings 16.3x P/B: Price/Book 1.6x Holdings 43 Wtd. Average Mkt. Cap. (mil) $6,694 ROE: Return on Equity 11.1 OROA: Operating Return on Operating Assets 17.7
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 15 ROBECO INVESTMENT FUNDS SAM SUSTAINABLE WATER FUND (unaudited) (continued) Comparison of Change in Value of $10,000 Investment in SAM Sustainable Water Fund vs. MSCI World Index (PERFORMANCE CHART)
SAM Sustainable SAM Sustainable Water Fund -- Water Fund -- MSCI World Institutional Class Investor Class Index ------------------- --------------- ---------- 10/01/2007 10000 10000 10000 02/29/2008 9150 9150 8869 08/31/2008 8780 8780 8308.55 02/28/2009 4865.15 4853.53 4689.9 08/31/2009 6827.4 6790.91 6878.34
The chart assumes a hypothetical $10,000 initial investment in the Fund made on October 1, 2007 (commencement of operations) and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the MSCI World Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2009
AVERAGE ANNUAL TOTAL RETURN --------------------- GROSS NET SINCE EXPENSE EXPENSE 1 YEAR INCEPTION(1) RATIO RATIO ------ ------------ ------- ------- SAM Sustainable Water Fund -- Institutional Class -22.24% -18.07% 8.90% 1.51% SAM Sustainable Water Fund -- Investor Class -22.66% -18.30% 9.15% 1.76% MSCI World Index -17.21% -17.30% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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 October 1, 2007 (commencement of operations) through August 31, 2009. The MSCI World Index is an unmanaged index of companies representative of the market structure of 23 developed market countries in North America, Europe, and the Asia/Pacific Region. 16 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS SAM SUSTAINABLE GLOBAL ACTIVE FUND (unaudited) Dear Shareholder: The SAM Sustainable Global Active Fund Institutional share class underperformed the MSCI World Index for the period June 18, 2009 to August 31, 2009 and the Investor share class underperformed the MSCI World Index for the period July 15, 2009 to August 31, 2009. During the reporting periods, the Institutional share class returned 13.00% and the Investor share class returned 11.55%. The Index returned 14.39% and 15.07%, respectively. In sum, the Fund underperformed the Index by -1.39% for the Institutional share class and by - -3.52% for the Investor share class. At the end of 2008 worries about more write-downs in the financial services industry weighed heavily on the markets. In spite of interest rate cuts on the part of various central banks equity prices continued to fall. With the publication of further weak economic and corporate data at the beginning of 2009 the stock markets continued their downturn. In the second quarter 2009, the global equity markets recovered significantly. During this period, stock picking had a negative impact on market performance. These negative effects came primarily from overweight exposure in defensive stocks in the health care and telecom sectors. Positive effects came from the financial sector, which benefited from the publication of unexpectedly good quarterly results by the largest U.S. banks. The state of global equity markets continued to improve in July and August 2009. Amongst others positive macroeconomic data from the U.S. property market carried the indices higher. Over this period, the Fund's overweight in the materials and consumer discretionary stocks has had a positive contribution. The Fund will continue to invest in sustainable companies that display an attractive price value disparity. We are convinced that our strategy will lead to better performance than the MSCI World Index in the long term. Sincerely, Diego d' Argenio Senior Portfolio Manager, SAM Sustainable Global Active Fund - ---------- 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 Fund is non-diversified. The Fund may invest more of its assets in a smaller number of companies. Gains or losses on a single stock may have a greater impact on the Fund. The Fund's sustainability investment criteria may limit the number of investment opportunities available to the Fund. Moreover, companies that promote sustainability goals may not perform as well as companies that do not pursue such goals. International investing is subject to currency volatility, political, social or economic instability, taxation, auditing and other financial practices.
TOP TEN POSITIONS (AS OF 8/31/09) % OF NET ASSETS - --------------------------------- --------------- Hewlett-Packard Co. 3.57% Daito Trust Construction Co., Ltd. 3.57% Barclays PLC 3.53% Noble Group Ltd. 3.48% Newmont Mining Corp. 3.41% Portugal Telecom, SGPS SA 3.15% International Business Machines Corp. 3.11% UnitedHealth Group, Inc. 3.11% National Australia Bank Ltd. 2.80% Pfizer, Inc. 2.80%
PORTFOLIO REVIEW (AS OF 8/31/09) - -------------------------------- P/E: Price/Earnings 13.0x P/B: Price/Book 1.8x Holdings 59 Wtd. Average Mkt. Cap. (mil) $40,125 ROE: Return on Equity 23.2 OROA: Operating Return on Operating Assets 22.5
Portfolio holdings are subject to change at any time. ANNUAL REPORT 2009 | 17 ROBECO INVESTMENT FUNDS SAM SUSTAINABLE GLOBAL ACTIVE FUND (unaudited) (concluded) Comparison of Change in Value of $10,000 Investment in SAM Sustainable Global Active Fund vs. MSCI World Index (PERFORMANCE CHART)
SAM Sustainable Global Active Fund -- MSCI World Institutional Class Index --------------------- ---------- 6/18/2009 10000 10000 6/30/2009 9970 10128 07/31/2009 10950 10988 8/31/2009 11300 11439
(PERFORMANCE CHART)
SAM Sustainable Global Active Fund -- MSCI World Investor Class Index --------------------- ---------- 07/15/2009 10000 10000 07/31/2009 10950 11053 08/31/2009 11155 11509
The chart assumes a hypothetical $10,000 initial investment in the Fund made on the commencement of operations and reflects Fund expenses. Investors should note that the Fund is an actively managed mutual fund while the MSCI World Index is unmanaged, does not incur expenses and is not available for investment. For Period Ended August 31, 2009
GROSS NET SINCE EXPENSE EXPENSE INCEPTION RATIO RATIO --------- ------- ------- SAM Sustainable Global Active Fund -- Institutional Class(1) 13.00% 1.42% 1.20% MSCI World Index 14.39% n/a n/a SAM Sustainable Global Active Fund -- Investor Class(2) 11.55% 1.67% 1.45% MSCI World Index 15.07% n/a n/a
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 ANNUAL OPERATING EXPENSE RATIOS ABOVE ARE AS STATED IN THE CURRENT PROSPECTUSES. THESE RATES 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 June 18, 2009 (commencement of operations) through August 31, 2009. (2) For the period July 15, 2009 (commencement of operations) through August 31, 2009. The MSCI World Index is an unmanaged index of companies representative of the market structure of 23 developed market countries in North America, Europe, and the Asia/Pacific Region. 18 | ANNUAL REPORT 2009 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, 2009 through August 31, 2009, 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. EXPENSE TABLE
BEGINNING ACCOUNT ENDING ACCOUNT ANNUALIZED EXPENSES VALUE VALUE EXPENSE PAID DURING MARCH 1, 2009 AUGUST 31, 2009 RATIO PERIOD* ----------------- --------------- ---------- ----------- ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II INSTITUTIONAL Actual ........................................ $1,000.00 $1,691.90 1.30% $ 8.82 Hypothetical .................................. 1,000.00 1,018.57 1.30% 6.64 INVESTOR Actual ........................................ $1,000.00 $1,690.60 1.55% $10.51 Hypothetical .................................. 1,000.00 1,017.29 1.55% 7.91 ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND INSTITUTIONAL Actual ........................................ $1,000.00 $1,850.80 3.08%(1) $22.13 Hypothetical .................................. 1,000.00 1,009.48 3.08%(1) 15.72 INVESTOR Actual ........................................ $1,000.00 $1,849.00 3.35%(1) $24.06 Hypothetical .................................. 1,000.00 1,008.10 3.35%(1) 17.10 ROBECO BOSTON PARTNERS MID CAP VALUE FUND INSTITUTIONAL Actual ........................................ $1,000.00 $1,500.00 1.00% $ 6.30 Hypothetical .................................. 1,000.00 1,020.10 1.00% 5.10 INVESTOR Actual ........................................ $1,000.00 $1,497.50 1.25% $ 7.87 Hypothetical .................................. 1,000.00 1,018.82 1.25% 6.38
ANNUAL REPORT 2009 | 19 ROBECO INVESTMENT FUNDS FUND EXPENSE EXAMPLES (unaudited) (continued)
BEGINNING ACCOUNT ENDING ACCOUNT ANNUALIZED EXPENSES VALUE VALUE EXPENSE PAID DURING MARCH 1, 2009 AUGUST 31, 2009 RATIO PERIOD* ----------------- --------------- ---------- ----------- ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND INSTITUTIONAL Actual ........................................ $1,000.00 $1,445.30 0.95% $ 5.86 Hypothetical .................................. 1,000.00 1,020.36 0.95% 4.85 INVESTOR Actual ........................................ $1,000.00 $1,445.70 1.20% $ 7.40 Hypothetical .................................. 1,000.00 1,019.08 1.20% 6.13 ROBECO BOSTON PARTNERS WPG SMALL CAP VALUE FUND INSTITUTIONAL Actual ........................................ $1,000.00 $1,529.70 1.52% $ 9.69 Hypothetical .................................. 1,000.00 1,017.45 1.52% 7.76 SAM SUSTAINABLE CLIMATE FUND INSTITUTIONAL Actual ........................................ $1,000.00 $1,572.10 1.50% $ 9.72 Hypothetical .................................. 1,000.00 1,017.55 1.50% 7.66 INVESTOR Actual ........................................ $1,000.00 $1,569.70 1.75% $11.33 Hypothetical .................................. 1,000.00 1,016.27 1.75% 8.93 SAM SUSTAINABLE WATER FUND INSTITUTIONAL Actual ........................................ $1,000.00 $1,403.30 1.50% $ 9.09 Hypothetical .................................. 1,000.00 1,017.55 1.50% 7.66 INVESTOR Actual ........................................ $1,000.00 $1,399.20 1.75% $10.58 Hypothetical .................................. 1,000.00 1,016.27 1.75% 8.93 SAM SUSTAINABLE GLOBAL ACTIVE FUND** INSTITUTIONAL Actual ........................................ $1,000.00 $1,130.00 1.20% $ 2.59 Hypothetical .................................. 1,000.00 1,019.08 1.20% 6.13 INVESTOR Actual ........................................ $1,000.00 $1,115,50 1.45% $ 1.97 Hypothetical .................................. 1,000.00 1,017.80 1.45% 7.40
* 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 Class commenced operations on June 18, 2009. Investor Class commenced operations on July 15, 2009. (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 0.85% and 0.81%, Institutional and Investor, respectively, of average net assets for the most recent fiscal half-year. 20 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 (unaudited) PORTFOLIO HOLDINGS SUMMARY TABLES ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Consumer Services ................................... 25.7% $16,687,850 Finance ............................................. 19.1 12,412,940 Real Estate Investment Trusts ....................... 9.4 6,129,463 Health Care ......................................... 9.1 5,889,239 Consumer Non-Durables ............................... 8.2 5,297,833 Capital Goods ....................................... 7.9 5,156,441 Technology .......................................... 5.9 3,808,894 Basic Industries .................................... 3.5 2,265,481 Energy .............................................. 3.0 1,924,542 Consumer Durables ................................... 2.5 1,613,535 Transportation ...................................... 1.6 1,024,475 Utilities ........................................... 0.9 624,121 Communications ...................................... 0.5 319,114 OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 2.7 1,719,307 ----- ----------- NET ASSETS ............................................. 100.0% $64,873,235 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Finance ............................................. 18.8% $16,134,523 Health Care ......................................... 14.8 12,667,189 Technology .......................................... 14.8 12,652,241 Consumer Services ................................... 12.1 10,340,620 Consumer Non-Durables ............................... 10.1 8,633,358 Capital Goods ....................................... 7.8 6,640,753 Basic Industries .................................... 4.8 4,125,357 Consumer Durables ................................... 3.7 3,204,592 Energy .............................................. 2.3 1,980,649 Transportation ...................................... 1.3 1,115,974 Communications ...................................... 0.5 456,511 PREFERRED STOCK ........................................ 4.3 3,726,739 WARRANTS ............................................... 0.0 -- SECURITIES SOLD SHORT .................................. (18.9) (16,222,474) OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 23.6 20,227,554 ----- ----------- NET ASSETS ............................................. 100.0% $85,683,586 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. ROBECO BOSTON PARTNERS MID CAP VALUE FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Finance ............................................. 17.7% $ 8,256,673 Consumer Services ................................... 17.7 8,248,829 Technology .......................................... 12.8 5,954,794 Basic Industries .................................... 8.0 3,737,763 Capital Goods ....................................... 7.3 3,380,284 Utilities ........................................... 6.4 3,002,570 Health Care ......................................... 6.3 2,951,556 Real Estate Investment Trusts ....................... 5.7 2,679,319 Energy .............................................. 5.3 2,446,961 Consumer Non-Durables ............................... 4.1 1,929,985 Consumer Durables ................................... 2.1 967,295 Communications ...................................... 1.3 609,663 Transportation ...................................... 1.1 501,487 OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 4.2 1,939,721 ----- ----------- NET ASSETS ............................................. 100.0% $46,606,900 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Finance ............................................. 26.5% $18,065,543 Consumer Services ................................... 16.0 10,935,838 Health Care ......................................... 14.9 10,157,781 Technology .......................................... 12.1 8,263,772 Energy .............................................. 9.7 6,626,569 Consumer Non-Durables ............................... 8.3 5,668,316 Consumer Durables ................................... 2.6 1,738,690 Capital Goods ....................................... 2.3 1,586,301 Real Estate Investment Trusts ....................... 2.1 1,429,319 Communications ...................................... 2.0 1,388,516 Utilities ........................................... 1.6 1,102,291 Basic Industries .................................... 1.0 704,061 CORPORATE BONDS ........................................ 0.6 425,242 WRITTEN OPTIONS ........................................ (1.5) (1,035,526) OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 1.8 1,214,924 ----- ----------- NET ASSETS ............................................. 100.0% $68,271,637 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 21 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 (unaudited) PORTFOLIO HOLDINGS SUMMARY TABLES ROBECO WPG SMALL CAP VALUE FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Finance ............................................. 28.4% $10,048,292 Consumer Services ................................... 15.6 5,531,885 Technology .......................................... 9.7 3,437,807 Consumer Non-Durables ............................... 8.1 2,867,338 Real Estate Investment Trusts ....................... 7.3 2,594,892 Utilities ........................................... 6.4 2,260,683 Capital Goods ....................................... 5.2 1,834,394 Health Care ......................................... 3.9 1,369,167 Transportation ...................................... 3.8 1,347,009 Energy .............................................. 3.2 1,156,648 Basic Industries .................................... 1.3 454,042 Consumer Durables ................................... 0.5 185,575 Communications ...................................... 0.3 96,840 OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 6.3 2,220,412 ----- ----------- NET ASSETS ............................................. 100.0% $35,404,984 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. SAM SUSTAINABLE CLIMATE FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Industrials ......................................... 49.4% $ 1,657,663 Utilities ........................................... 29.0 972,196 Materials ........................................... 13.7 457,867 Information Technology .............................. 3.2 107,150 Consumer Discretionary .............................. 3.0 101,651 OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 1.7 57,422 ----- ----------- NET ASSETS ............................................. 100.0% $ 3,353,949 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. SAM SUSTAINABLE WATER FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Industrials ......................................... 46.4% $ 1,979,536 Utilities ........................................... 27.6 1,176,687 Consumer Staples .................................... 10.2 436,927 Health Care ......................................... 6.0 255,820 Materials ........................................... 4.9 209,409 OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 4.9 210,553 ----- ----------- NET ASSETS ............................................. 100.0% $ 4,268,932 ===== ===========
Portfolio holdings are subject to change at any time. SAM SUSTAINABLE GLOBAL ACTIVE FUND
% of Net Security Type/Sector Classification Assets Value - ----------------------------------- -------- ----------- COMMON STOCK Financials .......................................... 20.3% $ 2,358,345 Health Care ......................................... 11.8 1,368,076 Consumer Staples .................................... 9.8 1,140,875 Information Technology .............................. 9.0 1,051,445 Industrial .......................................... 8.8 1,016,818 Materials ........................................... 8.4 978,491 Consumer Discretionary .............................. 8.2 955,365 Energy .............................................. 8.1 937,746 Utilities ........................................... 7.3 846,806 Telecommunciation Services .......................... 6.4 743,852 OTHER ASSETS IN EXCESS OF LIABILITIES ...................................... 1.9 219,300 ----- ----------- NET ASSETS ............................................. 100.0% $11,617,119 ===== ===========
- ----------- Portfolio holdings are subject to change at any time. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 22 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--97.3% BASIC INDUSTRIES--3.5% Olin Corp. ..................................... 13,105 $ 219,368 Rock-Tenn Co., Class A ......................... 4,430 227,215 Schweitzer-Mauduit International, Inc. ......... 19,710 969,338 Sensient Technologies Corp. .................... 11,555 301,239 USEC, Inc.* .................................... 120,510 548,321 ------------ 2,265,481 ------------ CAPITAL GOODS--7.9% Actuant Corp., Class A ......................... 8,825 124,697 Acuity Brands, Inc. ............................ 14,160 454,678 Beacon Roofing Supply, Inc.* ................... 35,725 600,895 Brady Corp., Class A ........................... 8,393 248,685 Drew Industries, Inc.* ......................... 16,655 342,760 Gardner Denver, Inc.* .......................... 9,330 302,945 Granite Construction, Inc. ..................... 5,685 182,489 Griffon Corp.* ................................. 29,140 308,010 Lennox International, Inc. ..................... 9,225 330,993 Lincoln Electric Holdings, Inc. ................ 12,115 551,475 LSI Industries, Inc. ........................... 16,075 118,955 Mueller Industries, Inc. ....................... 8,385 202,833 RBC Bearings, Inc.* ............................ 6,025 132,550 Rofin-Sinar Technologies, Inc.* ................ 4,945 112,449 RTI International Metals, Inc.* ................ 15,335 294,739 Toro Co. ....................................... 7,630 289,406 Tutor Perini Corp* ............................. 9,530 186,979 Wesco International, Inc.* ..................... 15,435 370,903 ------------ 5,156,441 ------------ COMMUNICATIONS--0.5% EarthLink, Inc.* ............................... 38,355 319,114 ------------ CONSUMER DURABLES--2.5% Lennar Corp., Class A .......................... 42,675 646,526 MDC Holdings, Inc. ............................. 8,235 308,483 Tempur-Pedic International, Inc. ............... 44,495 658,526 ------------ 1,613,535 ------------ CONSUMER NON-DURABLES--8.2% Alliance One International, Inc.* .............. 65,000 248,950 BJ's Wholesale Club, Inc.* ..................... 14,190 462,594 Brown Shoe Co., Inc. ........................... 29,882 224,115 Fresh Del Monte Produce, Inc.* ................. 18,695 428,116 Matthews International Corp., Class A 7,985 278,197 NBTY, Inc.* .................................... 18,750 694,875 Nu Skin Enterprises, Inc., Class A ............. 28,380 489,555 RC2 Corp.* ..................................... 34,865 547,381 Skechers U.S.A., Inc., Class A* ................ 28,925 515,154 Steven Madden Ltd.* ............................ 8,220 264,931 Take-Two Interactive Software, Inc.* ........... 15,185 159,443 Tupperware Brands Corp. ........................ 11,115 411,144 Universal Corp. ................................ 10,925 402,914 Warnaco Group, Inc., (The)* .................... 4,480 170,464 ------------ 5,297,833 ------------ CONSUMER SERVICES--25.7% ABM Industries, Inc. ........................... 16,190 363,142 Arbitron Inc ................................... 16,995 311,348
Number of Shares Value ------------ ------------ CONSUMER SERVICES--(CONTINUED) Asbury Automative Group, Inc.* ................. 39,880 $ 498,500 Asset Acceptance Capital Corp.* ................ 20,560 149,677 Bowne & Co., Inc. .............................. 124,805 873,635 Callaway Golf Co. .............................. 28,785 203,510 Charming Shoppes, Inc.* ........................ 106,930 560,313 Corporate Executive Board Co., (The) ........... 16,145 388,287 Dress Barn, Inc. (The)* ........................ 31,565 512,300 Ennis, Inc. .................................... 16,040 218,625 Finish Line, Inc., (The), Class A .............. 50,370 415,553 Foot Locker, Inc. .............................. 10,850 115,661 Franklin Covey Co.* ............................ 30,425 168,555 G&K Services, Inc., Class A .................... 13,542 318,237 Group 1 Automotive, Inc. ....................... 13,470 379,450 Gymboree Corp. (The)* .......................... 5,425 242,986 Heartland Payment Systems, Inc. ................ 44,545 557,258 Heidrick & Struggles International, Inc. ....... 29,170 613,153 Hillenbrand, Inc. .............................. 35,245 705,605 Huron Consulting Group Inc* .................... 12,620 237,508 InfoGROUP, Inc.* ............................... 36,875 227,519 International Speedway Corp., Class A .......... 18,948 526,944 Jackson Hewitt Tax Service, Inc. ............... 39,515 220,889 Knoll, Inc. .................................... 44,808 431,501 Live Nation, Inc.* ............................. 125,240 880,437 MAXIMUS, Inc. .................................. 7,115 296,340 Men's Wearhouse, Inc., (The) ................... 19,060 495,560 Monster Worldwide, Inc.* ....................... 38,560 625,443 MPS Group, Inc.* ............................... 27,405 270,213 Navigant Consulting, Inc.* ..................... 33,300 419,247 PetMed Express, Inc. ........................... 11,646 210,676 Regis Corp. .................................... 29,805 482,245 Rent-A-Center, Inc.* ........................... 23,325 460,202 School Specialty, Inc.* ........................ 6,680 152,237 Service Corp. International .................... 164,505 1,164,695 Spherion Corp.* ................................ 82,705 448,261 Steiner Leisure Ltd.* .......................... 5,930 196,995 Steinway Musical Instruments* .................. 7,745 88,913 Watson Wyatt Worldwide, Inc., Class A .......... 12,595 550,402 World Fuel Services Corp. ...................... 15,706 705,828 ------------ 16,687,850 ------------ ENERGY--3.0% Approach Resources, Inc.* ...................... 20,755 155,663 Bristow Group, Inc.* ........................... 30,335 885,782 Dril-Quip, Inc.* ............................... 10,985 468,620 Flotek Industries, Inc.* ....................... 30,045 48,973 Helix Energy Solutions Group, Inc.* ............ 24,810 290,277 Petroleum Development Corp.* ................... 5,495 75,227 ------------ 1,924,542 ------------ FINANCE--19.1% AMERISAFE, Inc.* ............................... 13,875 236,985 Apollo Investment Corp. ........................ 42,690 395,309 Ares Capital Corp. ............................. 70,510 655,743 Centerstate Banks, Inc. ........................ 26,220 219,199 CNA Surety Corp.* .............................. 10,755 170,789 Cowen Group., Inc.* ............................ 20,610 133,965
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 23 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II (concluded) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ FINANCE--(CONTINUED) East West Bancorp, Inc. ........................ 62,615 $ 576,684 FBR Capital Markets Corp.* ..................... 91,760 496,422 Fifth Street Finance Corp. ..................... 47,570 489,495 First Citizens Bancshares, Inc. ................ 2,510 347,434 First Financial Bancorp ........................ 22,715 191,715 Flagstone Reinsurance Holdings Ltd. ............ 17,815 193,471 Gladstone Capital Corp. ........................ 11,765 88,120 Hanover Insurance Group, Inc., (The) ........... 4,150 169,694 Horace Mann Educators Corp. .................... 19,195 235,139 Infinity Property & Casualty Corp. ............. 8,565 376,603 IPC Holdings Ltd. .............................. 22,940 743,715 JMP Group, Inc. ................................ 50,490 517,523 Maiden Holdings Ltd. ........................... 75,240 574,834 Max Capital Group Ltd. ......................... 55,540 1,136,348 Navigators Group, Inc., (The)* ................. 6,685 346,952 Nelnet, Inc., Class A* ......................... 54,341 802,073 PHH Corp.* ..................................... 40,275 856,247 Platinum Underwriters Holdings Ltd. ............ 22,630 820,338 ProAssurance Corp.* ............................ 3,160 165,900 Safety Insurance Group, Inc. ................... 7,590 243,867 SeaBright Insurance Holdings, Inc.* ............ 13,640 136,536 State Auto Financial Corp. ..................... 9,635 165,433 SVB Financial Group* ........................... 8,110 322,373 United America Indemnity Ltd., Class A* ........ 21,387 133,241 United Rentals, Inc.* .......................... 9,995 91,854 Washington Federal, Inc. ....................... 25,535 378,939 ------------ 12,412,940 ------------ HEALTH CARE--9.1% Amedisys, Inc.* ................................ 7,690 342,513 Centene Corp.* ................................. 13,550 234,551 Conmed Corp.* .................................. 18,895 336,898 Haemonetics Corp.* ............................. 5,345 281,361 Hanger Orthopedic Group, Inc.* ................. 22,845 320,058 Home Diagnostics, Inc.* ........................ 36,180 216,718 Invacare Corp. ................................. 11,250 243,675 Kindred Healthcare, Inc.* ...................... 33,345 476,167 LifePoint Hospitals, Inc.* ..................... 17,570 441,534 Lincare Holdings, Inc.* ........................ 15,765 416,038 Medical Action Industries, Inc.* ............... 15,285 191,521 Odyssey HealthCare, Inc.* ...................... 30,245 389,556 PharMerica Corp.* .............................. 14,830 297,342 RehabCare Group, Inc.* ......................... 8,880 186,391 Res-Care, Inc.* ................................ 9,465 137,337 Symmetry Medical, Inc.* ........................ 25,055 276,106 U.S. Physical Therapy, Inc.* ................... 57,619 836,628
Number of Shares Value ------------ ------------ HEALTH CARE--(CONTINUED) Zoll Medical Corp.* ............................ 14,730 $ 264,845 ------------ 5,889,239 ------------ REAL ESTATE INVESTMENT TRUSTS--9.4% Anworth Mortgage Asset Corp. ................... 158,432 1,186,656 Capstead Mortgage Corp. ........................ 37,965 518,222 Cypress Sharpridge Investments, Inc.* .......... 43,485 608,790 Gladstone Commercial Corp. ..................... 13,565 182,314 Hatteras Financial Corp. ....................... 19,425 580,613 Jones Lang LaSalle, Inc. ....................... 27,125 1,271,620 MFA Financial, Inc. ............................ 154,450 1,223,244 Redwood Trust, Inc. ............................ 34,810 558,004 ------------ 6,129,463 ------------ TECHNOLOGY--5.9% Bel Fuse, Inc., Class B ........................ 12,000 202,800 Belden, Inc. ................................... 14,630 306,206 CIBER, Inc.* ................................... 65,760 256,464 Coherent, Inc.* ................................ 5,475 122,421 Diebold, Inc. .................................. 10,590 319,500 Electronics For Imaging, Inc.* ................. 21,300 226,632 EnerSys* ....................................... 39,050 776,705 Gilat Satellite Networks Ltd.* ................. 26,305 111,796 Imation Corp. .................................. 23,010 197,886 Insight Enterprises, Inc.* ..................... 14,690 168,494 Ness Technologies, Inc.* ....................... 27,595 166,674 NETGEAR, Inc.* ................................. 21,720 370,978 PAR Technology Corp.* .......................... 29,495 179,330 Technitrol, Inc. ............................... 27,185 224,004 Verigy Ltd.* ................................... 16,745 179,004 ------------ 3,808,894 ------------ TRANSPORTATION--1.6% Landstar System, Inc. .......................... 7,195 250,890 Pacer International, Inc. ...................... 37,995 157,299 UTI Worldwide, Inc.* ........................... 47,960 616,286 ------------ 1,024,475 ------------ UTILITIES--0.9% PNM Resources, Inc. ............................ 53,435 624,121 ------------ TOTAL COMMON STOCK (Cost $59,634,650) ....................... 63,153,928 ------------ TOTAL INVESTMENTS--97.3% (Cost $59,634,650) ............................. 63,153,928 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--2.7% ....... 1,719,307 ------------ NET ASSETS--100.0% ................................ $ 64,873,235 ============
- ---------- * -- Non-income producing. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ -------------- Common Stock * $63,153,928 $-- $-- $63,153,928 ----------- --- --- ----------- Total $63,153,928 $-- $-- $63,153,928 =========== === === ===========
* see portfolio of investments detail for industry breakout. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 24 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ LONG POSITIONS--95.3% DOMESTIC COMMON STOCK--91.0% BASIC INDUSTRIES--4.8% Carpenter Technology Corp. ..................... 9,570 $ 203,937 Cytec Industries, Inc. + ....................... 18,910 546,310 Freeport-McMoRan Copper & Gold, Inc., + ........ 7,410 466,682 Harry Winston Diamond Corp. +................... 99,915 582,504 Haynes International, Inc. +* .................. 15,770 427,525 Innospec, Inc. + ............................... 45,725 625,518 Kapstone Paper and Packaging Corp. +* .......... 92,980 638,773 Material Sciences Corp.* ....................... 49,257 88,663 Thompson Creek Metals Co., Inc.* ............... 47,430 545,445 ------------ 4,125,357 ------------ CAPITAL GOODS--7.8% Ducommun, Inc. + ............................... 54,200 978,852 Griffon Corp. +* ............................... 73,181 773,523 Hubbell, Inc., Class B + ....................... 20,578 791,636 Key Technology, Inc.* .......................... 12,517 137,812 Keystone Consolidated Industries, Inc.* ........ 11,488 39,117 Manitowoc Co., Inc., (The) + ................... 46,595 309,391 Mohawk Industries, Inc. +* ..................... 8,840 443,061 MTS Medication Technologies, Inc. +* ........... 149,390 851,523 RINO International Corp.* ...................... 31,316 399,279 RTI International Metals, Inc. +* .............. 36,890 709,026 SL Industries, Inc.* ........................... 52,945 336,201 Thermadyne Holdings Corp.* ..................... 177,100 871,332 ------------ 6,640,753 ------------ COMMUNICATIONS--0.5% Check Point Software Technologies Ltd. +* .................................... 16,380 456,511 ------------ CONSUMER DURABLES--3.7% D.R. Horton, Inc. +............................. 47,575 637,981 Gentex Corp. + ................................. 37,630 549,022 Hooker Furniture Corp. ......................... 15,701 208,980 Magna International, Inc., Class A ............. 7,455 340,768 Pulte Homes, Inc. + ............................ 31,920 407,938 Stanley Furniture Co., Inc. .................... 22,272 269,937 Thor Industries, Inc. .......................... 30,325 789,966 ------------ 3,204,592 ------------ CONSUMER NON-DURABLES--10.1% Casual Male Retail Group, Inc.* ................ 416,930 1,279,975 Coach, Inc. + .................................. 19,228 543,960 Coca-Cola Femsa S.A. de C.V. - Sponsored ADR + ............................. 10,780 480,572 Diedrich Coffee, Inc. +* ....................... 20,132 432,637 Finish Line, Inc., (The), Class A + ............ 67,515 556,999 Genesco, Inc. +* ............................... 19,265 421,903 Matthews International Corp., Class A .......... 16,770 584,267 Overhill Farms, Inc.* .......................... 96,995 555,781 Polo Ralph Lauren Corp. + ...................... 10,635 705,951 Skechers U.S.A., Inc., Class A +* .............. 67,755 1,206,717 Steven Madden Ltd. +* .......................... 20,505 660,876 Tupperware Brands Corp. + ...................... 14,865 549,856
Number of Shares Value ------------ ------------ CONSUMER NON-DURABLES--(CONTINUED) VF Corp. + ..................................... 9,400 $ 653,864 ------------ 8,633,358 ------------ CONSUMER SERVICES--12.1% AFC Enterprises, Inc. +* ....................... 169,410 1,406,103 Bebe Stores, Inc. .............................. 24,395 186,134 Century Casinos, Inc.* ......................... 407,856 1,162,390 Cornell Cos., Inc. +* .......................... 31,115 625,100 Corrections Corp. of America +* ................ 27,675 549,072 Deluxe Corp. + ................................. 40,415 675,335 Dress Barn, Inc. (The) +* ...................... 25,000 405,750 eBay, Inc. +* .................................. 20,505 453,981 Famous Dave's of America, Inc. +* .............. 52,875 304,031 Global Traffic Network, Inc.* .................. 53,631 214,524 H&R Block, Inc. +............................... 29,027 501,587 Hackett Group, Inc. (The)* ..................... 315,785 827,357 Harte-Hanks, Inc. + ............................ 29,520 384,941 Heidrick & Struggles International, Inc. +...... 19,965 419,664 ICT Group, Inc.* ............................... 27,900 306,900 Monster Worldwide, Inc. +* ..................... 50,735 822,922 Ross Stores, Inc. + ............................ 11,451 534,075 Steiner Leisure Ltd. +* ........................ 16,880 560,754 ------------ 10,340,620 ------------ ENERGY--2.3% Approach Resources, Inc. +* .................... 107,379 805,342 Devon Energy Corp. + ........................... 10,585 649,707 EOG Resources, Inc. + .......................... 7,300 525,600 ------------ 1,980,649 ------------ FINANCE--18.8% ACE Ltd. + ..................................... 15,320 799,398 Arlington Asset Investment Corp., Class A* ..... 156,650 81,458 BCB Holdings Ltd.* ............................. 53,148 106,296 Berkshire Hathaway, Inc., Class B* ............. 172 565,192 Capital One Financial Corp. .................... 18,285 681,848 Diamond Hill Investment Group +* ............... 13,347 685,902 E*TRADE Financial Corp.* +...................... 116,835 205,630 Fidelity National Financial, Inc., Class A + ... 51,265 770,000 First American Corp. + ......................... 36,735 1,157,887 Goldman Sachs Group, Inc., (The) + ............. 3,958 654,891 Investors Title Co. + .......................... 5,869 183,113 IPC Holdings Ltd. + ............................ 27,985 907,274 JPMorgan Chase & Co. +.......................... 41,686 1,811,674 KKR Financial Holdings LLC + ................... 140,360 541,790 Loews Corp. + .................................. 24,000 819,600 Maiden Holdings Ltd. ........................... 257,682 1,968,690 Mass Financial Corp. Class A* .................. 3,295 27,052 Morgan Stanley + ............................... 14,893 431,301 SLM Corp.* ..................................... 63,185 562,346 State Street Corp. + ........................... 20,320 1,066,394 TFS Financial Corp. + .......................... 29,500 336,300 Travelers Companies, Inc., (The) + ............. 14,255 718,737 Wesco Financial Corp. + ........................ 905 273,310 White Mountains Insurance Group Ltd. + ......... 2,495 778,440 ------------ 16,134,523 ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 25 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (continued) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ HEALTH CARE--14.8% Alpha PRO Tech Ltd.* ........................... 630,830 $ 3,122,608 BioClinica, Inc.* .............................. 135,840 465,931 BioCryst Pharmaceuticals, Inc.* ................ 13,560 169,093 Cardiac Science Corp.* ......................... 78,365 246,850 Charles River Laboratories International, Inc. +* ...................... 22,880 789,131 Exactech, Inc. +* .............................. 29,005 431,304 Health Grades, Inc. +* ......................... 65,416 296,989 Lincare Holdings, Inc. +* ...................... 17,680 466,575 MedQuist, Inc. +................................ 171,807 1,376,174 Orthofix International N.V. +* ................. 26,831 734,364 PHC, Inc., Class A* ............................ 302,535 435,650 RehabCare Group, Inc. +* ....................... 20,345 427,041 Schering-Plough Corp. + ........................ 33,624 947,524 Sharps Compliance Corp. +* ..................... 80,745 746,891 Theragenics Corp.* ............................. 251,340 336,796 Unilens Vision, Inc. ........................... 87,132 257,911 Varian Medical Systems, Inc.* .................. 32,885 1,416,357 ------------ 12,667,189 ------------ TECHNOLOGY--14.8% Amdocs Ltd. +* ................................. 17,810 433,139 BluePhoenix Solutions Ltd.* .................... 157,425 516,354 CGI Group, Inc. Class A +* ..................... 56,385 582,457 Concurrent Computer Corp.* ..................... 156,727 700,570 Digi International, Inc. +* .................... 79,041 677,381 EZchip Semiconductor Ltd.* ..................... 27,720 328,482 Gilat Satellite Networks Ltd.* ................. 7,403 31,463 Hewlett-Packard Co. + .......................... 12,618 566,422 NU Horizons Electronics Corp. +* ............... 43,486 166,986 Oracle Corp. + ................................. 21,974 480,571 Orbcomm, Inc.* ................................. 146,702 315,409 PLATO Learning, Inc.* .......................... 328,201 1,447,366 Richardson Electronics Ltd. + .................. 132,750 537,637 Schawk, Inc. ................................... 25,765 291,917 Sourcefire, Inc. +* ............................ 34,750 660,250 Sybase, Inc. +* ................................ 15,510 540,523 Symantec Corp. +* .............................. 23,841 360,476 Telular Corp. +* ............................... 574,277 1,866,400 Tier Technologies, Inc., Class B +* ............ 131,070 994,821 Versant Corp.* ................................. 27,140 412,799 Virtusa Corp.* ................................. 73,640 740,818 ------------ 12,652,241 ------------ TRANSPORTATION--1.3% Dynamex, Inc. +* ............................... 28,375 465,634 FedEx Corp. + .................................. 9,465 650,340 ------------ 1,115,974 ------------ TOTAL DOMESTIC COMMON STOCK (Cost $66,383,327) ....................... 77,951,767 ------------ PREFERRED STOCK--4.3% FINANCE--4.3% Bank of America Corp. Capital Trust IV Pfd. 5.875% ........................ 34,605 613,547 Capital One Capital II Pfd. 7.500% + ........... 19,420 423,939 Citigroup Capital XVI Pfd. 6.450% .............. 38,325 709,779 Fifth Third Capital Trust V Pfd. 7.250% ........ 16,080 306,163 KeyCorp Capital LX Pfd. 6.750% ................. 26,655 489,386 SLM Corp. Pfd. 6.970%* ......................... 4,585 156,188
Number of Shares Value ------------ ------------ FINANCE--(CONTINUED) Sovereign Capital Trust V Pfd. 7.750% .......... 24,260 $ 555,069 Wachovia Capital Trust IV Pfd. 6.375% .......... 23,170 472,668 ------------ TOTAL PREFERRED STOCK (Cost $2,688,863) ........................ 3,726,739 ------------ TOTAL LONG POSITIONS--95.3% (Cost $69,072,190) ............................. 81,678,506 ------------ TOTAL INVESTMENTS (Cost $69,072190) .............................. 81,678,506 ------------ SECURITIES SOLD SHORT--(18.9%) COMMON STOCK BASIC INDUSTRIES--(0.6%) Hawkins, Inc. .................................. (22,355) (475,044) Uranium Energy Corp.* .......................... (11,655) (31,119) ------------ (506,163) ------------ CAPITAL GOODS--(2.3%) American Superconductor Corp.* ................. (5,535) (178,836) Applied Nanotech Holdings, Inc.* ............... (8,285) (2,220) Broadwind Energy, Inc.* ........................ (8,725) (65,961) China Fire & Security Group, Inc.* ............. (25,805) (395,333) DynaMotive Energy Systems Corp.* ...................................... (72,185) (13,138) Microvision, Inc.* ............................. (47,275) (159,317) Middleby Corp., (The)* ......................... (5,095) (240,433) RINO International Corp.* ...................... (39,591) (504,785) SmartHeat, Inc.* ............................... (9,015) (65,629) Smith & Wesson Holding Corp.* .................. (35,695) (192,039) Tetra Tech, Inc.* .............................. (4,930) (145,632) ------------ (1,963,323) ------------ COMMUNICATIONS--(1.5%) ActiveCare, Inc.* .............................. (421) (25) CTC Communications Group, Inc.* ................ (98,900) (10) Equinix, Inc.* ................................. (4,730) (398,550) GSI Commerce, Inc.* ............................ (25,735) (446,245) Interliant, Inc. ............................... (600) 0 Omniture, Inc.* ................................ (30,610) (438,029) One Communications Corp.* ...................... (36,619) (4) ------------ (1,282,863) ------------ CONSUMER DURABLES--(0.5%) AutoNation, Inc.* .............................. (12,710) (241,236) Kirkland's, Inc.* .............................. (12,740) (180,398) QSound Labs, Inc.* ............................. (4,440) (777) ------------ (422,411) ------------ CONSUMER NON-DURABLES--(1.6%) Amish Naturals, Inc.* .......................... (25,959) (701) Cal-Maine Foods, Inc. .......................... (11,475) (327,611) Diedrich Coffee, Inc.* ......................... (20,225) (434,635) Lifeway Foods, Inc.* ........................... (20,480) (264,397) Smart Balance, Inc.* ........................... (49,685) (317,487) Valence Technology, Inc.* ...................... (27,585) (41,378) ------------ (1,386,209) ------------ CONSUMER SERVICES--(4.3%) Allegiant Travel Co.* .......................... (7,265) (284,715) Bally Technologies, Inc.* ...................... (6,350) (256,731) Constant Contact, Inc.* ........................ (15,550) (323,907)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 26 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND (concluded) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ CONSUMER SERVICES--(CONTINUED) Deckers Outdoor Corp.* ......................... (4,375) $ (298,813) Iron Mountain, Inc.* ........................... (25,860) (757,439) Lamar Advertising Co., Class A* ................ (10,620) (243,092) Medifast, Inc.* ................................ (10,155) (190,711) New Oriental Education & Technology Group - ADR* ..................... (4,120) (291,078) PokerTek, Inc.* ................................ (6,110) (4,827) RiskMetrics Group, Inc.* ....................... (9,770) (152,021) Spectrum Group International, Inc.* ............ (4,616) (9,232) Sturm Ruger & Co., Inc. ........................ (24,005) (331,509) Ultimate Software Group, Inc., (The)* ...................................... (12,305) (324,483) Under Armour, Inc., Class A* ................... (8,890) (212,204) ------------ (3,680,762) ------------ ENERGY--(0.5%) Ethanex Energy, Inc.* .......................... (648) (49) First Solar, Inc.* ............................. (3,310) (402,430) SulphCo, Inc.* ................................. (34,495) (54,847) ------------ (457,326) ------------ FINANCE--0.0% Genmed Holding Corp.* .......................... (5) (30) ------------ HEALTH CARE--(2.9%) BioCryst Pharmaceuticals, Inc.* ................ (27,125) (338,249) Bodytel Scientific, Inc.* ...................... (4,840) (31) Conceptus, Inc.* ............................... (8,795) (159,365) Dexcom, Inc.* .................................. (33,985) (265,423) IDEXX Laboratories, Inc.* ...................... (4,835) (245,425) NuVasive, Inc.* ................................ (5,315) (212,972) Quality Systems, Inc. .......................... (6,205) (334,077) Rockwell Medical Technologies, Inc.* ........... (20,255) (162,243) Sharps Compliance Corp. ........................ (80,745) (746,891) ------------ (2,464,676) ------------ TECHNOLOGY--(4.7%) ANSYS, Inc.* ................................... (7,355) (258,455) ANTS Software, Inc.* ........................... (10,334) (4,960) Clearwire Corp., Class A* ...................... (48,000) (367,680) Compellent Technologies, Inc.* ................. (9,535) (142,262) ConSyGen, Inc.* ................................ (200) 0 Cray, Inc.* .................................... (52,535) (384,031) EZchip Semiconductor Ltd.* ..................... (34,240) (405,744)
Number of Shares Value ------------ ------------ TECHNOLOGY--(CONTINUED) Informatica Corp.* ............................. (13,240) $ (237,393) Itron, Inc.* ................................... (5,420) (296,962) Juniper Networks, Inc.* ........................ (10,570) (243,850) LML Payment Systems, Inc.* ..................... (7,808) (5,231) Nestor, Inc.* .................................. (15,200) (152) Netezza Corp.* ................................. (24,425) (234,480) NetSuite, Inc.* ................................ (17,920) (245,683) Palm, Inc.* .................................... (35,095) (467,816) Rubicon Technology, Inc.* ...................... (10,010) (122,522) Tiger Telematics, Inc.* ........................ (6,510) (5) Universal Display Corp.* ....................... (16,925) (184,483) VMware, Inc. Class A* .......................... (12,870) (455,984) Xybernaut Corp.* ............................... (35,000) (980) ------------ (4,058,673) ------------ TRANSPORTATION--0.0% China Logistics, Inc.* ......................... (26) (38) ------------ TOTAL COMMON STOCK (Proceeds $16,712,802) ................... (16,222,474) ------------ WARRANTS--0.0% UTILITIES--0.0% Greenhunter Energy, Inc. Exercise Price $27.50, Exp. 09/15/11 ................. (423) 0 ------------ TOTAL WARRANTS (Proceeds $0) ............................ 0 ------------ TOTAL SECURITIES SOLD SHORT--(18.9%) (Proceeds $16,712,802) ......................... (16,222,474) ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--23.6% ............................. 20,227,554 ------------ NET ASSETS--100.0% ................................ $ 85,683,586 ============
- ---------- ADR -- American Depositary Receipt * -- Non-income producing. + -- Security position is either entirely or partially held in a segregated account as collateral for securities sold short. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ ------------- Common Stock * $77,951,767 $-- $-- $77,951,767 Preferred Stock * 3,726,739 -- -- 3,726,739 ----------- --- --- ----------- Total Assets $81,678,506 -- -- $81,678,506 =========== === === ===========
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ ------------- Securities Sold Short * $16,222,474 $-- $-- $16,222,474 ----------- --- --- ----------- Total Liabilities $16,222,474 $-- $-- $16,222,474 =========== === === ===========
* see portfolio of investments detail for industry breakout. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 27 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS MID CAP VALUE FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--95.8% BASIC INDUSTRIES--8.0% Albemarle Corp. ................................ 12,175 $ 392,400 Allegheny Technologies, Inc. ................... 3,260 99,006 Ashland, Inc. .................................. 9,100 333,788 Cliffs Natural Resources, Inc. ................. 13,460 340,673 Crown Holdings, Inc.* .......................... 16,395 407,088 Lubrizol Corp., (The) .......................... 13,800 879,336 Mosaic Co., (The) .............................. 2,890 140,078 PPG Industries, Inc. ........................... 11,530 638,762 Reliance Steel & Aluminum Co. .................. 13,715 506,632 ------------ 3,737,763 ------------ CAPITAL GOODS--7.3% AGCO Corp.* .................................... 12,320 384,877 Cooper Industries Ltd., Class A ................ 10,605 342,011 Ingersoll-Rand PLC ............................. 13,485 416,552 Kennametal, Inc. ............................... 2,030 44,762 Lennox International, Inc. ..................... 7,080 254,030 Mettler-Toledo International, Inc.* ............ 3,195 279,243 Mohawk Industries, Inc.* ....................... 10,205 511,475 Stanley Works, (The) ........................... 10,190 417,077 Terex Corp.* ................................... 9,365 154,335 Thomas & Betts Corp.* .......................... 12,570 348,063 W.W. Grainger, Inc. ............................ 2,605 227,859 ------------ 3,380,284 ------------ COMMUNICATIONS--1.3% CenturyTel, Inc. ............................... 18,916 609,663 ------------ CONSUMER DURABLES--2.1% Gentex Corp. ................................... 20,110 293,405 Lennar Corp., Class A .......................... 18,630 282,245 NVR, Inc.* ..................................... 580 391,645 ------------ 967,295 ------------ CONSUMER NON-DURABLES--4.1% Dr. Pepper Snapple Group, Inc.* ................ 7,150 189,046 Electronic Arts, Inc.* ......................... 34,240 623,853 Lorillard, Inc. ................................ 3,950 287,442 Mattel, Inc. ................................... 27,480 494,365 VF Corp. ....................................... 4,820 335,279 ------------ 1,929,985 ------------ CONSUMER SERVICES--17.7% Abercrombie & Fitch Co., Class A ............... 14,565 470,304 Burger King Holdings, Inc. ..................... 8,860 158,860 Dun & Bradstreet Corp., (The) .................. 2,480 181,139 Equifax, Inc. .................................. 25,510 705,096 Expedia, Inc.* ................................. 17,009 392,057 GameStop Corp., Class A* ....................... 14,640 348,432 Gap, Inc., (The) ............................... 20,245 397,814 Herbalife Ltd. ................................. 13,855 419,529 Kohl's Corp.* .................................. 5,495 283,487 Kroger Co., (The) .............................. 20,170 435,470 Manpower, Inc. ................................. 16,665 861,581 McGraw-Hill Companies, Inc., (The) ............. 17,330 582,461 Monster Worldwide, Inc.* ....................... 16,070 260,655 Moody's Corp. .................................. 8,520 232,085 Omnicom Group, Inc. ............................ 15,355 557,694 Robert Half International, Inc. ................ 11,270 296,288 Safeway, Inc. .................................. 22,955 437,293
Number of Shares Value ------------ ------------ CONSUMER SERVICES--(CONTINUED) Staples, Inc. .................................. 9,475 $ 204,755 Starwood Hotels & Resorts Worldwide, Inc. ...... 7,315 217,841 Washington Post Co., Class B (The) ............. 850 369,206 Watson Wyatt Worldwide, Inc., Class A .......... 9,995 436,782 ------------ 8,248,829 ------------ ENERGY--5.3% Concho Resources, Inc.* ........................ 18,780 612,040 EOG Resources, Inc. ............................ 6,050 435,600 Helix Energy Solutions Group, Inc.* ............ 15,045 176,027 Noble Energy, Inc. ............................. 11,490 694,685 Petrohawk Energy Corp.* ........................ 14,985 322,627 Pride International, Inc.* ..................... 7,990 205,982 ------------ 2,446,961 ------------ FINANCE--17.7% ACE Ltd. ....................................... 8,495 443,269 Affiliated Managers Group, Inc.* ............... 3,375 220,489 Alleghany Corp.* ............................... 2,259 627,098 AON Corp. ...................................... 11,060 461,866 Assurant, Inc. ................................. 23,585 706,371 BB&T Corp. ..................................... 17,325 484,060 Capital One Financial Corp. .................... 14,960 557,858 Discover Financial Services .................... 42,195 580,181 Federated Investors, Inc., Class B ............. 5,105 134,006 Franklin Resources, Inc. ....................... 3,485 325,255 Hanover Insurance Group, Inc., (The) ........... 11,620 475,142 Loews Corp. .................................... 10,985 375,138 M&T Bank Corp. ................................. 3,800 234,688 Marsh & McLennan Cos., Inc. .................... 31,355 738,097 Mercury General Corp. .......................... 6,030 224,015 People's United Financial, Inc. ................ 5,955 95,637 Reinsurance Group of America, Inc. ............. 7,185 309,314 SEI Investments Co. ............................ 8,155 150,378 SLM Corp.* ..................................... 55,735 496,042 SunTrust Banks, Inc. ........................... 9,985 233,349 Travelers Companies, Inc., (The) ............... 3,815 192,352 Unum Group ..................................... 8,525 192,068 ------------ 8,256,673 ------------ HEALTH CARE--6.3% Cardinal Health, Inc. .......................... 6,945 240,158 DaVita, Inc.* .................................. 10,825 559,761 Hospira, Inc.* ................................. 12,300 480,807 Laboratory Corp. of America Holdings* .......... 5,950 415,251 McKesson Corp. ................................. 9,320 529,935 Omnicare, Inc. ................................. 17,975 411,448 Varian Medical Systems, Inc.* .................. 7,295 314,196 ------------ 2,951,556 ------------ REAL ESTATE INVESTMENT TRUSTS--5.7% Annaly Capital Management, Inc. ................ 42,526 737,401 AvalonBay Communities, Inc. .................... 1,520 97,934 Equity Residential ............................. 11,705 319,664 Kimco Realty Corp. ............................. 39,595 496,917 Regency Centers Corp. .......................... 7,630 255,987
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 28 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS MID CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ Taubman Centers, Inc. .......................... 10,640 $ 336,969 Ventas, Inc. ................................... 11,080 434,447 ------------ 2,679,319 ------------ TECHNOLOGY--12.8% Acxiom Corp. ................................... 42,735 389,743 Amdocs Ltd.* ................................... 10,190 247,821 Arrow Electronics, Inc.* ....................... 22,535 622,867 Avnet, Inc.* ................................... 16,170 430,930 Broadridge Financial Solutions, Inc. ........... 24,610 512,380 CACI International, Inc., Class A* ............. 4,425 203,373 Cymer, Inc.* ................................... 12,975 456,460 Flextronics International Ltd.* ................ 37,385 221,693 Harris Corp. ................................... 15,835 549,950 Hewitt Associates, Inc., Class A* .............. 1,275 45,926 Ingram Micro, Inc., Class A* ................... 19,450 325,982 McAfee, Inc.* .................................. 4,117 163,774 SRA International, Inc., Class A* .............. 9,885 196,415 Sybase, Inc.* .................................. 7,140 248,829 Symantec Corp.* ................................ 44,115 667,019 Western Digital Corp.* ......................... 7,415 254,186 Western Union Co. (The) ........................ 23,140 417,446 ------------ 5,954,794 ------------ TRANSPORTATION--1.1% CSX Corp. ...................................... 3,705 157,462 Norfolk Southern Corp. ......................... 7,500 344,025 ------------ 501,487 ------------
Number of Shares Value ------------ ------------ UTILITIES--6.4% Allegheny Energy, Inc. ......................... 18,905 $ 499,281 Alliant Energy Corp. ........................... 20,110 529,697 American Electric Power Co., Inc. .............. 11,425 359,088 Edison International ........................... 13,120 438,339 NV Energy, Inc. ................................ 30,170 363,850 PG&E Corp. ..................................... 10,875 441,416 Westar Energy, Inc. ............................ 18,075 370,899 ------------ 3,002,570 ------------ TOTAL COMMON STOCK (Cost $44,613,671) ....................... 44,667,179 ------------ TOTAL INVESTMENTS--95.8% (Cost $44,613,671) ............................. 44,667,179 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--4.2% ....... 1,939,721 ------------ NET ASSETS--100.0% ................................ $ 46,606,900 ============
- ---------- * -- Non-income producing. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ ------------- Common Stock * $44,667,179 $-- $-- $44,667,179 ----------- --- --- ----------- Total $44,667,179 $-- $-- $44,667,179 =========== === === ===========
* see portfolio of investments detail for industry breakout. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 29 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--99.1% BASIC INDUSTRIES--1.0% Carpenter Technology Corp. ..................... 6,230 $ 132,761 Cytec Industries, Inc. ......................... 19,775 571,300 ------------ 704,061 ------------ CAPITAL GOODS--2.3% Dover Corp. .................................... 20,890 722,585 Illinois Tool Works, Inc. ...................... 7,280 304,450 Parker-Hannifin Corp. .......................... 9,942 483,778 Wolseley PLC - ADR ............................. 32,260 75,488 ------------ 1,586,301 ------------ COMMUNICATIONS--2.0% Vodafone Group PLC - Sponsored ADR ............. 63,928 1,388,516 ------------ CONSUMER DURABLES--2.6% Lennar Corp., Class A # ........................ 20,900 316,635 Magna International, Inc., Class A ............. 9,595 438,587 Pulte Homes, Inc. # ............................ 5,780 73,868 Toll Brothers, Inc. #* ......................... 40,000 909,600 ------------ 1,738,690 ------------ CONSUMER NON-DURABLES--8.3% CEC Entertainment, Inc.* ....................... 12,695 339,591 Electronic Arts, Inc.* ......................... 33,185 604,631 Lorillard, Inc. ................................ 14,764 1,074,376 Mattel, Inc. ................................... 47,130 847,869 Matthews International Corp., Class A .......... 5,820 202,769 Nestle S.A. - Sponsored ADR .................... 14,930 618,849 NIKE, Inc., Class B # .......................... 5,440 301,322 Oxford Industries, Inc. ........................ 16,370 229,180 Pantry, Inc. (The)* ............................ 12,875 195,056 Skechers U.S.A., Inc., Class A* ................ 7,810 139,096 Steven Madden Ltd.* ............................ 2,845 91,694 Tupperware Brands Corp. ........................ 27,680 1,023,883 ------------ 5,668,316 ------------ CONSUMER SERVICES--16.0% Apollo Group, Inc., Class A* ................... 5,185 336,092 DSW, Inc., Class A* ............................ 5,680 86,109 eBay, Inc. #* .................................. 63,415 1,404,008 Equifax, Inc. .................................. 19,875 549,345 Expedia, Inc. #* ............................... 41,283 951,573 GameStop Corp., Class A* ....................... 47,610 1,133,118 Gap, Inc., (The) ............................... 12,090 237,568 Harte-Hanks, Inc. .............................. 30,680 400,067 Herbalife Ltd. ................................. 15,115 457,682 Hewitt Associates, Inc., Class A* .............. 10,330 372,087 HSN, Inc.* ..................................... 31,625 328,900 IAC/InterActiveCorp* ........................... 16,970 314,284 Interval Leisure Group, Inc.* .................. 29,745 312,025 Lender Processing Services, Inc................. 17,790 609,841 Manpower, Inc. ................................. 5,625 290,813 McGraw-Hill Companies, Inc., (The) ............. 9,100 305,851 Monster Worldwide, Inc.* ....................... 20,740 336,403 Moody's Corp. .................................. 9,710 264,500 Omnicom Group, Inc. ............................ 17,290 627,973 Regis Corp. .................................... 39,995 647,119
Number of Shares Value ------------ ------------ CONSUMER SERVICES--(CONTINUED) Rent-A-Center, Inc.* ........................... 21,125 $ 416,796 Shoe Carnival, Inc.* ........................... 5,435 85,438 Watson Wyatt Worldwide, Inc., Class A .......... 10,715 468,246 ------------ 10,935,838 ------------ ENERGY--9.7% Apache Corp. # ................................. 10,160 863,092 Chevron Corp. .................................. 16,900 1,181,986 Devon Energy Corp. # ........................... 16,040 984,535 EOG Resources, Inc. # .......................... 4,370 314,640 Marathon Oil Corp. # ........................... 14,250 439,898 Noble Energy, Inc. ............................. 17,865 1,080,118 Talisman Energy, Inc. .......................... 20,600 330,836 Total SA - ADR ................................. 24,995 1,431,464 ------------ 6,626,569 ------------ FINANCE--26.5% ACE Ltd. ....................................... 11,995 625,899 Alleghany Corp.* ............................... 2,571 713,710 Allied World Assurance Co. Holdings Ltd. ....... 10,155 470,481 American Express Co. ........................... 21,260 719,013 AON Corp. ...................................... 7,975 333,036 Arch Capital Group Ltd.* ....................... 2,835 184,190 Arlington Asset Investment Corp., Class A* ..... 34,295 17,833 Bank of America Corp. .......................... 62,770 1,104,124 BB&T Corp. ..................................... 26,240 733,146 Capital One Financial Corp. .................... 16,375 610,624 Comerica, Inc. ................................. 3,930 104,813 East West Bancorp, Inc. ........................ 13,725 126,407 Federated Investors, Inc., Class B ............. 8,010 210,263 Fifth Third Bancorp ............................ 40,560 443,726 First American Corp. ........................... 5,305 167,214 Flagstone Reinsurance Holdings Ltd. ............ 53,400 579,924 Hanover Insurance Group, Inc., (The) ........... 15,460 632,159 IPC Holdings Ltd. .............................. 26,090 845,838 J.G.Wentworth, Inc.+++ +/-* .................... -- 0 JPMorgan Chase & Co. # ......................... 65,265 2,836,417 Kohlberg Capital Corp. ......................... 18,790 89,440 Loews Corp. .................................... 52,169 1,781,571 Maiden Holdings Ltd. ........................... 2,680 20,475 Maiden Holdings Ltd. 144A * .................... 9,925 75,827 Peoples Choice Financial Corp. 144A +++* ....... 1,465 0 SLM Corp.* ..................................... 79,280 705,592 Solar Cayman Ltd. 144A +++* .................... 19,375 147,056 Specialty Underwriters' Alliance, Inc.* ........ 10,315 67,357 TMST, Inc. +++* ................................ 191,097 0 Travelers Companies, Inc., (The) ............... 22,840 1,151,593 Unum Group ..................................... 47,966 1,080,674 Wells Fargo & Co. .............................. 24,165 665,021 White Mountains Insurance Group Ltd. ........... 2,635 822,120 ------------ 18,065,543 ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 30 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (continued) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ HEALTH CARE--14.9% Aetna, Inc. .................................... 12,010 $ 342,285 Amgen, Inc.* ................................... 26,465 1,581,019 Becton, Dickinson & Co. ........................ 9,230 642,593 Cardinal Health, Inc. .......................... 20,250 700,245 DaVita, Inc.* .................................. 13,590 702,739 Johnson & Johnson .............................. 19,170 1,158,635 Lincare Holdings, Inc.* ........................ 22,035 581,504 Patterson Companies, Inc.* ..................... 13,305 362,295 Pfizer, Inc. ................................... 93,161 1,555,789 Sanofi-Aventis - ADR ........................... 18,245 621,607 UnitedHealth Group, Inc. ....................... 12,890 360,920 WellPoint, Inc.* ............................... 7,840 414,344 Wyeth .......................................... 23,695 1,133,806 ------------ 10,157,781 ------------ REAL ESTATE INVESTMENT TRUSTS--2.1% Annaly Capital Management, Inc. ................ 56,690 983,005 Ashford Hospitality Trust, Inc. ................ 55,930 172,264 Cypress Sharpridge Investments, Inc.* .......... 8,804 123,256 Cypress Sharpridge Investments, Inc.144A # ..... 10,771 150,794 ------------ 1,429,319 ------------ TECHNOLOGY--12.1% Accenture Ltd., Class A ........................ 21,720 716,760 BancTec, Inc., 144A +++* ....................... 15,732 92,661 Belden, Inc. ................................... 5,205 108,941 Fidelity National Information Services, Inc. ... 9,590 235,530 Heartland Payment Systems, Inc. ................ 20,010 250,325 Hewlett-Packard Co. ............................ 29,170 1,309,441 International Business Machines Corp. .......... 14,605 1,724,120 Microsoft Corp. ................................ 59,290 1,461,499 Sykes Enterprises, Inc.* ....................... 9,530 200,035 Symantec Corp.* ................................ 38,280 578,794 Tech Data Corp.* ............................... 14,245 542,735 Tyco Electronics Ltd. .......................... 21,710 495,422 Western Union Co. (The) ........................ 21,500 387,860 Wright Express Corp.* .......................... 5,065 159,649 ------------ 8,263,772 ------------ UTILITIES--1.6% Allegheny Energy, Inc. ......................... 22,035 581,944 Alliant Energy Corp. ........................... 19,755 520,347 ------------ 1,102,291 ------------ TOTAL COMMON STOCK (Cost $64,903,659) ....................... 67,666,997 ------------
Par (000) Value ------------ ------------ CORPORATE BONDS--0.6% Eastman Kodak Co.## 3.375% 10/15/33 ............................. $ 399 $ 364,087 MBIA Insurance Corp.144A## + 14.00% 01/15/33 ............................. 151 61,155 Thornburg Mortgage, Inc. (PIK)@+++ 18.00% 03/31/15 ............................. 74 0 Thornburg Mortgage, Inc. 144A@+++ 18.00% 03/31/15 ............................. 824 0 ------------ TOTAL CORPORATE BONDS (Cost $1,288,324) ........................ 425,242 ------------ TOTAL INVESTMENTS--99.7% (Cost $66,191,983) ............................. 68,092,239 ------------ Number of Contracts ------------ OPTIONS WRITTEN--(1.5%) Apache Corp. Call Options Expires 10/17/09 Strike Price $85 ............................ (96) (39,360) Devon Energy Corp. Call Options Expires 01/15/10 Strike Price $50 ............................ (52) (65,520) eBay, Inc. Call Options Expires 01/15/10 Strike Price $15 ............................ (194) (143,075) EOG Resources, Inc. Call Options Expires 10/17/09 Strike Price $80 ............................ (34) (3,808) Expedia, Inc. Call Options Expires 04/17/10 Strike Price $25 ............................ (86) (21,500) Expedia, Inc. Call Options Expires 04/17/10 Strike Price $30 ............................ (86) (8,170) JPMorgan Chase & Co. Call Options Expires 01/16/10 Strike Price $25 ............................ (134) (252,590) JPMorgan Chase & Co. Call Options Expires 09/21/09 Strike Price $50 ............................ (189) (2,457) Lennar Corp. Call Options Expires 02/20/10 Strike Price $15 ............................ (209) (54,863) Marathon Oil Corp. Call Options Expires 10/17/09 Strike Price $32.50 ......................... (113) (9,605) Nike, Inc. Call Options Expires 01/16/10 Strike Price $60 ............................ (54) (11,448) Pulte Homes, Inc. Call Options Expires 01/20/10 Strike Price $15 ............................ (57) (5,130)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 31 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS
Number Contracts Value ------------ ------------ OPTIONS WRITTEN--(CONTINUED) Toll Brothers, Inc. Call Options Expires 01/20/10 Strike Price $12.50 ......................... (400) $ (418,000) ------------ TOTAL OPTIONS WRITTEN (Premiums received $900,977) (1,035,526) ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--1.8% ....... 1,214,924 ------------ NET ASSETS--100.0% ................................ $ 68,271,637 ============
- ---------- 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 Depositary Receipt PIK -- Payment In Kind * -- Non-income producing. @ -- Security in default. +++ -- Security has been valued at fair value as determined in good faith by or under the direction of The RBB Fund, Inc.'s Board of Directors. +/- -- Total shares owned by the Fund as of August 31, 2009 were less than one share. + -- Adjustable rate security. # -- Security segregated as collateral for options written. ## -- Callable security. A summary of the inputs used to value the Funds' net assets as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ ------------- Common Stock: Basic Industries $ 704,061 $ -- $ -- $ 704,061 Capital Goods 1,586,301 -- -- 1,586,301 Communciations 1,388,516 -- -- 1,388,516 Consumer Durables 1,738,690 -- -- 1,738,690 Consumer Non-Durables 5,668,316 -- -- 5,668,316 Consumer Services 10,935,838 -- -- 10,935,838 Energy 6,626,569 -- -- 6,626,569 Finance 17,918,487 -- 147,056 18,065,543 Health Care 10,157,781 -- -- 10,157,781 Real Estate Investment Trusts 1,429,319 -- -- 1,429,319 Technology 8,171,111 -- 92,661 8,263,772 Utilities 1,102,291 -- -- 1,102,291 Corporate Bonds -- 425,242 -- 425,242 ----------- -------- -------- ----------- Total Assets $67,427,280 $425,242 $239,717 $68,092,239 =========== ======== ======== ===========
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ ------------- Options Written $-- $1,035,526 $-- $1,035,526 --- ---------- --- ---------- Total Liabilities $-- $1,035,526 $-- $1,035,526 === ========== === ==========
The following is a reconciliation of the Fund's Level 3 investments for which significant unobservable inputs were used to determine fair value.
COMMON STOCK ------------------------------------- REAL ESTATE TOTAL INVESTMENT CORPORATE INVESTMENTS FINANCE TRUSTS TECHNOLOGY BONDS ----------- --------- ------------ ---------- --------- Balance as of August 31, 2008 $ 1,978,474 $ 732,174 $ 170,289 $167,542 $ 908,469 Accrued discounts/premiums 5,156 -- -- -- 5,156 Net realized gain/(loss) 84,007 83,391 -- -- 616 Change in unrealized appreciation (depreciation) (1,252,892) (414,598) (19,172) (74,881) (744,241) Net purchases/(sales) (424,234) (253,911) (323) -- (170,000) Transfers in and/or out of Level 3 (150,794) -- (150,794) -- -- ----------- --------- --------- -------- --------- Balance as of August 31, 2009 $ 239,717 $ 147,056 $ -- $ 92,661 $ -- =========== ========= ========= ======== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 32 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO WPG SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--93.7% BASIC INDUSTRIES--1.3% RTI International Metals, Inc.* ................ 13,900 $ 267,158 Schweitzer-Mauduit International, Inc. ......... 3,800 186,884 ------------ 454,042 ------------ CAPITAL GOODS--5.2% BE Aerospace, Inc.* ............................ 16,000 274,080 Beacon Roofing Supply, Inc.* ................... 13,200 222,024 Columbus McKinnon Corp.* ....................... 14,700 180,810 Granite Construction, Inc. ..................... 5,100 163,710 ICF International, Inc.* ....................... 7,000 191,450 Lakeland Industries, Inc.* ..................... 51,200 476,160 Teleflex, Inc. ................................. 7,200 326,160 ------------ 1,834,394 ------------ COMMUNICATIONS--0.3% Lionbridge Technologies, Inc.* ................. 36,000 96,840 ------------ CONSUMER DURABLES--0.5% Lifetime Brands, Inc. .......................... 32,500 185,575 ------------ CONSUMER NON-DURABLES--8.1% Alliance One International, Inc.* .............. 149,400 572,202 Brown Shoe Co., Inc. ........................... 18,400 138,000 Chiquita Brands International, Inc.* ........... 51,900 799,260 Del Monte Foods Co. ............................ 50,000 524,500 Fresh Del Monte Produce, Inc.* ................. 8,900 203,810 Pantry, Inc. (The)* ............................ 36,200 548,430 Universal Corp. ................................ 2,200 81,136 ------------ 2,867,338 ------------ CONSUMER SERVICES--15.6% America's Car-Mart, Inc.* ...................... 8,000 164,800 Casual Male Retail Group, Inc.* ................ 113,300 347,831 Cornell Cos., Inc.* ............................ 9,900 198,891 Corrections Corp. of America* .................. 13,500 267,840 Geo Group, Inc., (The)* ........................ 19,000 348,080 Great American Group, Inc.* .................... 107,200 487,760 Healthcare Services Group, Inc. ................ 5,100 90,168 Hillenbrand, Inc. .............................. 9,700 194,194 Jack in the Box, Inc.* ......................... 5,600 114,184 LECG Corp.* .................................... 56,600 190,176 Lions Gate Entertainment Corp.* ................ 49,500 324,720 MDC Partners, Inc., Class A* ................... 216,000 1,302,480 New Frontier Media, Inc.* ...................... 111,000 243,090 Princeton Review, Inc. (The)* .................. 182,300 723,731 Regis Corp. .................................... 33,000 533,940 ------------ 5,531,885 ------------ ENERGY--3.2% Approach Resources, Inc.* ...................... 58,800 441,000 GeoMet, Inc.* .................................. 185,600 224,576 Holly Corp. .................................... 17,600 401,984 InterOil Corp.* ................................ 2,900 89,088 ------------ 1,156,648 ------------
Number of Shares Value ------------ ------------ FINANCE--28.4% A.B.Whatley Group, Inc.* 144A .................. 93,855 $ 971 Allied World Assurance Co. Holdings Ltd. ....... 6,700 310,411 Ares Capital Corp. ............................. 46,300 430,590 Aspen Insurance Holdings Ltd. .................. 19,900 505,460 Bancorp Rhode Island, Inc. ..................... 6,600 171,798 Berkshire Hills Bancorp, Inc. .................. 15,900 357,909 Brookline Bancorp, Inc. ........................ 20,000 208,800 Centerstate Banks, Inc. ........................ 19,500 163,020 Delphi Financial Group, Inc., Class A .......... 27,000 630,990 Encore Bancshares, Inc.* ....................... 33,300 272,727 ESSA Bancorp, Inc. ............................. 15,400 194,964 FBR Capital Markets Corp.* ..................... 98,840 534,724 First Financial Bancorp ........................ 47,800 403,432 Home Federal Bancorp, Inc. ..................... 15,800 177,750 KBW, Inc.* ..................................... 5,900 168,858 Max Capital Group Ltd. ......................... 23,300 476,718 MB Financial, Inc. ............................. 16,700 231,295 Meadowbrook Insurance Group, Inc. .............. 150,500 1,199,485 Nelnet, Inc., Class A* ......................... 23,400 345,384 Renasant Corp. ................................. 19,800 301,356 Safeguard Scientifics, Inc.* ................... 6,750 75,263 SCBT Financial Corp. ........................... 13,100 336,015 SeaBright Insurance Holdings, Inc.* ............ 26,000 260,260 Seacoast Banking Corp of Florida ............... 50,600 143,198 Texas Capital Bancshares, Inc.* ................ 21,400 354,170 United Financial Bancorp, Inc. ................. 25,300 310,937 Univest Corp of Pennsylvania ................... 4,600 95,542 Validus Holdings Ltd. .......................... 20,100 515,766 ViewPoint Financial Group ...................... 17,800 222,856 Westfield Financial, Inc. ...................... 31,700 290,055 WSFS Financial Corp. ........................... 12,900 357,588 ------------ 10,048,292 ------------ HEALTH CARE--3.9% Exactech, Inc.* ................................ 20,300 301,861 HealthTronics, Inc.* ........................... 108,500 277,760 ICU Medical, Inc.* ............................. 2,400 89,256 Inverness Medical Innovations, Inc.* ........... 3,800 135,280 Life Sciences Research, Inc.* .................. 31,600 245,216 NovaMed, Inc.* ................................. 38,200 161,586 Sun Healthcare Group, Inc.* .................... 19,200 158,208 ------------ 1,369,167 ------------ REAL ESTATE INVESTMENT TRUSTS--7.3% American Campus Communities, Inc. .............. 8,300 215,883 Chimera Investment Corp. ....................... 117,400 446,120 Hatteras Financial Corp. ....................... 11,000 328,790 Highwoods Properties, Inc. ..................... 10,100 296,637 MFA Financial, Inc. ............................ 32,300 255,816 Redwood Trust, Inc. ............................ 27,500 440,825 Starwood Property Trust, Inc.* ................. 23,100 457,149 Washington Real Estate Investment Trust ........ 5,700 153,672 ------------ 2,594,892 ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 33 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO WPG SMALL CAP VALUE FUND (concluded) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ TECHNOLOGY--9.7% Actuate Corp.* ................................. 24,100 $ 135,442 CDC Software Corp. - ADR* ...................... 78,400 664,048 CIBER, Inc.* ................................... 75,700 295,230 Ciena Corp.* ................................... 12,700 170,180 CPI International, Inc.* ....................... 12,900 121,002 Digi International, Inc.* ...................... 35,500 304,235 ManTech International Corp., Class A* .......... 4,000 211,360 Ness Technologies, Inc.* ....................... 28,100 169,724 OmniVision Technologies, Inc.* ................. 18,000 263,340 Plantronics, Inc. .............................. 5,100 121,839 PLATO Learning, Inc.* .......................... 24,900 109,809 Qlogic Corp.* .................................. 8,300 131,223 RADWARE Ltd.* .................................. 18,700 206,822 Silicon Graphics International Corp.* .......... 32,700 179,523 Techwell, Inc.* ................................ 22,000 197,120 Zoran Corp.* ................................... 14,200 156,910 ------------ 3,437,807 ------------ TRANSPORTATION--3.8% Airtran Holdings, Inc.* ........................ 26,400 175,560 Arkansas Best Corp. ............................ 5,800 185,020 Celadon Group, Inc.* ........................... 41,900 410,201 Knight Transportation, Inc. .................... 7,000 115,430 Rand Logistics, Inc.* .......................... 13,400 39,530 Werner Enterprises, Inc. ....................... 24,100 421,268 ------------ 1,347,009 ------------
Number of Shares Value ------------ ------------ UTILITIES--6.4% Aegean Marine Petroleum Network, Inc. .......... 13,600 $ 279,888 Black Hills Corp. .............................. 5,400 138,132 El Paso Electric Co.* .......................... 12,600 213,444 Great Plains Energy, Inc. ...................... 11,600 203,232 Portland General Electric Co. .................. 25,500 497,760 StealthGas, Inc. ............................... 63,000 313,740 UGI Corp. ...................................... 12,200 311,222 Vectren Corp. .................................. 13,100 303,265 ------------ 2,260,683 ------------ TOTAL COMMON STOCK (Cost $30,235,564) ....................... 33,184,572 ------------ TOTAL INVESTMENTS--93.7% (Cost $30,235,564) ............................. 33,184,572 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--6.3% ....... 2,220,412 ------------ NET ASSETS--100.0% ................................ $ 35,404,984 ============
- ---------- ADR -- American Depositary Receipt * -- Non-income producing. 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. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ---------- ----------- ------------- Common Stock * $33,184,572 $-- $-- $33,184,572 ----------- --- --- ----------- Total $33,184,572 $-- $-- $33,184,572 =========== === === ===========
* see portfolio of investments detail for industry breakout. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 34 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO SAM SUSTAINABLE CLIMATE FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--98.3% AUSTRIA--9.2% Verbund - Oesterreichische Elektrizitaetswirtschafts AG (Utilities) .... 1,501 $ 76,154 Wienerberger AG (Industrials)* ................. 5,250 119,821 Zumtobel AG (Industrials)* ..................... 7,840 113,294 ------------ 309,269 ------------ BRAZIL--2.8% Cia Energetica de Minas Gerais - ADR (Utilities) ............................. 6,465 94,454 ------------ CANADA--7.0% Canadian Solar, Inc. (Industrials)* ............ 6,900 101,706 Intermap Technologies Corp. (Industrials)* ..... 10,100 24,910 Ram Power Corp. (Utilities)+++ ................. 38,300 106,005 ------------ 232,621 ------------ CHINA--5.4% Trina Solar Ltd. - ADR (Industrials)* .......... 3,500 93,485 Yingli Green Energy Holding Co. Ltd. - ADR (Industrials)* .......................... 8,200 88,478 ------------ 181,963 ------------ DENMARK--3.0% Novozymes A/S, Class B (Materials) ............. 1,160 99,533 ------------ FINLAND--1.3% Vaisala Oyj, Class A (Information Technology) .. 1,200 43,817 ------------ FRANCE--5.3% Compagnie de Saint-Gobain (Industrials) ........ 1,700 76,502 Veolia Environnement (Utilities) ............... 2,930 101,357 ------------ 177,859 ------------ GERMANY--2.4% Steico AG (Materials)* ......................... 4,000 20,529 Vossloh AG (Industrials) ....................... 510 60,107 ------------ 80,636 ------------ GREECE--2.0% Terna Energy SA (Utilities) .................... 8,600 67,440 ------------ IRELAND--3.4% CRH PLC (Materials) ............................ 3,760 96,488 Kingspan Group PLC (Industrials) ............... 2,000 18,092 ------------ 114,580 ------------ ITALY--3.9% Ansaldo STS SpA (Industrials) .................. 1,520 30,703 Landi Renzo SpA (Consumer Discretionary) ....... 3,200 14,164 Terna Rete Elettrica Nazionale SpA (Utilities) ............................. 23,580 86,877 ------------ 131,744 ------------
Number of Shares Value ------------ ------------ JAPAN--1.9% Yamatake Corp. (Information Technology) ........ 3,100 $ 63,333 ------------ NETHERLANDS--3.6% Smit Internationale NV (Industrials) ........... 1,676 121,746 ------------ SPAIN--10.7% EDP Renovaveis SA (Utilities)* ................. 12,030 119,344 Gamesa Corp.Tecnologica SA (Industrials) ....... 5,381 117,797 Iberdrola Renovables SA (Utilities) ............ 26,390 121,065 ------------ 358,206 ------------ SWEDEN--0.7% Munters AB (Industrials)* ...................... 3,299 21,272 ------------ SWITZERLAND--4.0% ABB Ltd. (Industrials)* ........................ 4,230 81,173 Syngenta AG (Materials) ........................ 230 54,084 ------------ 135,257 ------------ UNITED STATES--31.7% Acuity Brands, Inc. (Industrials) .............. 2,120 68,073 Aecom Technology Corp. (Industrials)* .......... 2,420 66,332 Apogee Enterprises, Inc. (Industrials) ......... 3,200 42,240 Covanta Holding Corp. (Industrials)* ........... 7,060 126,374 Ecolab, Inc. (Materials) ....................... 2,140 90,501 Ener1, Inc. (Industrials)* ..................... 900 5,742 Fuel Systems Solutions, Inc. (Consumer Discretionary)* ................... 2,610 87,487 Insituform Technologies, Inc., Class A (Industrials) ....................... 3,751 71,832 ITC Holdings Corp. (Utilities) ................. 2,270 105,737 LSB Industries, Inc. (Materials)* .............. 6,265 96,732 PG&E Corp. (Utilities) ......................... 2,310 93,763 Quanta Services, Inc. (Industrials)* ........... 4,500 99,540 Regal-Beloit Corp. (Industrials) ............... 670 30,458 Tetra Tech, Inc. (Industrials)* ................ 2,640 77,986 ------------ 1,062,797 ------------ TOTAL COMMON STOCK (Cost $3,051,953) ........................ 3,296,527 ------------ TOTAL INVESTMENTS--98.3% (Cost $3,051,953) .............................. 3,296,527 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--1.7% ....... 57,422 ------------ NET ASSETS--100.0% ................................ $ 3,353,949 ============
- ---------- ADR -- American Depositary Receipt * -- Non-income producing. +++ -- Security has been valued at fair value as determined in good faith by or under the direction of The RBB Fund, Inc.'s Board of Directors. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 35 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO SAM SUSTAINABLE CLIMATE FUND (concluded) PORTFOLIO OF INVESTMENTS A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ---------- ----------- ------------ ------------- Common Stock: Consumer Discretionary $ 101,651 $-- $ -- $ 101,651 Industrials 1,657,663 -- -- 1,657,663 Information Technology 107,150 -- -- 107,150 Materials 457,867 -- -- 457,867 Utilities 866,191 -- 106,005 972,196 ---------- --- -------- ---------- Total $3,190,522 $-- $106,005 $3,296,527 ========== === ======== ==========
The following is a reconciliation of the Fund's Level 3 investments for which significant unobservable inputs were used to determine fair value.
TOTAL INVESTMENTS UTILITIES ----------------- --------- Balance as of August 31, 2008 $ -- $ -- Change in unrealized appreciation (depreciation) (25) (25) Net purchases/(sales) 106,030 106,030 -------- -------- Balance as of August 31, 2009 $106,005 $106,005 ======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 36 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO SAM SUSTAINABLE WATER FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--95.1% AUSTRIA--0.5% BWT AG (Industrials) ........................... 820 $ 22,559 ------------ BRAZIL--2.0% Cia de Saneamento Basico do Estado de Sao Paulo - ADR (Utilities) .............. 2,300 84,180 ------------ CANADA--2.9% BioteQ Environmental Tech, Inc. (Industrials)*.. 12,285 4,825 Hanfeng Evergreen, Inc. (Materials)* ........... 7,600 38,182 Intermap Technologies Corp. (Industrials)* ..... 9,500 23,430 Stantec, Inc. (Industrials)* ................... 1,600 41,390 SunOpta, Inc. (Consumer Staples)* .............. 3,900 13,884 ------------ 121,711 ------------ CHINA--1.1% Epure International Ltd. (Industrials) ......... 106,000 43,770 Xinjiang Tianye Water Saving Irrigation System Co. Ltd. (Industrials)* .............................. 48,000 4,459 ------------ 48,229 ------------ DENMARK--1.0% Danisco A/S (Consumer Staples) ................. 870 42,561 ------------ FINLAND--1.2% Uponor Oyj (Industrials) ....................... 3,100 52,130 ------------ FRANCE--11.3% Foraco International SA (Industrials) .......... 7,700 10,902 Suez Environnement SA (Utilities) .............. 12,600 259,211 Veolia Environnement (Utilities) ............... 6,176 213,646 ------------ 483,759 ------------ GERMANY--4.1% Henkel AG & Co. KGaA (Consumer Staples) ........ 2,200 86,923 KSB AG (Industrials) ........................... 142 80,297 Washtec AG (Industrials)* ...................... 500 5,290 ------------ 172,510 ------------ HONG KONG--9.6% Beijing Enterprises Water Group Ltd. (Industrials)* ......................... 58,000 11,524 Chaoda Modern Agriculture (Consumer Staples) ... 287,040 170,362 China Green Holdings Ltd. Bermuda (Consumer Staples) .................. 39,000 40,960 China Water Affairs Group Ltd. (Utilities) ..... 133,000 33,634 Guangdong Investment Ltd. (Utilities) .......... 302,000 154,693 ------------ 411,173 ------------ ITALY--1.8% ACEA SpA (Utilities) ........................... 1,300 15,851 Hera SpA (Utilities) ........................... 24,999 61,750 ------------ 77,601 ------------
Number of Shares Value ------------ ------------ JAPAN--1.9% Kitz Corp. (Industrials) ....................... 5,000 $ 22,730 Kurita Water Industries Ltd. (Industrials) ..... 1,800 59,968 ------------ 82,698 ------------ NETHERLANDS--5.4% Aalberts Industries N.V. (Industrials) ............................... 3,450 42,337 Grontmij N.V. (Industrials) .................... 800 21,475 Ten Cate N.V. (Industrials) .................... 640 13,529 Wavin N.V. (Industrials) ....................... 70,000 151,633 ------------ 228,974 ------------ PHILIPPINES--0.7% Manila Water Co., Inc. (Utilities) ............. 93,700 29,764 ------------ SINGAPORE--1.2% Boustead Singapore Ltd. (Industrials) .......... 54,000 27,732 Hyflux Ltd. (Industrials) ...................... 12,000 23,901 ------------ 51,633 ------------ SOUTH KOREA--1.9% Woongjin Coway Co., Ltd. (Industrials) ............................... 2,890 79,950 ------------ SPAIN--0.4% Fluidra SA (Industrials)* ...................... 4,200 17,040 ------------ SWITZERLAND--4.9% Geberit AG (Industrials) ....................... 820 126,148 Nestle SA (Consumer Staples) ................... 1,980 82,237 ------------ 208,385 ------------ UNITED KINGDOM--0.9% Pennon Group PLC (Utilities) ................... 2,900 21,764 PuriCore PLC (Health Care)* .................... 28,900 8,116 Spice PLC (Industrials) ........................ 5,000 5,820 United Utilities Group PLC (Utilities) ......... 272 2,005 ------------ 37,705 ------------ UNITED STATES--42.3% American States Water Co. (Utilities) .......... 1,100 36,322 American Water Works Co., Inc. (Utilities) ................................. 10,305 207,131 Aqua America, Inc. (Utilities) ................. 1,600 26,960 Calgon Carbon Corp. (Materials)* ............... 2,400 34,320 California Water Service Group (Utilities) ..... 800 29,776 Danaher Corp. (Industrials) .................... 3,000 182,130 Ecolab, Inc. (Materials) ....................... 1,660 70,201 ICF International, Inc. (Industrials)* ......... 700 19,145 IDEX Corp. (Industrials) ....................... 2,400 63,456 Insituform Technologies, Inc., Class A (Industrials)* ...................... 2,400 45,960 Itron, Inc. (Industrials)* ..................... 1,000 54,790 ITT Corp. (Industrials) ........................ 5,090 254,907 Layne Christensen Co. (Industrials)* ........... 600 15,480
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 37 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO SAM SUSTAINABLE WATER FUND (concluded) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ UNITED STATES--(CONTINUED) Lindsay Manufacturing Co. (Industrials) ........ 200 $ 8,302 Millipore Corp. (Health Care)* ................. 600 39,738 Mueller Water Products, Inc., Class A (Industrials) ....................... 11,416 52,514 Nalco Holding Co. (Materials) .................. 3,647 65,281 Pall Corp. (Industrials) ....................... 6,350 188,786 Pentair, Inc. (Industrials) .................... 1,200 33,996 Roper Industries, Inc. (Industrials) ........... 2,600 123,188 Thermo Fisher Scientific, Inc. (Health Care)* .............................. 4,600 207,966 Toro Co. (Industrials) ......................... 510 19,344 TyraTech, Inc. (Materials)* .................... 3,500 1,425 Valmont Industries, Inc. (Industrials) ......... 300 24,699 ------------ 1,805,817 ------------ TOTAL COMMON STOCK (Cost $4,240,970) ........................... 4,058,379 ------------ PREFERRED STOCK--0.0% UNITED KINGDOM--0.0% PuriCore PLC * ................................. 4,867 0 ------------ TOTAL PREFERRED STOCK (Cost $0) ................................... 0 ------------ TOTAL INVESTMENTS--95.1% (Cost $4,240,970) .............................. 4,058,379 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--4.9% ....... 210,553 ------------ NET ASSETS--100.0% ................................ $ 4,268,932 ============
- ---------- ADR -- American Depositary Receipt * -- Non-income producing. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ---------- ----------- ------------ ------------- Common Stock * $4,058,379 $-- $-- $4,058,379 ---------- --- --- ---------- Total $4,058,379 $-- $-- $4,058,379 ========== === === ==========
* see portfolio of investments detail for industry breakout. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 38 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO SAM SUSTAINABLE GLOBAL ACTIVE FUND PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ COMMON STOCK--98.1% AUSTRALIA--5.2% Macquarie Group Ltd. (Financial) ............... 5,254 $ 225,587 National Australia Bank Ltd. (Financial) ....... 13,500 324,963 Westpac Banking Corp. (Financial) .............. 2,902 59,774 ------------ 610,324 ------------ BERMUDA--2.1% RenaissanceRe Holdings Ltd. (Financial) ................................ 4,425 240,941 ------------ CANADA--6.5% BCE, Inc. (Telecommunication Services) ......... 3,469 85,240 Inmet Mining Corp. (Materials) ................. 3,192 138,381 National Bank of Canada (Financial) ............ 2,641 148,243 Nexen, Inc. (Energy) ........................... 14,364 282,097 Teck Resources Ltd., Class B (Materials)* ...... 4,004 96,630 ------------ 750,591 ------------ GERMANY--3.2% Continental AG (Consumer Discretionary)* ....... 4,208 173,800 Henkel AG & Co. KGaA (Consumer Staples) ........ 2,176 85,974 Muenchener Rueckversicherungs- Gesellschaft AG (Financial) ................. 782 116,626 ------------ 376,400 ------------ HONG KONG--3.5% Noble Group Ltd. (Industrials) ................. 275,000 404,594 ------------ JAPAN--10.2% Daito Trust Construction Co., Ltd. (Financial) ................................. 8,700 415,132 Fast Retailing Co., Ltd. (Consumer Discretionary) .................... 1,700 203,708 ITOCHU Corp. (Industrials) ..................... 27,000 191,510 Mitsubishi Corp. (Industrials) ................. 6,400 129,651 Mitsui O.S.K. Lines, Ltd. (Industrials) ........ 22,000 140,677 Nitori Co., Ltd. (Consumer Discretionary) ...... 1,400 108,329 ------------ 1,189,007 ------------ NETHERLANDS--2.6% Koninklijke Ahold N.V. (Consumer Staples) ...... 25,463 298,274 ------------ PORTUGAL--3.7% EDP - Energias de Portugal, SA (Utilities) ..... 15,000 64,835 Portugal Telecom, SGPS SA (Telecommunication Services) ................ 35,401 365,916 ------------ 430,751 ------------
Number of Shares Value ------------ ------------ SPAIN--7.0% Banco Santander SA (Financial) ................. 10,378 $ 159,715 Iberdrola Renovables SA (Utilities) ............ 64,854 297,521 Sociedad General de Aguas de Barcelona SA, Class A (Utilities) ........... 2,902 66,316 Telefonica SA (Telecommunication Services) ................ 11,607 292,696 ------------ 816,248 ------------ SWEDEN--3.9% Boliden AB (Materials) ......................... 22,302 228,708 Telefonaktiebolaget LM Ericsson, Class B (Information Technology) ................................ 23,098 220,971 ------------ 449,679 ------------ SWITZERLAND--1.7% Baloise Holding AG (Financial) ................. 2,220 201,056 ------------ UNITED KINGDOM--6.7% AstraZeneca PLC (Health Care) .................. 3,337 154,282 Barclays PLC (Financial)* ...................... 66,160 409,549 BG PLC (Energy) ................................ 3,231 53,493 BP PLC (Energy) ................................ 1,172 10,150 Travis Perkins PLC (Industrials) ............... 11,447 150,386 ------------ 777,860 ------------ UNITED STATES--41.8% Aetna, Inc. (Health Care) ...................... 6,674 190,209 American Water Works Co., Inc. (Utilities) ..... 6,000 120,600 Bristol-Myers Squibb Co. (Health Care) ......... 2,031 44,946 Bunge Ltd. (Consumer Staples) .................. 725 48,582 Celanese Corp., Series A (Materials) ........... 4,643 118,257 Chevron Corp. (Energy) ......................... 1,831 128,060 ConocoPhillips (Energy) ........................ 1,513 68,130 Constellation Energy Group, Inc. (Utilities) ................................. 7,000 221,550 Forest Oil Corp. (Energy)* ..................... 7,411 116,501 Health Net, Inc. (Health Care)* ................ 11,781 180,485 Hewlett-Packard Co. (Information Technology) ... 9,248 415,143 International Business Machines Corp. (Information Technology) .............. 3,065 361,823 JPMorgan Chase & Co. (Financial) ............... 1,306 56,759 Kimberly-Clark Corp. (Consumer Staples) ........ 4,266 257,922 Limited Brands, Inc. (Consumer Discretionary) .............................. 18,136 270,589 McDonald's Corp. (Consumer Discretionary) .............................. 1,306 73,449 McKesson Corp. (Health Care) ................... 1,964 111,673 Newmont Mining Corp. (Materials) ............... 9,866 396,515 Occidental Petroleum Corp. (Energy) ............ 3,821 279,315 Pfizer, Inc. (Health Care) ..................... 19,456 324,915 PG&E Corp. (Utilities) ......................... 1,872 75,984
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 39 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 ROBECO SAM SUSTAINABLE GLOBAL ACTIVE FUND (concluded) PORTFOLIO OF INVESTMENTS
Number of Shares Value ------------ ------------ UNITED STATES--(CONTINUED) Procter & Gamble Co. (Consumer Staples) ........ 5,362 $ 290,138 Reynolds American, Inc. (Consumer Staples) ..... 3,500 159,985 Target Corp. (Consumer Discretionary) .......... 2,670 125,490 Texas Instruments, Inc. (Information Technology) .................... 2,176 53,508 UnitedHealth Group, Inc. (Health Care) ......... 12,913 361,566 ------------ 4,852,094 ------------ TOTAL COMMON STOCK (Cost $10,738,183) .......................... 11,397,819 ------------ TOTAL INVESTMENTS--98.1% (Cost $10,738,183) ............................. 11,397,819 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES--1.9% ....... 219,300 ------------ NET ASSETS--100.0% ................................ $ 11,617,119 ============
- ---------- * -- Non-income producing. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is as follows (see note 1- significant accounting policies):
LEVEL 2 LEVEL 3 LEVEL 1 SIGNIFICANT SIGNIFICANT TOTAL QUOTED OBSERVABLE UNOBSERVABLE FAIR VALUE AT PRICE INPUT INPUT 08/31/09 ----------- ----------- ------------ ------------- Common Stock * $11,397,819 $-- $-- $11,397,819 ----------- --- --- ----------- Total $11,397,819 $-- $-- $11,397,819 =========== === === ===========
* see portfolio of investments detail for industry breakout. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 40 | ANNUAL REPORT 2009 [THIS PAGE INTENTIONALLY LEFT BLANK] ROBECO INVESTMENT FUNDS AUGUST 31, 2009 STATEMENTS OF ASSETS AND LIABILITIES
ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON PARTNERS PARTNERS PARTNERS PARTNERS SMALL CAP LONG/SHORT MID CAP ALL-CAP VALUE FUND II EQUITY FUND VALUE FUND VALUE FUND ------------- ------------- ------------- ------------- ASSETS Investments in securities, at value+ ....................... $ 63,153,928 $ 81,678,506 $44,667,179 $68,092,239 Cash ....................................................... 1,579,124 13,437,489 1,925,867 1,212,083 Receivables Investments sold ........................................ 722,773 2,110,804 -- 30,494 Deposits with brokers for securities sold short ......... -- 15,251,786 -- -- Dividends and interest .................................. 34,235 32,383 64,581 115,517 Capital shares sold ..................................... 14,817 1,817,462 4,959 7,528 Prepaid expenses and other assets .......................... 15,091 14,088 18,525 14,969 ------------ ------------ ----------- ----------- Total assets ......................................... 65,519,968 114,342,518 46,681,111 69,472,830 ------------ ------------ ----------- ----------- LIABILITIES Securities sold short, at fair value+++..................... -- 16,222,474 -- -- Options written, at value* ................................. -- -- -- 1,035,526 Payables Investments purchased ................................... 466,493 4,349,426 -- 82,275 Capital shares redeemed ................................. 14,766 48,185 3,461 541 Due to prime broker ..................................... -- 7,820,289 -- -- Investment advisory fees ................................ 34,719 122,407 2,888 18,744 Distribution and service fees (Investor Class) .......... 9,058 4,619 2,885 1,041 Dividends on securities sold short ...................... -- 587 -- -- Interest payable ........................................ -- 5,441 -- -- Other accrued expenses and liabilities ..................... 121,697 85,504 64,977 63,066 ------------ ------------ ----------- ----------- Total liabilities .................................... 646,733 28,658,932 74,211 1,201,193 ------------ ------------ ----------- ----------- Net Assets .............................................. $ 64,873,235 $ 85,683,586 $46,606,900 $68,271,637 ============ ============ =========== =========== NET ASSETS CONSIST OF Par value .................................................. $ 6,339 $ 5,498 $ 5,639 $ 5,436 Paid-in capital ............................................ 98,078,745 83,993,094 53,412,090 70,307,410 Undistributed net investment income/(loss) ................. -- (52,079) 232,015 791,371 Accumulated net realized loss from investments ............. (36,731,127) (11,359,571) (7,096,352) (4,598,287) Net unrealized appreciation on investments and foreign currency translation ........................ 3,519,278 13,096,644 53,508 1,765,707 ------------ ------------ ----------- ----------- Net Assets ................................................. $ 64,873,235 $ 85,683,586 $46,606,900 $68,271,637 ============ ============ =========== =========== INSTITUTIONAL CLASS Net assets ................................................. $ 21,465,648 $ 54,703,285 $32,691,262 $63,084,582 Shares outstanding ......................................... 2,046,518 3,474,120 3,920,958 5,021,163 ------------ ------------ ----------- ----------- Net asset value, offering and redemption price per share ... $ 10.49 $ 15.75 $ 8.34 $ 12.56 ============ ============ =========== =========== INVESTOR CLASS Net assets ................................................. $ 43,407,587 $ 30,980,301 $13,915,638 $ 5,187,055 Shares outstanding ......................................... 4,292,420 2,023,641 1,717,657 414,425 ------------ ------------ ----------- ----------- Net asset value, offering and redemption price per share ... $ 10.11 $ 15.31 $ 8.10 $ 12.52 ============ ============ =========== =========== + Investment in securities, at cost ....................... $ 59,634,650 $ 69,072,190 $44,613,671 $66,191,983 +++ Proceeds received, securities sold short ............... -- 16,712,802 -- -- * Premiums received, options written ...................... -- -- -- 900,977
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 42 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS AUGUST 31, 2009 STATEMENTS OF ASSETS AND LIABILITIES (concluded)
SAM ROBECO WPG SAM SAM SUSTAINABLE SMALL CAP SUSTAINABLE SUSTAINABLE GLOBAL ACTIVE VALUE FUND CLIMATE FUND WATER FUND FUND ------------ ------------ ----------- ------------- ASSETS Investments in securities, at value+ ....................... $ 33,184,572 $ 3,296,527 $ 4,058,379 $11,397,819 Foreign currency, at value # ............................... -- 1,917 -- 3,386 Cash ....................................................... 2,159,119 114,298 231,748 617,400 Receivables Investments sold ........................................ 129,834 -- 19,637 -- Dividends and interest .................................. 30,989 5,989 10,806 16,022 Investment adviser ...................................... -- -- -- 19,355 Prepaid expenses and other assets .......................... 13,205 16,056 15,483 31,858 ------------ ----------- ----------- ----------- Total assets ......................................... 35,517,719 3,434,787 4,336,053 12,085,840 ------------ ----------- ----------- ----------- LIABILITIES Payables Investments purchased ................................... 21,203 18,667 12,012 424,539 Capital shares redeemed ................................. 10,000 -- -- -- Investment advisory fees ................................ 26,848 10,509 9,646 -- Distribution and service fees (Investor Class) .......... -- 62 113 1 Other accrued expenses and liabilities ..................... 54,684 51,600 45,350 44,181 ------------ ----------- ----------- ----------- Total liabilities .................................... 112,735 80,838 67,121 468,721 ------------ ----------- ----------- ----------- Net Assets ................................................. $ 35,404,984 $ 3,353,949 $ 4,268,932 $11,617,119 ============ =========== =========== =========== NET ASSETS CONSIST OF Par value .................................................. $ 3,350 $ 504 $ 632 $ 1,028 Paid-in capital ............................................ 49,658,687 4,678,799 5,748,634 10,308,792 Undistributed net investment income ........................ 107,004 1,751 20,212 10,150 Accumulated net realized gain/(loss) from investments ...... (17,313,065) (1,571,630) (1,317,880) 635,679 Net unrealized appreciation/(depreciation) on investments and foreign currency translation ............ 2,949,008 244,525 (182,666) 661,470 ------------ ----------- ----------- ----------- Net Assets ................................................. $ 35,404,984 $ 3,353,949 $ 4,268,932 $11,617,119 ============ =========== =========== =========== INSTITUTIONAL CLASS Net assets ................................................. $ 35,404,984 $ 3,045,326 $ 3,723,866 $11,613,613 Shares outstanding ......................................... 3,349,737 457,852 551,380 1,027,702 ------------ ----------- ----------- ----------- Net asset value, offering and redemption price per share ... $ 10.57 $ 6.65 $ 6.75 $ 11.30 ============ =========== =========== =========== INVESTOR CLASS Net assets ................................................. $ -- $ 308,623 $ 545,066 $ 3,506 Shares outstanding ......................................... -- 46,469 80,968 310 ------------ ----------- ----------- ----------- Net asset value, offering and redemption price per share ... $ -- $ 6.64 $ 6.73 $ 11.30 ============ =========== =========== =========== + Investment in securities, at cost ....................... $ 30,235,564 $ 3,051,953 $ 4,240,970 $10,738,183 # Foreign currency, at cost ............................... -- 1,916 -- 3,380
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 43 ROBECO INVESTMENT FUNDS For the Year Ended AUGUST 31, 2009 STATEMENTS OF OPERATIONS
ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON ROBECO BOSTON PARTNERS PARTNERS PARTNERS PARTNERS SMALL CAP LONG/SHORT MID CAP ALL-CAP VALUE FUND II EQUITY FUND VALUE FUND VALUE FUND ------------- ------------- ------------- ------------- INVESTMENT INCOME Dividends+ ....................................................... $ 1,578,949 $ 505,090 $ 880,834 $ 1,206,270 Interest ......................................................... 4,808 6,875 3,433 47,721 ------------ ------------ ----------- ----------- Total investment income ....................................... 1,583,757 511,965 884,267 1,253,991 ------------ ------------ ----------- ----------- EXPENSES Advisory fees .................................................... 631,490 770,343 303,323 367,021 Transfer agent fees .............................................. 132,085 82,627 110,126 77,725 Distribution fees (Investor Class) ............................... 96,222 18,030 27,930 7,536 Administration and accounting fees ............................... 92,628 95,143 86,609 87,504 Printing and shareholder reporting fees .......................... 80,575 15,006 28,111 21,377 Directors' and officers' fees .................................... 37,624 15,235 24,726 26,919 Professional fees ................................................ 40,143 36,296 38,917 42,115 Custodian fees ................................................... 43,385 44,303 16,777 30,695 Registration and filing fees ..................................... 44,438 27,800 22,999 30,093 Dividend expense on securities sold short ........................ -- 12,078 -- -- Prime broker interest expense .................................... -- 277,374 -- -- Other expenses ................................................... 2,746 1,447 8,163 2,631 ------------ ------------ ----------- ----------- Total expenses before waivers and reimbursements .............. 1,201,336 1,395,682 667,681 693,616 Less: waivers and reimbursements .............................. (284,230) (232,319) (260,653) (250,284) ------------ ------------ ----------- ----------- Net expenses after waivers and reimbursements .................... 917,106 1,163,363 407,028 443,332 ------------ ------------ ----------- ----------- Net investment income/(loss) ..................................... 666,651 (651,398) 477,239 810,659 ------------ ------------ ----------- ----------- Net realized gain/(loss) from: Investments ................................................... (30,907,801) (10,757,974) (5,933,857) (4,504,959) Investments sold-short ........................................ -- 5,739,255 -- -- Foreign currency transactions ................................. -- (123) -- -- Written options ............................................... -- -- -- (29,132) Net increase from payments by affiliates (Note 2) ............. -- -- 55,676 -- Net change in unrealized appreciation/(depreciation) on: Investments ................................................... 8,902,011 18,237,630 (324,285) 2,829,703 Investments sold short ........................................ -- (2,206,518) -- -- Written options ............................................... -- -- -- (180,036) ------------ ------------ ----------- ----------- Net realized and unrealized gain/(loss) on investments and foreign currency ...................................................... (22,005,790) 11,012,270 (6,202,466) (1,884,424) ------------ ------------ ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .................................................. $(21,339,139) $ 10,360,872 $(5,725,227) $(1,073,765) ============ ============ =========== =========== +Net of foreign withholding taxes of .......................... $ -- $ (8,676) $ (797) $ (14,570) ============ ============ =========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 44 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS For the Year Ended AUGUST 31, 2009 STATEMENTS OF OPERATIONS (concluded)
SAM ROBECO WPG SAM SAM SUSTAINABLE SMALL CAP SUSTAINABLE SUSTAINABLE GLOBAL ACTIVE VALUE FUND CLIMATE FUND WATER FUND FUND* ------------ ------------ ----------- ------------- INVESTMENT INCOME Dividends+ ............................................... $ 572,945 $ 42,702 $ 75,629 $ 30,170 Interest ................................................. 3,923 568 442 79 Income from securities loaned (Note 6) ................... 2,608 -- -- -- ------------ ----------- ----------- ---------- Total investment income ............................... 579,476 43,270 76,071 30,249 ------------ ----------- ----------- ---------- EXPENSES Advisory fees ............................................ 263,101 25,705 33,927 16,572 Transfer agent fees ...................................... 90,242 63,465 63,465 7,983 Distribution fees (Investor Class) ....................... -- 504 931 1 Administration and accounting fees ....................... 81,795 81,987 86,411 17,021 Printing and shareholder reporting fees .................. 22,567 -- -- 3,500 Directors' and officers' fees ............................ 23,989 12,972 13,102 1,952 Professional fees ........................................ 28,150 33,502 32,235 26,125 Custodian fees ........................................... 36,488 23,191 39,918 5,971 Registration and filing fees ............................. 20,424 54,218 63,108 3,200 Other expenses ........................................... 2,544 3,479 3,207 1,729 ------------ ----------- ----------- ---------- Total expenses before waivers and reimbursements ...... 569,300 299,023 336,304 84,054 Less: waivers and reimbursements ...................... (99,333) (260,030) (284,553) (59,381) ------------ ----------- ----------- ---------- Net expenses after waivers and reimbursements ............ 469,967 38,993 51,751 24,673 ------------ ----------- ----------- ---------- Net investment income .................................... 109,509 4,277 24,320 5,576 ------------ ----------- ----------- ---------- Net realized gain/(loss) from: Investments ........................................... (10,265,024) (1,368,736) (1,247,224) 635,679 Foreign currency transactions ......................... -- (2,052) (1,906) 4,574 Net change in unrealized appreciation/(depreciation) on: Investments ........................................... 3,986,476 738,720 309,987 659,636 Foreign currency translation .......................... -- 151 298 1,834 ------------ ----------- ----------- ---------- Net realized and unrealized gain/(loss) on investments and foreign currency ...................................... (6,278,548) (631,917) (938,845) 1,301,723 ------------ ----------- ----------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS .......................................... $ (6,169,039) $ (627,640) $ (914,525) $1,307,299 ============ =========== =========== ========== +Net of foreign withholding taxes of .................. $ (309) $ (3,100) $ (6,014) $ (1,551) ============ =========== =========== ==========
* FOR THE PERIOD JUNE 18, 2009 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 2009. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 45 ROBECO INVESTMENT FUNDS 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, 2009 AUGUST 31, 2008 AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- --------------- --------------- FROM OPERATIONS: Net investment income/(loss) ................................. $ 666,651 $ 510,903 $ (651,398) $ (1,406,344) Net realized gain/(loss) from investments .................... (30,907,801) 7,738,669 (5,018,842) 7,116,485 Net change in unrealized appreciation/(depreciation) from investments .......................................... 8,902,011 (30,099,681) 16,031,112 (6,247,351) ------------ ------------- ------------ ------------ Net increase/(decrease) in net assets from operations ........... (21,339,139) (21,850,109) 10,360,872 (537,210) ------------ ------------- ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional Class ....................................... (428,811) -- -- -- Investor Class ............................................ (550,302) -- -- -- Net realized capital gains Institutional Class ....................................... (141,170) (30,253,296) (3,859,743) (7,243,467) Investor Class ............................................ (222,896) (41,264,087) (1,041,399) (1,286,875) Return of capital Institutional Class ....................................... (117,965) -- -- -- Investor Class ............................................ (151,361) -- -- -- ------------ ------------- ------------ ------------ Net decrease in net assets from dividends and distributions to shareholders .............................................. (1,612,505) (71,517,383) (4,901,142) (8,530,342) ------------ ------------- ------------ ------------ CAPITAL TRANSACTIONS: Increase/(decrease) in net assets from capital transactions Institutional Class Proceeds from shares sold ................................. 5,138,859 13,446,388 23,055,972 7,217,557 Proceeds from reorganization (Note 9) ..................... -- -- 8,000,331 -- Reinvestment of distributions ............................. 672,856 26,185,309 3,803,772 7,230,172 Shares redeemed ........................................... (29,398,473) (37,628,853) (20,373,730) (44,089,855) Redemption fees (Note 7) .................................. 3,551 8,904 11,244 6,818 Investor Class Proceeds from shares sold ................................. 2,306,110 3,143,741 23,337,683 212,230 Reinvestment of distributions ............................. 911,751 40,280,964 1,037,134 1,284,194 Shares redeemed ........................................... (13,838,158) (78,942,201) (2,802,031) (7,078,728) Redemption fees (Note 7) .................................. 6,768 11,556 3,256 1,268 ------------ ------------- ------------ ------------ Net increase/(decrease) in net assets from capital transactions . (34,196,736) (33,494,192) 36,073,631 (35,216,344) ------------ ------------- ------------ ------------ Total increase/(decrease) in net assets ......................... (57,148,380) (126,861,684) 41,533,361 (44,283,896) NET ASSETS Beginning of year ............................................ 122,021,615 248,883,299 44,150,225 88,434,121 ------------ ------------- ------------ ------------ End of year .................................................. $ 64,873,235 $ 122,021,615 $ 85,683,586 $ 44,150,225 ============ ============= ============ ============ Undistributed net investment income/(loss), end of year ......... $ -- $ 523,488 $ (52,079) $ -- ============ ============= ============ ============ SHARE TRANSACTIONS: Institutional Class Shares sold ............................................... 624,057 907,906 1,699,043 486,140 Shares issued in reorganization (Note 9) .................. -- -- 746,155 -- Shares reinvested ......................................... 91,297 2,128,887 425,002 481,370 Shares redeemed ........................................... (3,442,537) (2,657,341) (1,750,768) (2,894,572) ------------ ------------- ------------ ------------ Net increase/(decrease) ...................................... (2,727,183) 379,452 1,119,432 (1,927,062) ------------ ------------- ------------ ------------ Investor Class Shares sold ............................................... 270,214 233,059 1,636,225 14,174 Shares reinvested ......................................... 128,055 3,393,510 118,937 87,064 Shares redeemed ........................................... (1,823,957) (5,261,517) (241,075) (455,993) ------------ ------------- ------------ ------------ Net increase/(decrease) ................................ (1,425,688) (1,634,948) 1,514,087 (354,755) ------------ ------------- ------------ ------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 46 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS STATEMENTS OF CHANGES IN NET ASSETS (continued)
ROBECO BOSTON PARTNERS ROBECO BOSTON PARTNERS MID CAP VALUE FUND ALL-CAP VALUE FUND -------------------------------- -------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- --------------- --------------- FROM OPERATIONS: Net investment income ................................... $ 477,239 $ 357,500 $ 810,659 $ 531,890 Net realized gain/(loss) from investments ............... (5,878,181) (392,105) (4,534,091) 590,704 Net change in unrealized appreciation/(depreciation) from investments ..................................... (324,285) (3,105,700) 2,649,667 (2,882,310) ----------- ----------- ----------- ----------- Net decrease in net assets resulting from operations ....... (5,725,227) (3,140,305) (1,073,765) (1,759,716) ----------- ----------- ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional Class .................................. (341,607) (195,014) (456,682) (156,892) Investor Class ....................................... (110,208) (46,318) (17,485) (24,174) Net realized capital gains Institutional Class .................................. (1,154) (4,230,671) (335,000) (1,351,923) Investor Class ....................................... (496) (1,659,111) (18,253) (300,869) ----------- ----------- ----------- ----------- Net decrease in net assets from dividends and distributions to shareholders ......................................... (453,465) (6,131,114) (827,420) (1,833,858) ----------- ----------- ----------- ----------- CAPITAL TRANSACTIONS: Increase/(decrease) in net assets from share transactions Institutional Class Proceeds from shares sold ............................ 5,308,485 6,424,242 17,515,574 42,200,560 Reinvestment of distributions ........................ 335,472 4,312,435 791,556 1,507,839 Shares redeemed ...................................... (4,554,459) (4,717,369) (5,127,776) (2,604,362) Investor Class Proceeds from shares sold ............................ 5,122,885 11,198,586 2,710,752 703,592 Reinvestment of distributions ........................ 107,613 1,686,203 31,921 284,356 Shares redeemed ...................................... (5,791,669) (5,875,445) (762,358) (1,226,649) ----------- ----------- ----------- ----------- Net increase in net assets from capital share transactions . 528,327 13,028,652 15,159,669 40,865,336 ----------- ----------- ----------- ----------- Total increase/(decrease) in net assets .................... (5,650,365) 3,757,233 13,258,484 37,271,762 NET ASSETS Beginning of year ........................................ 52,257,265 48,500,032 55,013,153 17,741,391 ----------- ----------- ----------- ----------- End of year ............................................. $46,606,900 $52,257,265 $68,271,637 $55,013,153 =========== =========== =========== =========== Undistributed net investment income, end of year ........... $ 232,015 $ 210,966 $ 791,371 $ 454,886 =========== =========== =========== =========== SHARE TRANSACTIONS: Institutional Class Shares sold .......................................... 794,979 664,615 1,609,618 3,054,460 Shares reinvested .................................... 53,081 444,123 78,063 103,418 Shares redeemed ...................................... (675,830) (479,829) (475,846) (181,568) ----------- ----------- ----------- ----------- Net increase ............................................... 172,230 628,909 1,211,835 2,976,310 ----------- ----------- ----------- ----------- Investor Class Shares sold .......................................... 741,258 1,172,629 252,948 50,582 Shares reinvested .................................... 17,469 178,623 3,155 19,543 Shares redeemed ...................................... (935,943) (601,239) (74,947) (81,989) ----------- ----------- ----------- ----------- Net increase/(decrease) .................................... (177,216) 750,013 181,156 (11,864) ----------- ----------- ----------- -----------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 47 ROBECO INVESTMENT FUNDS STATEMENTS OF CHANGES IN NET ASSETS (continued)
ROBECO SAM SUSTAINABLE WPG SMALL CAP VALUE FUND CLIMATE FUND -------------------------------- ----------------------------------- FOR THE FOR THE FOR THE PERIOD YEAR ENDED YEAR ENDED YEAR ENDED OCTOBER 1, 2007* AUGUST 31, 2009 AUGUST 31, 2008 AUGUST 31, 2009 TO AUGUST 31, 2008 --------------- --------------- --------------- ------------------ FROM OPERATIONS: Net investment income .............................. $ 109,509 $ 50,718 $ 4,277 $ 9,164 Net realized loss from investments and foreign currency ........................................ (10,265,024) (4,964,281) (1,370,788) (197,558) Net change in unrealized appreciation/(depreciation) from investments and foreign currency ........... 3,986,476 (3,287,345) 738,871 (494,346) ------------ ------------ ----------- ----------- Net decrease in net assets resulting from operations .. (6,169,039) (8,200,908) (627,640) (682,740) ------------ ------------ ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional Class ............................. (50,712) (43,780) (22,232) -- Investor Class .................................. -- -- (1,465) -- Net realized capital gains Institutional Class ............................. (38,110) (7,781,157) -- -- ------------ ------------ ----------- ----------- Net decrease in net assets from dividends and distributions to shareholders ...................... (88,822) (7,824,937) (23,697) -- ------------ ------------ ----------- ----------- CAPITAL TRANSACTIONS: Increase/(decrease) in net assets from share transactions Institutional Class Proceeds from shares sold ....................... 3,279,900 5,122,604 237,487 4,053,797 Reinvestment of distributions ................... 83,238 7,357,551 22,232 -- Shares redeemed ................................. (4,838,738) (7,283,092) (3,176) (6,417) Redemption fees (Note 7) ........................ 5,244 -- 70 198 Investor Class Proceeds from shares sold ....................... -- -- 145,940 336,612 Reinvestment of distributions ................... -- -- 1,444 -- Shares redeemed ................................. -- -- (75,627) (24,543) Redemption fees (Note 7) ........................ -- -- 6 3 ------------ ------------ ----------- ----------- Net increase/(decrease) in net assets from capital share transactions ................................. (1,470,356) 5,197,063 328,376 4,359,650 ------------ ------------ ----------- ----------- Total increase/(decrease) in net assets ............ (7,728,217) (10,828,782) (322,961) 3,676,910 NET ASSETS Beginning of period ................................ 43,133,201 53,961,983 3,676,910 -- ------------ ------------ ----------- ----------- End of period ...................................... $ 35,404,984 $ 43,133,201 $ 3,353,949 $ 3,676,910 ============ ============ =========== =========== Undistributed net investment income, end of year ...... $ 107,004 $ 50,718 $ 1,751 $ 23,152 ============ ============ =========== =========== SHARE TRANSACTIONS: Institutional Class Shares sold ..................................... 366,216 384,461 48,277 406,238 Shares reinvested ............................... 10,672 559,084 4,622 -- Shares redeemed ................................. (567,013) (568,539) (587) (698) ------------ ------------ ----------- ----------- Net increase/(decrease) ............................... (190,125) 375,006 52,312 405,540 ------------ ------------ ----------- ----------- Investor Class Shares sold ..................................... -- -- 26,319 36,797 Shares reinvested ............................... -- -- 300 -- Shares redeemed ................................. -- -- (14,427) (2,520) ------------ ------------ ----------- ----------- Net increase .......................................... -- -- 12,192 34,277 ------------ ------------ ----------- -----------
* Commencement of operations THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 48 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS STATEMENTS OF CHANGES IN NET ASSETS (concluded)
SAM SAM SUSTAINABLE GLOBAL SUSTAINABLE WATER FUND ACTIVE FUND ----------------------------------- ------------------ FOR THE PERIOD PERIOD YEAR ENDED OCTOBER 1, 2007* JUNE 18, 2009* AUGUST 31, 2009 TO AUGUST 31, 2008 TO AUGUST 31, 2009 --------------- ------------------ ------------------ FROM OPERATIONS: Net investment income .............................. $ 24,320 $ 16,860 $ 5,576 Net realized gain/(loss) from investments and foreign currency ............................ (1,249,130) (68,933) 640,253 Net change in unrealized appreciation/(depreciation) from investments and foreign currency ........... 310,285 (492,951) 661,470 ----------- ----------- ----------- Net increase/(decrease) in net assets resulting from operations ......................................... (914,525) (545,024) 1,307,299 ----------- ----------- ----------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income Institutional Class ............................. (28,831) -- -- Investor Class .................................. (2,732) -- -- ----------- ----------- ----------- Net decrease in net assets from dividends and distributions to shareholders ...................... (31,563) -- -- ----------- ----------- ----------- CAPITAL TRANSACTIONS: Increase/(decrease) in net assets from share transactions Institutional Class Proceeds from shares sold ....................... 712,588 4,590,777 10,306,820 Reinvestment of distributions ................... 28,831 -- -- Shares redeemed ................................. (216,910) (6,002) -- Investor Class Proceeds from shares sold ....................... 289,535 503,368 3,000 Reinvestment of distributions ................... 2,708 -- -- Shares redeemed ................................. (95,372) (49,479) -- ----------- ----------- ----------- Net increase in net assets from capital share transactions ................................. 721,380 5,038,664 10,309,820 ----------- ----------- ----------- Total increase/(decrease) in net assets ............... (224,708) 4,493,640 11,617,119 NET ASSETS Beginning of period ................................ 4,493,640 -- -- ----------- ----------- ----------- End of period ...................................... $ 4,268,932 $ 4,493,640 $11,617,119 =========== =========== =========== Undistributed net investment income, end of year ...... $ 20,212 $ 29,196 $ 10,150 =========== =========== =========== SHARE TRANSACTIONS: Institutional Class Shares sold ..................................... 117,956 464,294 1,027,702 Shares reinvested ............................... 5,290 -- -- Shares redeemed ................................. (35,489) (671) -- ----------- ----------- ----------- Net increase .......................................... 87,757 463,623 1,027,702 ----------- ----------- ----------- Investor Class Shares sold ..................................... 48,588 53,871 310 Shares reinvested ............................... 497 -- -- Shares redeemed ................................. (16,263) (5,725) -- ----------- ----------- ----------- Net increase .......................................... 32,822 48,146 310 ----------- ----------- -----------
* Commencement of operations THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 49 ROBECO INVESTMENT FUNDS FOR THE YEAR ENDED AUGUST 31, 2009 STATEMENT OF CASH FLOWS
ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND ------------- CASH FLOWS PROVIDED FROM (USED IN) OPERATING ACTIVITIES: Net increase in net assets resulting from operations .......... $ 10,360,872 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: Purchases of long-term portfolio investments .................. (81,663,692) Proceeds from disposition of long-term portfolio investments ...................................... 65,454,231 Purchases to cover short sales ................................ 26,595,018 Proceeds from short sales ..................................... (21,229,882) Net realized gain on investments and investments sold short ... 5,018,719 Net unrealized appreciation on investments and investments sold short(1) .............................................. (17,498,847) Increase in deposits with brokers for securities sold short ... (5,221,585) Increase in receivable for securities sold .................... (2,021,390) Decrease in dividend and interest receivable .................. 7,903 Increase in prepaid expenses and other assets ................. (3,782) Increase in payable for investments purchased ................. 4,081,499 Decrease in dividend payable for short sales .................. (2,430) Increase in interest payable .................................. 4,088 Increase in payable to adviser ................................ 74,537 Decrease in accrued expenses .................................. (113,857) ------------ NET CASH USED IN OPERATING ACTIVITIES ......................... (16,158,598) ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase in payable to Prime Broker ........................... 1,606,466 Net payment for fund share activity ........................... 21,462,389 Distributions paid from realized capital gains ................ (60,236) ------------ Net cash provided by financing activities(1) .................. 23,008,619 ------------ NET INCREASE IN CASH .......................................... 6,850,021 CASH AT BEGINNING OF YEAR(2) .................................. 6,587,468 ------------ CASH AT END OF YEAR(2) ........................................ $ 13,437,489 ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest expense ................ $ 41,281 ============
- ---------- (1) Non cash financing activities not included herein consists of reinvestment of dividends and distributions of $4,840,906 and subscriptions issued in reorganization of $8,000,331. (2) Consists of PNC Bank Money Market Account. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 50 | ANNUAL REPORT 2009 [THIS PAGE INTENTIONALLY LEFT BLANK] ROBECO INVESTMENT FUNDS FINANCIAL HIGHLIGHTS PER SHARE OPERATING PERFORMANCE Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements.
NET ASSET NET REALIZED TOTAL VALUE, NET AND UNREALIZED FROM BEGINNING INVESTMENT GAIN/(LOSS) ON INVESTMENT OF PERIOD INCOME/(LOSS) INVESTMENTS OPERATIONS --------- ------------- -------------- ---------- ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II INSTITUTIONAL CLASS 8/31/09 $11.87 $ 0.11* $(1.26) $(1.15) 8/31/08 21.47 0.07* (1.97) (1.90) 8/31/07 22.82 (0.01)* 2.41 2.40 8/31/06 24.75 (0.08)* 1.57 1.49 8/31/05 22.80 (0.10) 5.07 4.97 INVESTOR CLASS 8/31/09 $11.43 $ 0.07* $(1.20) $(1.13) 8/31/08 21.02 0.03* (1.92) (1.89) 8/31/07 22.40 (0.07)* 2.37 2.30 8/31/06 24.35 (0.13)* 1.54 1.41 8/31/05 22.53 (0.17) 5.01 4.84 ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND INSTITUTIONAL CLASS 8/31/09 $15.47 $(0.22)* $ 2.98 $ 2.76 8/31/08 17.23 (0.36)* 0.50 0.14 8/31/07 18.57 (0.21)* 0.73 0.52 8/31/06 17.89 (0.26)* 2.40 2.14 8/31/05 14.70 (0.25) 3.43 3.18 INVESTOR CLASS 8/31/09 $15.17 $(0.25)* $ 2.87 $ 2.62 8/31/08 16.97 (0.39)* 0.49 0.10 8/31/07 18.36 (0.26)* 0.73 0.47 8/31/06 17.74 (0.30)* 2.38 2.08 8/31/05 14.62 (0.28) 3.39 3.11 ROBECO BOSTON PARTNERS MID CAP VALUE FUND INSTITUTIONAL CLASS 8/31/09 $ 9.35 $ 0.09* $(1.01)(3) $(0.92) 8/31/08 11.45 0.08* (0.76) (0.68) 8/31/07 13.05 0.05* 2.44 2.49 8/31/06 14.02 0.04* 0.86 0.90 8/31/05 13.16 -- (4) 3.22 3.22 INVESTOR CLASS 8/31/09 $ 9.08 $ 0.07* $(0.98)(3) $(0.91) 8/31/08 11.16 0.06* (0.74) (0.68) 8/31/07 12.81 0.02* 2.39 2.41 8/31/06 13.80 (0.01)(4) * 0.87 0.86 8/31/05 13.02 -- (4) 3.13 3.13 DIVIDENDS TO DISTRIBUTIONS TO SHAREHOLDERS SHAREHOLDERS FROM NET FROM NET INVESTMENT REALIZED RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS ------------ ---------------- ---------- ------------- ROBECO BOSTON PARTNERS SMALL CAP VALUE FUND II INSTITUTIONAL CLASS 8/31/09 $(0.14) $(0.05) $(0.04) $(0.23) 8/31/08 -- (7.70) -- (7.70) 8/31/07 (0.09) (3.67) -- (3.76) 8/31/06 -- (3.42) -- (3.42) 8/31/05 -- (3.03) -- (3.03) INVESTOR CLASS 8/31/09 $(0.11) $(0.05) $(0.03) $(0.19) 8/31/08 -- (7.70) -- (7.70) 8/31/07 (0.02) (3.67) -- (3.69) 8/31/06 -- (3.36) -- (3.36) 8/31/05 -- (3.03) -- (3.03) ROBECO BOSTON PARTNERS LONG/SHORT EQUITY FUND INSTITUTIONAL CLASS 8/31/09 $ -- $(2.48) $ -- $(2.48) 8/31/08 -- (1.90) -- (1.90) 8/31/07 -- (1.86) -- (1.86) 8/31/06 -- (1.47) -- (1.47) 8/31/05 -- -- -- -- INVESTOR CLASS 8/31/09 $ -- $(2.48) $ -- $(2.48) 8/31/08 -- (1.90) -- (1.90) 8/31/07 -- (1.86) -- (1.86) 8/31/06 -- (1.47) -- (1.47) 8/31/05 -- -- -- -- ROBECO BOSTON PARTNERS MID CAP VALUE FUND INSTITUTIONAL CLASS 8/31/09 $(0.09) $ --(4) $ -- $(0.09) 8/31/08 (0.06) (1.36) -- (1.42) 8/31/07 (0.03) (4.06) -- (4.09) 8/31/06 (0.02) (1.85) -- (1.87) 8/31/05 (0.01) (2.35) -- (2.36) INVESTOR CLASS 8/31/09 $(0.07) $ --(4) $ -- $(0.07) 8/31/08 (0.04) (1.36) -- (1.40) 8/31/07 -- (4.06) -- (4.06) 8/31/06 -- (1.85) -- (1.85) 8/31/05 -- (2.35) -- (2.35)
* 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 the period. (2) Redemption fees are reflected in total return calculations. (3) In 2009, the investment advisor fully reimbursed the BP Mid Cap Value Fund for a loss on a transaction not meeting the Fund's investment guidelines, which otherwise would have reduced total return by 0.11% and net realized and unrealized gain/(loss) on investment by $0.01 per share. (4) Amount is less than $0.01 per share. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 52 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE
RATIO OF EXPENSES TO RATIO OF NET AVERAGE NET INVESTMENT RATIO OF ASSETS WITH RATIO OF INCOME (LOSS) NET NET EXPENSES TO WAIVERS AND EXPENSES TO TO AVERAGE ASSET ASSETS, AVERAGE NET REIMBURSEMENTS AVERAGE NET NET ASSETS VALUE, TOTAL END OF ASSETS WITH (EXCLUDING ASSETS WITHOUT WITH WAIVERS PORTFOLIO REDEMPTION END OF INVESTMENT PERIOD WAIVERS AND DIVIDEND AND WAIVERS AND AND TURNOVER FEES PERIOD RETURN(1,2) (000) REIMBURSEMENTS INTEREST EXPENSE) REIMBURSEMENTS REIMBURSEMENTS RATE - ---------- ------ ----------- -------- -------------- ----------------- -------------- -------------- --------- $ --(4) $10.49 (8.97)% $ 21,466 1.30% N/A 1.74% 1.29% 66% --(4) 11.87 (10.15) 56,652 1.39 N/A 1.54 0.47 54 0.01 21.47 10.53 94,337 1.55 N/A 1.56 (0.09) 46 --(4) 22.82 6.39 114,153 1.52 N/A 1.53 (0.34) 34 0.01 24.75 22.65 138,143 1.53 N/A 1.54 (0.42) 38 $ --(4) $10.11 (9.20)% $ 43,408 1.55% N/A 2.00% 0.90% 66% -- 11.43 (10.40) 65,370 1.64 N/A 1.79 0.19 54 0.01 21.02 10.26 154,546 1.80 N/A 1.81 (0.32) 46 --(4) 22.40 6.12 230,362 1.77 N/A 1.78 (0.58) 34 0.01 24.35 22.32 274,648 1.78 N/A 1.79 (0.64) 38 $ --(4) $15.75 30.02% $ 54,703 3.35% 2.50% 4.04% (1.85)% 172% --(4) 15.47 1.12 36,423 3.98 2.50 4.36 (2.27) 124 --(4) 17.23 2.61 73,770 3.44 2.50 3.60 (1.17) 93 0.01 18.57 12.93 90,313 3.24 2.50 3.40 (1.51) 109 0.01 17.89 21.70 99,748 3.13 2.50 3.30 (1.82) 107 $ --(4) $15.31 29.63% $ 30,980 3.55% 2.75% 4.19% (2.09)% 172% --(4) 15.17 0.88 7,728 4.23 2.75 4.61 (2.51) 124 --(4) 16.97 2.35 14,664 3.69 2.75 3.85 (1.42) 93 0.01 18.36 12.69 20,706 3.48 2.75 3.65 (1.77) 109 0.01 17.74 21.34 24,716 3.37 2.75 3.55 (2.07) 107 $ -- $ 8.34 (9.50)%(3) $ 32,691 1.00% N/A 1.69% 1.33% 58% -- 9.35 (6.41) 35,056 1.00 N/A 1.48 0.80 64 -- 11.45 21.32 35,722 1.00 N/A 1.48 0.38 89 -- 13.05 6.82 27,538 1.00 N/A 1.38 0.28 97 -- 14.02 25.97 54,187 1.00 N/A 1.31 0.03 74 $ -- $ 8.10 (9.79)%(3) $ 13,916 1.25% N/A 1.93% 1.09% 58% -- 9.08 (6.62) 17,202 1.25 N/A 1.73 0.55 64 -- 11.16 21.02 12,778 1.25 N/A 1.73 0.14 89 -- 12.81 6.59 5,334 1.25 N/A 1.70 (0.04) 97 -- 13.80 25.47 4,462 1.25 N/A 1.56 (0.22) 74
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 53 ROBECO INVESTMENT FUNDS FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements.
NET REALIZED DISTRIBUTIONS NET AND DIVIDENDS TO TO ASSET NET UNREALIZED TOTAL SHAREHOLDERS SHAREHOLDERS VALUE, INVESTMENT GAIN/ FROM FROM NET FROM NET BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT REALIZED TOTAL REDEMPTION OF PERIOD /(LOSS) INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS FEES --------- ---------- ----------- ---------- ------------ ------------- ------------- ---------- ROBECO BOSTON PARTNERS ALL-CAP VALUE FUND INSTITUTIONAL CLASS 8/31/09 $13.61 $ 0.19* $(1.03) $(0.84) $(0.12) $(0.09) $(0.21) $-- 8/31/08 16.47 0.23* (1.54) (1.31) (0.16) (1.39) (1.55) -- 8/31/07 15.69 0.16* 2.05 2.21 (0.13) (1.30) (1.43) -- 8/31/06 15.54 0.15* 1.03 1.18 (0.08) (0.95) (1.03) -- 8/31/05 13.29 0.07 2.83 2.90 (0.05) (0.60) (0.65) -- INVESTOR CLASS 8/31/09 $13.56 $ 0.16* $(1.03) $(0.87) $(0.08) $(0.09) $(0.17) $-- 8/31/08 16.41 0.16* (1.51) (1.35) (0.11) (1.39) (1.50) -- 8/31/07 15.63 0.11* 2.06 2.17 (0.09) (1.30) (1.39) -- 8/31/06 15.49 0.11* 1.03 1.14 (0.05) (0.95) (1.00) -- 8/31/05 13.26 0.03 2.83 2.86 (0.03) (0.60) (0.63) -- ROBECO WPG SMALL CAP VALUE FUND INSTITUTIONAL CLASS 8/31/09 $12.18 $ 0.03* $(1.62) $(1.59) $(0.01) $(0.01) $(0.02) $--(2) 8/31/08 17.05 0.05 (2.46) (2.41) (0.01) (2.45) (2.46) -- 8/31/07 16.54 0.01 2.31 2.32 -- (1.81) (1.81) -- 8/31/06 17.42 --(2) 1.10 1.10 -- (1.98) (1.98) -- 8/31/05(3) 17.55 (0.04) (0.09) (0.13) -- -- -- -- 12/31/04 16.34 --(2) 3.11 3.11 -- (1.90) (1.90) -- SAM SUSTAINABLE CLIMATE FUND INSTITUTIONAL CLASS 8/31/09 $ 8.36 $ 0.01* $(1.67) $(1.66) $(0.05) $ -- $(0.05) $-- 10/1/07** through 8/31/08 10.00 0.02* (1.66) (1.64) -- -- -- -- INVESTOR CLASS 8/31/09 $ 8.36 $ --(2)* $(1.68) $(1.68) $(0.04) $ -- $(0.04) $-- 10/1/07** through 8/31/08 10.00 0.02* (1.66) (1.64) -- -- -- -- SAM SUSTAINABLE WATER FUND INSTITUTIONAL CLASS 8/31/09 $ 8.78 $ 0.04* $(2.01) $(1.97) $(0.06) $ -- $(0.06) $-- 10/1/07** through 8/31/08 10.00 0.04* (1.26) (1.22) -- -- -- -- INVESTOR CLASS 8/31/09 $ 8.78 $ 0.04* $(2.04) $(2.00) $(0.05) $ -- $(0.05) $-- 10/1/07** through 8/31/08 10.00 0.04* (1.26) (1.22) -- -- -- --
* Calculated based on average shares outstanding. ** Commencement of Operations (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 the period. (2) Amount is less than $0.01. (3) For the period January 1, 2005 through August 31, 2005. (4) Annualized. (5) Redemption fees are reflected in total return calculations. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 54 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE
RATIO OF NET INVESTMENT RATIO OF RATIO OF INCOME (LOSS) NET NET EXPENSES TO EXPENSES TO TO AVERAGE ASSET ASSETS, AVERAGE NET AVERAGE NET NET ASSETS VALUE, TOTAL END OF ASSETS WITH ASSETS WITHOUT WITH WAIVERS PORTFOLIO END OF INVESTMENT PERIOD WAIVERS AND WAIVERS AND AND TURNOVER PERIOD RETURN(1, 5) (000) REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS RATE - ------ ------------ ------- -------------- --------------- --------------- --------- $12.56 (5.88)% $63,085 0.95% 1.50% 1.79% 55% 13.61 (8.55) 51,850 0.95 1.70 1.59 44 16.47 14.38 13,720 0.95 2.24 0.92 45 15.69 7.95 9,374 1.09 2.93 0.94 51 15.54 22.33 7,315 1.25 3.90 0.53 29 $12.52 (6.15)% $ 5,187 1.20% 1.75% 1.51% 55% 13.56 (8.82) 3,164 1.20 1.95 1.10 44 16.41 14.16 4,021 1.20 2.49 0.67 45 15.63 7.72 3,739 1.34 3.19 0.69 51 15.49 22.06 2,840 1.50 4.04 0.20 29 $10.57 (12.93)% $35,405 1.61% 1.95% 0.37% 137% 12.18 (15.12) 43,133 1.61 1.65 0.11 131 17.05 14.28 53,962 1.47 1.47 0.09 138 16.54 7.16 48,607 1.43 1.43 0.02 139 17.42 (0.74) 52,368 1.57(4) 1.57(4) (0.35)(4) 136 17.55 19.35 57,787 1.55 1.55 (0.55) 159 $ 6.65 (19.55)% $ 3,045 1.50% 11.64% 0.19% 129% 8.36 (16.40) 3,390 1.50(4) 9.18(4) 0.16(4) 34 $ 6.64 (19.88)% $ 309 1.75% 11.56% (0.07)% 129% 8.36 (16.40) 287 1.75(4) 8.93(4) (0.09)(4) 34 $ 6.75 (22.24)% $ 3,724 1.50% 9.92% 0.73% 61% 8.78 (12.20) 4,071 1.50(4) 8.89(4) 0.42(4) 40 $ 6.73 (22.66)% $ 545 1.75% 9.82% 0.61% 61% 8.78 (12.20) 423 1.75(4) 8.64(4) 0.17(4) 40
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 55 ROBECO INVESTMENT FUNDS FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE Contained below is per share operating performance data for each class of shares outstanding, total investment return, ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements.
NET DIVIDENDS TO ASSET NET REALIZED TOTAL SHAREHOLDERS VALUE, NET AND UNREALIZED FROM FROM NET BEGINNING INVESTMENT GAIN ON INVESTMENT INVESTMENT TOTAL REDEMPTION OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME DISTRIBUTIONS FEES --------- ---------- -------------- ---------- ------------ ------------- ---------- SAM SUSTAINABLE GLOBAL ACTIVE FUND INSTITUTIONAL CLASS 6/18/09** through 8/31/09 $10.00 $0.01* $1.29 $1.30 $-- $-- $-- INVESTOR CLASS 7/15/09** through 8/31/09 $10.13 $ --*(4) $1.17 $1.17 $-- $-- $--
* Calculated based on average shares outstanding for the period. ** Commencement of operations. (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 return for periods less than one year has not been annualized. (2) Redemption fees are reflected in total return calculations. (3) Annualized. (4) Amount is less than $0.01 per share. (5) Not Annualized. THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. 56 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS FINANCIAL HIGHLIGHTS (continued) PER SHARE OPERATING PERFORMANCE
RATIO OF NET INVESTMENT RATIO OF RATIO OF INCOME (LOSS) NET NET EXPENSES TO EXPENSES TO TO AVERAGE ASSET ASSETS, AVERAGE NET AVERAGE NET NET ASSETS VALUE, TOTAL END OF ASSETS WITH ASSETS WITHOUT WITH WAIVERS PORTFOLIO END OF INVESTMENT PERIOD WAIVERS AND WAIVERS AND AND TURNOVER PERIOD RETURN(1, 2) (000) REIMBURSEMENTS REIMBURSEMENTS REIMBURSEMENTS RATE - ------ ------------ ------- -------------- --------------- -------------- --------- $11.30 13.00% $11,614 1.20%(3) 4.06%(3) 0.27%(3) 72%(5) $11.30 11.55% $ 4 1.45%(3) 4.20%(3) 0.13%(3) 72%(5)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS. ANNUAL REPORT 2009 | 57 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 trust," 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 nineteen 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 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 ("WPG Small Cap Value Fund"), the SAM Sustainable Climate Fund, SAM Sustainable Water Fund and SAM Sustainable Global Active Fund (collectively "SAM Funds") (each a "Fund," collectively the "Funds"). As of August 31, 2009, the BP Funds and SAM Sustainable Global Active Fund each offer two classes of shares, Institutional Class and Investor Class. The WPG Small Cap Value Fund is a single class fund, offering only the Institutional Class of shares. The SAM Sustainable Climate Fund and the SAM Sustainable Water Fund each offer four classes of shares, Institutional Class, Investor Class, Class A and Class C. As of August 31, 2009, Class A and Class C Shares have not been issued. RBB has authorized capital of one hundred billion shares of common stock of which 78.973 billion shares are currently classified into one hundred and twenty-nine classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten 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 a 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. Such procedures use fundamental valuation methods, which may include, but are not limited to, an analysis of the effect of any restrictions on the resale of the security, industry analysis and trends, significant changes in the issuer's financial position, and any other event which could have a significant impact on the value of the security. Determination of fair value involves subjective judgment as the actual market value of a particular security can be established only by negotiations between the parties in a sales transaction, and the difference between the recorded fair value and the value that would be received in a sale could be significant. The Funds have adopted the provisions of Statement of Financial Accounting Standards No. 157 ("SFAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, the Funds utilize a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. - Level 1 - quoted prices in active markets for identical securities - Level 2 - prices determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 - prices determined using significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) In April 2009, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position No. 157-4,"Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions 58 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (continued) That Are Not Orderly" ("FSP 157-4"). FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs used in valuation techniques used to measure fair value and changes in inputs over the period. FSP 157-4 expands the Level 3 hierarchy disclosure and the Level 3 roll forward disclosure for each major security type. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value each Fund's investments as of August 31, 2009 is included in each Fund's Portfolio of Investments. In March 2008, Statement of Financial Accounting Standards No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161") was issued. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. SFAS 161 is intended to improve financial reporting for derivative instruments by requiring enhanced disclosure that enables investors to understand how and why a fund uses derivatives, how derivative instruments and hedging activities are accounted for, and how derivative instruments and related hedging activities affect a fund's financial performance and financial position. 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 and those differences could be significant. 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. 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. 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. U.S. TAX STATUS -- No provision is made for U.S. income taxes as it is each Fund's intention to qualify or 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. ANNUAL REPORT 2009 | 59 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (continued) 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 political, economic and currency exchange developments including investment restrictions and changes in foreign laws. OPTIONS WRITTEN -- The Funds are subject to equity price risk in the normal course of pursuing their investment objectives and may enter into options written to hedge against changes in the value of equities. The BP All-Cap Value Fund, the WPG Small Cap Value Fund and the SAM Funds 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. 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. Written options are recorded as liabilities to the extent of premiums 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 or the purchase cost for a written put 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, 2009 as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ---------- Options outstanding at August 31, 2008 585 $ 334,241 Options written 2,437 1,111,088 Options closed (766) (290,356) Options expired (293) (116,841) Options exercised (259) (137,155) ----- ---------- Options outstanding at August 31, 2009 1,704 $ 900,977 ===== ==========
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. In accordance with the terms of its prime brokerage agreements, the Fund may receive rebate income or be charged a fee on borrowed securities. Such income or fee is calculated on a daily basis based upon the market value of each borrowed security and a variable rate that is dependent upon the availability of such security. The Funds record these prime broker charges on a net basis as interest income or interest expense. For the year ended August 31, 2009, the BP Long/Short Equity Fund had net charges of $232,005 on borrowed securities. Such amounts are included in prime broker interest expense on the statement of operations. As of August 31, 2009, the BP Long/Short Equity Fund had securities sold short valued at $16,222,474 for which securities of $32,005,333 and cash deposits of $15,251,786 were pledged as collateral. In accordance with the Special Custody and Pledge Agreement with Goldman Sachs (the Fund's prime broker), the BP Long/Short Equity 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 Libor rate plus an agreed upon spread. 60 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (continued) The BP Long/Short Equity Fund utilized cash borrowings from Goldman Sachs to meet required margin cash deposits as follows during the year ended August 31, 2009:
AVERAGE DAILY WEIGHTED AVERAGE DAYS UTILIZED BORROWINGS INTEREST RATE - ------------- ------------- ---------------- 365 $2,865,697 1.55%
As of August 31, 2009, the Fund had borrowings of $7,806,293. Interest expense for the year ended August 31, 2009 totaled $45,369. 2. TRANSACTIONS WITH INVESTMENT ADVISOR AND OTHER SERVICES Robeco Investment Management, Inc. ("Robeco") provides investment advisory services to the BP Funds and the WPG Small Cap Value Fund. For its advisory services with respect to the BP Funds, Robeco is entitled to receive 1.00% 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, 0.80% 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, 2011, Robeco has contractually agreed to limit the BP Funds' total operating expenses (other than brokerage commissions, extraordinary items, interest, dividends on short sales, or taxes) 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. Robeco may not recoup any of its waived investment advisory fees.
INSTITUTIONAL INVESTOR ------------- -------- BP Small Cap Value Fund II 1.30% 1.55% BP Long/Short Equity Fund 2.50% 2.75% BP Mid Cap Value Fund 1.00% 1.25% BP All-Cap Value Fund 0.95% 1.20%
For its advisory services with respect to the WPG Small Cap Value Fund, 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
Until December 31, 2011, Robeco has contractually agreed to limit the WPG Small Cap Value Fund's operating expenses to 1.70% as a percentage of each Fund's average daily net assets. Robeco may not recoup any of its waived investment advisory fees. In 2009, Robeco fully reimbursed BP Mid Cap Value Fund for a loss of $55,676 on a transaction not meeting the Fund's investment guidelines. Sustainable Asset Management USA, Inc. ("SAM") provides investment advisory services to the SAM Funds. SAM is an affiliate of Robeco Investment Management, Inc., and a subsidiary of Robeco Groep. SAM is entitled to an advisory fee at the annual rate of 1.00% of SAM Sustainable Climate Fund and SAM Sustainable Water Fund and 0.80% of SAM Sustainable Global Active Fund's average daily net assets, computed daily and payable monthly. Until December 31, 2011, SAM has contractually agreed to limit the SAM Funds' total operating expenses (other than brokerage commissions, extraordinary items, interest or taxes) to the extent that such expenses exceed certain ratios. SAM has agreed to waive fees and reimburse expenses to the extent that total operating expenses of the SAM Sustainable Climate Fund and the SAM Sustainable Water Fund exceed to 1.50% for the Institutional Class and 1.75% for the Investor Class of the Funds' average daily net assets attributable to the respective class. For the Institutional Class, SAM has agreed to waive fees and reimburse expenses to the extent that the total operating expenses of the SAM Sustainable Global Active Fund exceed 1.20% of the first $50 million of the Fund's average daily net assets, 1.10% of the Fund's average daily net assets between $50 million and $100 million and 1.00% of the Fund's average daily net assets in excess of $100 million. For the Investor Class, SAM has agreed to waive fees and reimburse expenses to the extent that the total operating expenses of the SAM Sustainable Global Active Fund exceed 1.45% of the first $50 million of the Fund's average daily net assets, 1.35% of the Fund's average daily net assets between $50 million and $100 million and 1.25% of the Fund's average daily net assets in excess of $100 million. SAM may not recoup any of its waived investment advisory fees. ANNUAL REPORT 2009 | 61 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (continued) PNC Global Investment Servicing (U.S.) Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as administrator for the Funds. For providing administration and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of each Fund's average daily net assets, subject to certain minimum monthly fees. Included in the administration and accounting service fees, shown on the Statement of Operations, are fees for providing regulatory administrative services to RBB. For providing these services, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to each Fund in proportion to its net assets of the Company. In addition, PNC serves as the Funds' transfer and dividend disbursing agent. For providing transfer agency services, PNC is entitled to receive a minimum monthly fee. PFPC Trust Company ("PFPC Trust") is a member of The PNC Financial Services Groups, Inc. and provides certain custodial services to the Funds. PFPC Trust is entitled to receive a monthly fee equal to an annual percentage rate of the Funds' average daily net assets, is subject to certain minimum monthly fees. Prior to November 17, 2008, Mellon Trust of New England, N.A. ("Mellon") provided custodial services to the WPG Small Cap Value Fund. As of November 17, 2008, PFPC Trust Company became the custodian for the WPG Small Cap Value Fund. The Board of Directors of the Company has approved a Distribution Agreement for the Funds 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. 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. 3. DIRECTORS/COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Funds or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding investments and U.S. government obligations) were as follows:
Purchases Sales ----------- ----------- BP Small Cap Value Fund II $42,876,403 $78,258,063 BP Long/Short Equity Fund* 81,663,692 65,454,231 BP Mid Cap Value Fund 22,992,821 21,788,694 BP All-Cap Value Fund 42,251,094 25,668,064 WPG Small Cap Value Fund 39,826,871 39,831,747 SAM Sustainable Climate Fund 3,725,933 3,150,930 SAM Sustainable Water Fund 2,807,666 2,019,275 SAM Sustainable Global Active Fund 17,653,670 7,551,176
* The cost of purchases excludes securities received from the Fund Reorganization (Note 9). 5. CAPITAL SHARE TRANSACTIONS As of August 31, 2009, 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, which has 50,000,000 shares of $0.001 par value common stock authorized. 62 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (continued) As of August 31, 2009, the following Funds had shareholders that 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) 63% BP Long/Short Equity Fund (2 shareholders) 60% BP Mid Cap Value Fund (1 shareholder) 63% BP All-Cap Value Fund (3 shareholders) 84% SAM Sustainable Climate Fund (1 shareholder) 76% SAM Sustainable Water Fund (2 shareholders) 75% SAM Sustainable Global Active Fund (2 shareholders) 91%
6. SECURITIES LENDING Securities may be loaned to financial institutions, such as broker-dealers, and are required to be secured continuously by collateral in cash, cash equivalents, letter of credit or U.S. Government securities maintained on a current basis at an amount at least equal to the market value of the securities loaned. During the year ended August 31, 2009, the WPG Small Cap Value Fund participated in securities lending. At August 31, 2009, the Fund had no securities on loan. 7. REDEMPTION FEES There is a 1.00% redemption fee on shares redeemed which have been held 60 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. WPG Small Cap Value Fund and the SAM Funds have a 2.00% and 1.00% redemption fee, respectively, on shares redeemed within 60 days of purchase. The redemption fees are retained by the Funds for the benefit of the remaining shareholders and recorded as paid-in capital. 8. FEDERAL INCOME TAX INFORMATION FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Funds' tax positions taken on Federal income tax returns for all open tax years (tax years August 31, 2006-2009) and has concluded that no provision for income tax is required in the Funds' financial statements. However, management's conclusions may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). Each of the Funds' federal tax returns for the prior three fiscal years remains subject to examination by the Internal Revenue Service. As of August 31, 2009, 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 $61,881,916 $11,776,608 $(10,504,596) $1,272,012 BP Long/Short Equity Fund 71,746,133 14,538,513 (4,606,140) 9,932,373 BP Mid Cap Value Fund 44,860,599 4,652,639 (4,846,059) (193,420) BP All-Cap Value Fund 66,998,060 7,219,326 (6,125,147) 1,094,179 WPG Small Cap Value Fund 32,235,856 4,769,391 (3,820,675) 948,716 SAM Sustainable Climate Fund 3,125,994 488,900 (318,367) 170,533 SAM Sustainable Water Fund 4,560,358 337,360 (839,339) (501,979) SAM Sustainable Global Active Fund 10,739,200 774,135 (115,516) 658,619
Distributions to shareholders from net investment income and realized gains are determined in accordance with Federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. ANNUAL REPORT 2009 | 63 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (continued) The following permanent differences as of August 31, 2009, were reclassified among the following accounts. They are primarily attributable to net investment loss, gains and losses on foreign currency transactions, return of capital distributions received, capitalization of short sale dividends, investments in partnerships, redesignation of dividends paid, deemed distributions due to shareholder redemptions, investments in trust preferred securities, adjustments related to Fund reorganizations and non-deductible expenses.
INCREASE/(DECREASE) INCREASE/(DECREASE) UNDISTRIBUTED NET ACCUMULATED NET INCREASE/(DECREASE) INVESTMENT REALIZED GAIN/(LOSS) ADDITIONAL PAID-IN FUND INCOME/(LOSS) ON INVESTMENTS CAPITAL - ---------------------------------- ------------------- -------------------- ------------------- BP Small Cap Value Fund II $(211,026) $ 54,287 $ 156,739 BP Long/Short Equity Fund 599,319 (3,718,195) 3,118,876 BP Mid Cap Value Fund (4,375) 4,375 -- BP All-Cap Value Fund (7) 7 -- WPG Small Cap Value Fund (2,511) 2,511 -- SAM Sustainable Climate Fund (1,981) 2,052 (71) SAM Sustainable Water Fund (1,741) 1,906 (165) SAM Sustainable Global Active Fund 4,574 (4,574) --
As of August 31 2009, 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 $ -- $-- BP Long/Short Equity Fund -- -- BP Mid Cap Value Fund 232,015 -- BP All-Cap Value Fund 791,371 -- WPG Small Cap Value Fund 107,004 -- SAM Sustainable Climate Fund 3,191 -- SAM Sustainable Water Fund 21,610 -- SAM Sustainable Global Active Fund 646,846 --
The differences between book and tax basis components of distributable earning 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 income tax purposes. The tax character of distributions paid during the fiscal years ended August 31, 2009 and 2008 is as follows:
2009 2008 ----------------------------------------------- -------------------------------------- ORDINARY LONG-TERM RETURN OF ORDINARY LONG-TERM FUND INCOME GAINS CAPITAL TOTAL INCOME GAINS TOTAL - ---------------------------- ---------- --------- --------- ---------- ---------- ----------- ----------- BP Small Cap Value Fund II $1,343,179 $ -- $269,326 $1,612,505 $1,470,954 $70,046,429 $71,517,383 BP Long/Short Equity Fund 4,901,142 -- -- 4,901,142 1,043,196 7,487,146 8,530,342 BP Mid Cap Value Fund 452,583 882 -- 453,465 2,968,866 3,162,248 6,131,114 BP All-Cap Value Fund 474,174 353,246 -- 827,420 815,509 1,018,349 1,833,858 WPG Small Cap Value Fund 88,822 -- -- 88,822 4,255,795 3,569,142 7,824,937 SAM Sustainable Climate Fund 23,697 -- -- 23,697 -- -- -- SAM Sustainable Water Fund 31,563 -- -- 31,563 -- -- --
Distributions from net investment income and short-term capital gains are treated as ordinary income for federal income tax purposes. 64 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS NOTES TO FINANCIAL STATEMENTS (concluded) For Federal income tax purposes, capital loss carryforwards represent net realized capital losses of a Fund that may be carried forward for a maximum of eight years and applied against future net capital gains. As of August 31, 2009, the following Funds had capital loss carryforwards available to offset future realized capital gains through the expiration dates indicated below:
FUND 2016 2017 TOTAL - ---------------------------- ---------- ----------- ----------- BP Small Cap Value Fund II $ -- $15,908,734 $15,908,734 BP Long/Short Equity Fund 3,108,415 1,948,489 5,056,904 BP Mid Cap Value Fund -- 2,550,027 2,550,027 BP All-Cap Value Fund -- 1,022,337 1,022,337 WPG Small Cap Value Fund -- 7,340,717 7,340,717 SAM Sustainable Climate Fund 4,482 1,030,355 1,034,837 SAM Sustainable Water Fund -- 183,846 183,846
Due to limitations imposed by the Internal Revenue Code and the regulations thereunder, losses of $2,326,868 for the BP Long/Short Equity Fund which were acquired in its reorganization with WPG 130/30 Large Cap Core Fund (see Note 9) were reclassed to paid-in capital since they will not be 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 fiscal year ended August 31, 2009, the following Funds will defer post-October capital and foreign currency losses to the fiscal year ended August 31, 2010.
FOREIGN FUND CAPITAL CURRENCY - ---------------------------- ----------- -------- BP Small Cap Value Fund II $18,575,127 $ -- BP Long/Short Equity Fund 3,594,095 15,313 BP Mid Cap Value Fund 4,299,397 -- BP All-Cap Value Fund 2,756,066 -- WPG Small Cap Value Fund 7,972,056 -- SAM Sustainable Climate Fund 462,752 1,440 SAM Sustainable Water Fund 814,646 1,398
9. FUND REORGANIZATION The Board of Directors of the Company and the stockholders of the WPG 130/30 Large Cap Core Fund (approved a plan of reorganization pursuant to which the assets and identified liabilities of the WPG 130/30 Large Cap Core Fund were transferred into the BP Long/Short Equity Fund in exchange for 746,155 Institutional Class shares of the BP Long/Short Equity Fund with a Net Asset Value of $10.72. The reorganization was a tax-free event and took place on April 20, 2009. The following information relates to the Funds immediately prior and immediately after the consummation of the reorganization:
SHARES UNREALIZED CAPITAL LOSS FUND OUTSTANDING NET ASSETS DEPRECIATION CARRY FORWARD - ------------------------------------------------------ ----------- ----------- ------------ ------------- WPG 130/30 Large Cap Core Fund (before reorganization) 834,162 $ 8,000,331 $(1,467,735) $(5,435,283) BP Long/Short Equity Fund Fund (before reorganization) 1,872,054 25,301,128 N/A N/A BP Long/Short Equity Fund Fund (after reorganization) 2,618,209 33,301,459 N/A N/A
10. SUBSEQUENT EVENT Management has evaluated the impact of all subsequent events on the Fund(s) through October 27, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements ANNUAL REPORT 2009 | 65 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 Mid Cap Value Fund, Robeco Boston Partners All-Cap Value Fund, Robeco WPG Small Cap Value Fund, SAM Sustainable Climate Fund, SAM Sustainable Water Fund, and SAM Sustainable Global Active Fund (eight of the series constituting The RBB Fund, Inc.) (the "Funds") as of August 31, 2009, and the related statements of operations for the year or period then ended, the statements of changes in net assets for each of the years or periods presented in the two year period then ended, and the financial highlights for each of the years or periods presented in the three year period then ended. We have also audited the statement of cash flows for the Robeco Boston Partners Long/Short Equity Fund for the year ended August 31, 2009. 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 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 15, 2005 expressed unqualified opinions 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. 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, 2009, by correspondence with the custodian and brokers or by other appropriate procedures where replies from brokers were not received. 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 Robeco Boston Partners Small Cap Value Fund II, Robeco Boston Partners Long/Short Equity Fund, Robeco Boston Partners Mid Cap Value Fund, Robeco Boston Partners All-Cap Value Fund, Robeco WPG Small Cap Value Fund, SAM Sustainable Climate Fund, SAM Sustainable Water Fund, and SAM Sustainable Global Active Fund of The RBB Fund, Inc. at August 31, 2009, and the results of their operations for the year or period then ended, the changes in their net assets for each of the years or periods presented in the two year period then ended, their financial highlights for each of the years or periods presented in the three year period then ended, and the statement of cash flows of the Robeco Boston Partners Long/Short Equity Fund for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Philadelphia, Pennsylvania October 27, 2009 66 | ANNUAL REPORT 2009 ROBECO INVESTMENT 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, 2009) 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, 2009, the following dividends and distributions were paid by each of the Funds:
ORDINARY LONG-TERM RETURN OF INCOME CAPITAL GAINS CAPITAL ---------- ------------- --------- BP Small Cap Value Fund II ............ $1,343,179 $ -- $269,326 BP Long/Short Equity Fund ............. 4,901,142 -- -- BP Mid Cap Value Fund ................. 452,583 882 -- BP All-Cap Value Fund ................. 474,174 353,246 -- WPG Small Cap Value Fund .............. 88,822 -- -- SAM Sustainable Climate Fund .......... 23,697 -- -- SAM Sustainable Water Fund ............ 31,563 -- --
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 ...................................... 100% BP Long/Short Equity Fund ....................................... 11% BP Mid Cap Value Fund ........................................... 100% BP All-Cap Value Fund ........................................... 86% WPG Small Cap Value Fund ........................................ 100% SAM Sustainable Climate Fund .................................... 100% SAM Sustainable Water Fund ...................................... 100%
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 ...................................... 100% BP Long/Short Equity Fund ....................................... 8% BP Mid Cap Value Fund ........................................... 100% BP All-Cap Value Fund ........................................... 62% WPG Small Cap Value Fund ........................................ 100% SAM Sustainable Climate Fund .................................... 34% SAM Sustainable Water Fund ...................................... 29%
The SAM Funds paid foreign taxes and recognized foreign source income as follows:
FOREIGN FOREIGN TAXES PAID SOURCE INCOME ---------- ------------- SAM Sustainable Climate Fund ...................... $3,100 $30,959 SAM Sustainable Water Fund ........................ 4,661 61,242 SAM Sustainable Global Active Fund ................ 1,382 14,666
These amounts were reported to shareholders as income in 2008. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2009. 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 2010. 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 each 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 2009 | 67 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 (800) 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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS ROBECO INVESTMENT MANAGEMENT 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 and the Company on behalf of the 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, and Robeco WPG Small Cap Value Fund (for this section only, the "Advisory Agreements") at a meeting of the Board held on May 7, 2009. At the Meeting, the Board, including all of the Independent Directors, 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 arrangements. In approving the Advisory Agreements, the Board considered information provided by Robeco 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of Robeco's services provided to the Funds; (ii) descriptions of the experience and qualifications of Robeco's personnel providing those services; (iii) Robeco's investment philosophies and processes; (iv) Robeco's assets under management and client descriptions; (v) Robeco'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) Robeco's current advisory fee arrangements with the Company and other similarly managed clients; (vii) Robeco's compliance procedures; (viii) Robeco'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 each Fund's management fees and total expense ratio to those of its 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. As part of their review, the Board considered the nature, extent and quality of the services provided by Robeco. The Board concluded that Robeco had substantial resources to provide services to the Funds and that Robeco's services had been acceptable. The Board also considered the investment performance of the Funds and Robeco. Information on the Funds' investment performance was provided for one, three, and five year periods, as applicable. The Board considered the Funds' investment performance in light of their investment objectives and investment strategies. The Board concluded that the investment performance of each of the Funds as compared to their respective benchmarks and Lipper peer groups was acceptable. In reaching these conclusions, the Board also considered the recent extraordinary market conditions. The Board also considered the advisory fee rates payable by the Funds under the Advisory Agreements. In this regard, information on the fees paid by the Funds and the Funds' total operating expense ratios (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that the advisory fees, after fee waivers, of the Funds, with the exception of the Boston Partners Long/Short Equity Fund and WPG Small Cap Value Fund, were lower than median fees of each Fund's respective peer group. It was noted that the expense structure for the Boston Partners Long/Short Equity Fund is higher due to the 68 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS OTHER INFORMATION (unaudited) (continued) operation of two separate investment portfolios and the cost of short sales. It was also noted that the contractual advisory fees for the WPG Small Cap Value Fund were lower than the median contractual advisory fees for its respective peer group. In addition, the Board noted that Robeco had contractually agreed to waive management fees and reimburse expenses through December 31, 2011 to limit total annual operating expenses to agreed upon levels for each Fund. After reviewing the information regarding Robeco's costs, profitability and economies of scale, and after considering Robeco's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Funds were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. SUSTAINABLE ASSET MANAGEMENT As required by the 1940 Act, the Board of the Company, including all of the Independent Directors, considered the initial approval of the investment advisory agreement between SAM and the Company (the "Sustainable Global Active Fund Advisory Agreement") on behalf of the SAM Sustainable Global Active Fund (the "Sustainable Global Active Fund") at a meeting of the Board held on November 13, 2008, for an initial period ending August 16, 2010, and the renewal of the investment advisory agreements between SAM and the Company (for this section only, the "Advisory Agreements") on behalf of the SAM Sustainable Climate Fund and SAM Sustainable Water Fund (for this section only, each a "Fund", together the "Funds") at a meeting of the Board held on May 7, 2009 for an additional one-year term. The Board's decision to approve the Sustainable Global Active Fund Advisory Agreement and the Advisory Agreements reflects the exercise of its business judgment to continue the existing arrangement. In considering the approval of the Sustainable Global Active Fund Advisory Agreement with SAM, the Directors took into account all materials provided prior to and during the meeting held on November 13, 2008 (for this section only, the "Meeting"), the presentations made during the Meeting, and the discussions during the Meeting. Among other things, the Directors considered (i) the nature, extent, and quality of SAM's services to be provided to the Sustainable Global Active Fund; (ii) descriptions of the experience and qualifications of the personnel providing those services; (iii) SAM's investment philosophies and processes; (iv) its soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (v) the proposed advisory fee arrangements with the Company and the advisory fee arrangement with other similarly managed clients; (vi) SAM's compliance procedures; (vii) SAM's financial information and insurance coverage; (viii) the extent to which economies of scale are relevant to the Sustainable Global Active Fund; (ix) a report comparing the Sustainable Global Active Fund's proposed advisory fees and expenses; and (x) a report disclosing the firm's composite performance. The Directors then determined that the nature, extent and quality of services to be provided by SAM in advising the Sustainable Global Active Fund was satisfactory; the profits expected to be earned by SAM seemed reasonable; and the benefits to be derived by SAM from managing the Fund, including its use of soft dollars and its method for selecting brokers seemed reasonable. The Directors, including all of the Independent Directors, concluded that the advisory fee structure was reasonable for the Sustainable Global Active Fund and determined that the Sustainable Global Active Fund Advisory Agreement should be approved for an initial period ending August 16, 2010. In approving the Advisory Agreements with respect to the Funds, the Board considered information provided by SAM 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of SAM's services provided to the Funds; (ii) descriptions of the experience and qualifications of SAM's personnel providing those services; (iii) SAM's investment philosophies and processes; (iv) SAM's assets under management and client descriptions; (v) SAM's trade allocation policies; (vi) SAM's current advisory fee arrangements with the Company and other similarly managed clients; (vii) SAM's compliance procedures; (viii) SAM'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 comparing each Fund's management fees and total expense ratio to those of its 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. ANNUAL REPORT 2009 | 69 ROBECO INVESTMENT FUNDS OTHER INFORMATION (unaudited) (continued) As part of their review, the Board considered the nature, extent and quality of the services provided by SAM. The Board concluded that SAM had substantial resources to provide services to the Funds and that SAM's services had been acceptable. The Board also considered the investment performance of the Funds and SAM. The Board considered the Funds' investment performance in light of their investment objectives and investment strategies. The Board concluded that the investment performance of each of the Funds as compared to their respective benchmarks and Lipper peer groups was acceptable. In reaching these conclusions, the Board also considered the recent extraordinary market conditions. The Board also considered the advisory fee rates payable by the Funds under the Advisory Agreements. In this regard, information on the fees paid by the Funds and the Funds' total operating expense ratios (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that the fees of the Funds were generally high on a relative basis due to the low level of assets in the Funds. In addition, the Board noted that SAM had contractually agreed to waive management fees and reimburse expenses through December 31, 2011 to limit total annual operating expenses to agreed upon levels for each of the Funds. After reviewing the information regarding SAM's costs, profitability and economies of scale, and after considering SAM's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Funds were fair and reasonable and that the Advisory Agreements should be approved and continued for an additional one-year period ending August 16, 2010. 70 | ANNUAL REPORT 2009 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 by calling (800) 261-4073.
NUMBER OF TERM OF PORTFOLIOS IN POSITION(S) OFFICE AND FUND COMPLEX OTHER NAME, ADDRESS, HELD LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - -------------------- ----------- --------------- ----------------------------------- ------------- ---------------------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services 19 Kalmar Pooled Investment 103 Bellevue Parkway organizations from 1997 to present. Trust; (registered Wilmington, DE 19809 investment company) WT DOB: 3/43 Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox Chase 19 None 103 Bellevue Parkway Cancer Center (biomedical research Wilmington, DE 19809 and medical care) (2000-2004). DOB: 12/35 Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 19 None 103 Bellevue Parkway Partners, L.P. (an investment Wilmington, DE 19809 Director 1991 to partnership) from 2000 to 2006. DOB: 5/48 present Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 19 MTI Holding Group, Inc. 103 Bellevue Parkway President, MTI Holding Group, Inc. (formerly known as Moyco Wilmington, DE 19809 (formerly known as Moyco Technologies, Inc.) DOB: 3/34 Technologies, Inc.) (manufacturer of precision coated and industrial abrasives). Robert A. Straniere Director 2006 to present Since 2009, Administrative Law 19 Reich and Tang Group (asset 103 Bellevue Parkway Judge, New York City. Founding management); The SPARX Asia Wilmington, DE 19809 Partner, Straniere Law Firm (1980 Funds Group (registered DOB: 3/41 to date); Partner, Gotham investment company) Strategies (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); Partner, Kanter-Davidoff (law firm) (2006 to present).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 2009 | 71 ROBECO INVESTMENT FUNDS FUND MANAGEMENT (unaudited) (continued)
NUMBER OF TERM OF PORTFOLIOS IN POSITION(S) OFFICE AND FUND COMPLEX OTHER NAME, ADDRESS, HELD LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS AND DATE OF BIRTH WITH FUND TIME SERVED(1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - -------------------- ----------- --------------- ----------------------------------- ------------- ---------------------------- INTERESTED DIRECTORS(2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice 19 Comcast Corporation; AMDOCS 103 Bellevue Parkway Chairman, Comcast Corporation Limited (service provider to Wilmington, DE 19809 (cable television and telecommunications DOB: 7/33 communications). companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice 19 Kensington Funds (registered 103 Bellevue Parkway President and prior thereto, investment company) 6 Wilmington, DE 19809 Executive Vice President of Portfolios DOB: 4/38 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 Haydon Bolts, Inc. 19 Cornerstone Bank 103 Bellevue Parkway (bolt manufacturer) and Parkway Wilmington, DE 19809 Real Estate Company (subsidiary of DOB: 9/38 Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 72 | ANNUAL REPORT 2009 ROBECO INVESTMENT FUNDS FUND MANAGEMENT (unaudited) (concluded)
NUMBER OF PORTFOLIOS IN FUND OTHER POSITION(S) TERM OF OFFICE COMPLEX DIRECTORSHIPS NAME, ADDRESS, HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED DURING PAST 5 YEARS DIRECTOR DIRECTOR - ---------------------------- ----------- -------------------- --------------------------------------- ----------- ------------- OFFICERS Salvatore Faia, Esquire, CPA President President June 2009 President, Vigilant Compliance Services N/A N/A Vigilant Compliance Services and Chief to present and Chief since 2004; Senior Legal Counsel, PNC 713 Chelsea Road Compliance Compliance Officer Global Investment Servicing (U.S.), Mullica Hill, NJ 08062 Officer 2004 to present Inc. from 2002 to 2004; and Director DOB: 12/62 of Energy Income Partnership since 2005. Joel Weiss Treasurer June 2009 to present Vice President and Managing Director, N/A N/A 103 Bellevue Parkway PNC Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. since 1993 DOB: 1/63 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and Counsel, N/A N/A 103 Bellevue Parkway PNC Global Investment Servicing Wilmington, DE 19809 (U.S.), Inc. (financial services DOB: 7/74 company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of PNC N/A N/A 103 Bellevue Parkway Treasurer Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. (financial services company) DOB: 10/60 Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath LLP N/A N/A One Logan Square Secretary (law firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 7/59
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 2009 | 73 INVESTMENT ADVISERS Robeco Investment Management Inc. 909 Third Avenue New York, NY 10022 or Sustainable Asset Management USA, Inc. 909 Third Avenue, 32nd Floor New York, NY 10022 and Josefstrasse 218 CH-8005 Zurich, Switzerland ADMINISTRATOR PNC Global Investment Servicing (U.S.), Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.), 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 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 ANNUAL INVESTMENT ADVISER'S REPORT AUGUST 31, 2009 (UNAUDITED) Fellow Shareholder: This annual report for the Schneider Funds covers the fiscal year ended August 31, 2009. The year unfolded as a tale of two divergent equity markets, although the net result for the period was an overall decline. The broad-market Russell 3000 Index posted a -18.6% return. From September 2008 through February of this year, the Russell 3000 Index posted negative returns in five out of six months for a stunning 42.6% decline. The ongoing financial and credit crisis dramatically intensified when Lehman Brothers collapsed and subsequently several major financial institutions suffered a modern day "run on the bank." Confidence disappeared, credit markets seized up, and global economies went into a tailspin. These extraordinary events were followed by massive efforts by governments and central banks to pump liquidity and restore confidence in the financial system. The unparalleled financial and economic stress that dominated the first half of the fiscal year presented extraordinary challenges for deep value investors like us. It was difficult for many investors to maintain a long-term focus when facing widespread fears of falling into a financial and economic abyss. From March through August, equities rebounded sharply by posting positive performance every month with an overall 41.8% return for the Russell 3000 Index. Credit markets displayed evidence of a slow healing after last year's crisis conditions. Investors appeared relieved that a catastrophic scenario for the markets had been avoided, and equities were helped by anticipation of a stabilizing economy and eventual path to recovery. During the second half of the fiscal year, the Funds outperformed their benchmarks by a substantial margin. The extreme headwinds for deep value investors abated somewhat, particularly the unprecedented widening in credit spreads that occurred in the midst of the financial crisis. Since last spring, we have seen a partial return towards more normal credit conditions. The severe disruption in the equity markets allowed us to make long-term investments in very attractive - even extraordinary -opportunities. We took advantage of the panic to invest in compelling values in select segments of the technology and energy sectors, and to add to positions in preexisting holdings that were unreasonably punished. It appears that the longest and deepest U.S. recession in post-war history has thankfully ended. A recovery during the next year should be driven by two important elements. First, the abrupt collapse in confidence and output a year ago was met with a commensurately huge monetary and fiscal response. Second, the sharp and long inventory drawdown that occurred should contribute powerfully to GDP going forward as the pace of destocking moderates and is followed in 2010 by an absolute upturn in the inventory cycle. Growth overseas should be even stronger due to these factors, plus a much smaller drag from the credit crunch. However, we are concerned that the U.S. recovery beyond 2010 could be weak. With total federal outlays reaching 28% of GDP, a level not seen in over 60 years, the economy will have to face the repercussions of massive deficit spending. Combined with an estimated doubling of the government debt-to-GDP ratio over the next five years, the likely outcome will be additional tax and regulatory burdens that stifle productivity and aggregate demand. On the other hand, we see few longer-term impediments to growth in the developing economies, particularly India, mainland Asia, and South America. These regions generally do not have an excessive debt burden and have largely escaped the housing bust. Although both Funds have staged a notable performance rebound from the March lows, our valuation measures indicate that the portfolios are still much cheaper than the historical average. In addition, the companies included in the Fund's holdings, should mount an earnings recovery from levels that became very depressed during the severe economic slump. We appreciate the confidence you have placed in us to manage this portion of your assets with discipline, skill and a long-term perspective. /s/ Arnold C. Schneider Arnold C. Schneider III, CFA Portfolio Manager Schneider Capital Management 1 THE SCHNEIDER FUNDS ANNUAL INVESTMENT ADVISER'S REPORT (CONTINUED) AUGUST 31, 2009 (UNAUDITED) SCHNEIDER VALUE FUND - PORTFOLIO REVIEW Performance picked up markedly during the second half of the fiscal year. The Schneider Value Fund (the "Value Fund") returned 67.48% compared to 44.21% for the Russell Value 1000 Index (the "Index") during the six months ended August 31, 2009. For the full fiscal year, the -22.06% return for the Value Fund compared to a -20.27% return for the Index. Since inception, the Value Fund's longer-term performance exceeded the benchmark (see table on page 3). We began the fiscal year with an overweight in technology, which is our typical posture during recessions, and expanded our position when the economy imploded last September after the collapse of Lehman Brothers. This decision proved to be highly beneficial during the fiscal year. We had particular success with semiconductor capital equipment makers such as ASML Holding. Capital spending by semiconductor companies was running at multi-year lows and significantly below trend. With the useful life of a semiconductor fabrication plant averaging five years, we believe that manufacturers must eventually begin their next capacity expansion cycle in order to remain competitive. After an unrewarding stretch of investing in the financial services sector, our patience and experience was rewarded with a strong showing during the fiscal year. Annaly Capital Management Inc., a non-credit risk agency mortgage REIT we have owned since 2005 with much success, was a calm port during the financial storm. Timely investments earlier in 2009 in several insurance names also made a favorable contribution during the period. Our more recent increase in exposure to U.S. natural gas and coal mining stocks detracted modestly from performance during the period. As natural gas and coal prices plummeted during the fall of 2008, we seized the opportunity to increase our positions in these segments at very attractive valuations. The current oversupply situation in both commodities should be self-correcting with the aggressive cutbacks in production we have seen in conjunction with the natural depletion rate of these resources. We have focused our investments in companies that possess significant lower-cost reserves and sufficient capital to ramp up production when the pricing picture improves. There is tremendous operating and earnings leverage as these industries swing toward a supply-demand balance. What is less compelling is the opportunity for near- to intermediate-term earnings growth in some of the deepest cyclical areas of the market, including many basic materials, industrial commodities and commercial real estate stocks. The capacity utilization rate in the U.S. has sunk to an all-time low, and we have a long way to go in many basic industries to get back to what would even be considered average levels. The Fund is generally underweighted in these areas. TEN LARGEST HOLDINGS Chesapeake Energy Corp. 6.7% Dell Inc. 5.8% Arch Coal Inc. 5.4% RRI Energy Inc. 5.2% Bank of America Corp. 5.0% Annaly Capital Mgmt Inc. REIT 4.9% Forest Oil Corp. 4.6% Capital One Financial Corp. 4.0% NVR Inc. 4.0% Intl Rectifier Corp. 3.8%
As a percentage of net assets on August 31, 2009 - ---------- 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, 2009 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Schneider Value Fund vs. Russell 1000(R) Value Index (PERFORMANCE GRAPH)
Russell 1000 Value Index Aggregate Inst Schneider Value & Investor --------------- -------------------- 30-Sep-02 10000 10000 8/31/03 14846 12418.1 8/31/04 19034 14593.5 8/31/05 22720 17052.9 8/31/2006 25185 19428.1 8/31/2007 28932 21927.1 8/31/2008 21684 18709.2 8/31/2009 16901 14917.6
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 Periods Ended August 31, 2009
AVERAGE ANNUAL ----------------------- SINCE ONE YEAR FIVE YEARS INCEPTION* -------- ---------- ---------- SCHNEIDER VALUE -22.06% -2.35% 7.88% RUSSELL 1000(R) VALUE INDEX -20.27% 0.45% 5.95%
* Inception date: September 30, 2002 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. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-520-3277. THE FUND'S GROSS AND NET ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, ARE 1.11% AND 0.92%, RESPECTIVELY. SHARES OF THE FUND NOT PURCHASED THROUGH REINVESTED DIVIDENDS OR CAPITAL GAINS AND HELD LESS THAN 90 DAYS ARE SUBJECT TO A 1.00% REDEMPTION FEE. 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 $12.14 per share on August 31, 2009, adjusted for dividends and distributions totaling $6.17 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, 2009 (UNAUDITED) SCHNEIDER SMALL CAP VALUE FUND - PORTFOLIO REVIEW Performance surged during the second half of the fiscal year. The Schneider Small Cap Value Fund (the "Small Cap Value Fund") produced a 88.98% return compared to 50.12% for the benchmark Russell 2000 Value Index (the "Index") during the six months ended August 31, 2009. The Small Cap Value Fund's -13.20% return for the full fiscal year outpaced the -20.68% for the Index. Long-term performance results also surpassed the benchmark (see table on page 5). The primary drivers of the favorable relative performance were our security selection and weightings in the technology and energy sectors. The severe disruption in the equity markets presented an uncommon opportunity to invest in companies with attractive valuations and a promising fundamental outlook. Pockets of the depressed technology sector offered tremendous value during the market meltdown, and we measurably increased our exposure. Investor panic had even driven down several holdings to prices below the net cash per share on the balance sheet, including Entegris, Openwave Systems and ModusLink Global Solutions. These names rebounded strongly since last spring. We still hold a favorable fundamental outlook for our investments, even though some of the stocks have less remaining upside potential after their strong run. Although there were few tech spending excesses before the recession hit, business capital expenditures went into a sharp decline. This underinvestment and sharp reduction in inventories should inevitably lead to an equipment spending rebound now that the global economy has stabilized and credit conditions have improved markedly. Tech company balance sheets are generally in better shape than many other industrials, and we favor the global scope of their businesses. The energy sector is the area that saw the largest increase in weighting compared to a year ago. We have made these investments with high conviction and a willingness to be patient in light of the sizable upside potential. The Fund has significant exposure, both direct and indirect, to U.S. natural gas. The fundamental story is tracking with our expectations. Supply is beginning to fall sequentially in response to the 60% pull-back in drilling activity and natural depletion rates should eventually contribute to a large decline in supplies. We expect a tightening in U.S. natural gas supply and demand sometime in 2010, assuming normal temperature patterns. Our gas exploration & production companies are expected to benefit directly, while investments in coal mining stocks stand to gain indirectly from higher gas prices. Production cutbacks in the central Appalachia region, which we expect to continue into 2010, should help reduce the current oversupply situation in coal. TEN LARGEST HOLDINGS Entegris Inc. 5.5% Massey Energy Co. 5.0% Arch Coal Inc. 4.8% SandRidge Energy Inc. 4.5% NVR Inc. 4.2% Forest Oil Corp. 3.1% Anworth Mtge Asset Corp REIT. 3.0% AAR Corp. 3.0% ModusLink Global Solutions Inc. 2.6% Regions Financial Corp. 2.5%
As a percentage of net assets on August 31, 2009 - ---------- 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 (CONTINUED) AUGUST 31, 2009 (UNAUDITED) Comparison of Change in Value of $10,000 Investment in Schneider Small Cap Value Fund vs. Russell 2000(R) Value Index (PERFORMANCE GRAPH)
Schneider Small Russell 2000 Cap Value Fund Value Index --------------- ------------ 31-Aug-99 10000 10000 31-Aug-00 11372 11370 31-Aug-01 13640 13421 8/31/02 12173 12669 8/31/03 18636 15669 8/31/04 25716 18724 8/31/05 33834 22956 8/31/2006 36469 25874 8/31/2007 36732 27595 8/31/2008 29467 25519 8/31/2009 25577 20240
The chart assumes a hypothetical $10,000 initial investment in the Fund made on August 31, 1999 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 Periods Ended August 31, 2009
AVERAGE ANNUAL --------------------------------- ONE YEAR FIVE YEARS TEN YEARS -------- ---------- --------- SCHNEIDER SMALL CAP VALUE -13.20% -0.11% 9.85% RUSSELL 2000(R) VALUE INDEX -20.68% 1.57% 7.31%
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. FOR PERFORMANCE DATA CURRENT TO THE MOST RECENT MONTH-END, PLEASE CALL 1-888-520-3277. THE FUND'S GROSS AND NET ANNUAL OPERATING EXPENSES, AS STATED IN THE CURRENT PROSPECTUS, ARE 1.51% AND 1.17% RESPECTIVELY. SHARES OF THE FUND NOT PURCHASED THROUGH REINVESTED DIVIDENDS OR CAPITAL GAINS AND HELD LESS THAN ONE YEAR ARE SUBJECT TO A 1.75% REDEMPTION FEE The Fund's annualized ten year return is based on an increase in net asset value from $10.00 per share on August 31, 1999 to $12.34 per share on August 31, 2009, adjusted for dividends and distributions totaling $29.45 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 30000 to change. 5 THE SCHNEIDER FUNDS 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 year from March 1, 2009 through August 31, 2009, 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.
SCHNEIDER VALUE FUND --------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2009 AUGUST 31, 2009 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,674.50 $6.07 Hypothetical (5% return before expenses) 1,000.00 1,020.61 4.59
SCHNEIDER SMALL CAP VALUE FUND --------------------------------------------------------------- BEGINNING ACCOUNT VALUE ENDING ACCOUNT VALUE EXPENSES PAID MARCH 1, 2009 AUGUST 31, 2009 DURING PERIOD* ----------------------- -------------------- -------------- Actual $1,000.00 $1,889.70 $8.38 Hypothetical (5% return before expenses) 1,000.00 1,019.34 5.87
* Expenses are equal to an annualized six-month expense ratio of 0.90% for the Schneider Value Fund and 1.15% 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 67.45% for the Schneider Value Fund and 88.97% for the Schneider Small Cap Value Fund. 6 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2009 (UNAUDITED)
% OF NET ASSETS VALUE -------- ------------ Domestic Common Stocks: Oil & Gas .................................. 12.2% $ 14,442,806 Banks ...................................... 9.4 11,093,026 Insurance .................................. 9.1 10,823,215 Coal ....................................... 8.3 9,863,182 Semiconductors ............................. 8.1 9,542,309 Energy & Utilities ......................... 7.6 9,062,853 Real Estate Investment Trusts .............. 7.4 8,827,226 Home Builders .............................. 6.6 7,784,110 Computers .................................. 5.9 6,953,058 Electronics ................................ 3.4 3,983,909 Automobile Parts & Equipment ............... 2.6 3,143,248 Food ....................................... 2.5 2,937,802 Retail ..................................... 2.2 2,619,262 Health Care - Services ..................... 2.1 2,458,342 Manufacturing .............................. 1.7 2,002,010 Automobile Manufacturers ................... 1.4 1,665,821 Health Care - Products ..................... 1.3 1,569,741 Aerospace & Defense ........................ 1.3 1,550,449 Leisure Time ............................... 1.1 1,269,743 Media ...................................... 1.0 1,151,070 Telecommunications ......................... 0.9 1,021,499 Pharmaceuticals ............................ 0.8 981,180 Life & Health Insurance .................... 0.5 647,889 Chemicals .................................. 0.3 406,916 Exchange Traded Fund .......................... 2.3 2,690,835 Preferred Stock ............................... 0.4 473,245 Liabilities in Excess of Other Assets ......... (0.4) (497,740) ----- ------------ NET ASSETS .................................... 100.0% $118,467,006 ===== ============
- ---------- Portfolio holdings are subject to change at any time. The accompanying notes are an integral part of the financial statements. 7 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO HOLDINGS SUMMARY TABLE AUGUST 31, 2009 (UNAUDITED)
% OF NET ASSETS VALUE -------- ----------- Domestic Common Stocks: Semiconductors ............................. 12.9% $12,665,277 Coal ....................................... 9.8 9,658,247 Oil & Gas .................................. 7.6 7,482,689 Internet ................................... 6.7 6,569,655 Real Estate Investment Trusts .............. 6.1 5,970,660 Commercial Services ........................ 5.8 5,715,633 Computers .................................. 5.3 5,253,465 Aerospace & Defense ........................ 5.1 4,970,273 Home Builders .............................. 4.7 4,631,343 Banks ...................................... 4.2 4,160,666 State Commercial Banks ..................... 3.9 3,829,251 Energy & Utilities ......................... 3.1 2,997,066 Retail ..................................... 2.9 2,890,934 Insurance .................................. 2.8 2,705,597 Building Materials ......................... 1.8 1,815,858 Healthcare - Products ...................... 1.5 1,485,315 Software ................................... 1.3 1,244,250 Apparel .................................... 1.2 1,157,276 Leisure Time ............................... 1.0 1,029,053 Automobile Parts & Equipment ............... 1.0 966,195 Automobile Manufacturers ................... 0.9 885,802 Airlines ................................... 0.9 875,871 Financial .................................. 0.8 768,642 Real Estate ................................ 0.7 730,952 Electronics ................................ 0.7 705,307 Food ....................................... 0.7 680,612 Transportation ............................. 0.7 669,056 Chemicals .................................. 0.5 512,195 Industrial ................................. 0.4 426,915 Telecommunications ......................... 0.4 348,090 Savings & Loans ............................ 0.2 180,900 Distribution/Wholesale ..................... 0.0 10,212 Exchange Traded Fund .......................... 2.1 2,062,452 Corporate Bonds ............................... 0.0 5,025 Other Assets in Excess of Liabilities ......... 2.3 2,221,886 ----- ----------- NET ASSETS .................................... 100.0% $98,282,620 ===== ===========
- ---------- Portfolio holdings are subject to change at any time. The accompanying notes are an integral part of the financial statements. 8 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2009
SHARES VALUE -------------- --------------- DOMESTIC COMMON STOCKS -- 97.7% AEROSPACE & DEFENSE -- 1.3% Boeing Co. (The) ............................ 31,215 $ 1,550,449 --------------- AUTOMOBILE MANUFACTURERS -- 1.4% Navistar International Corp.* ............... 38,525 1,665,821 --------------- AUTOMOBILE PARTS & EQUIPMENT -- 2.6% Magna International, Inc., Class A .......... 68,765 3,143,248 --------------- BANKS -- 9.4% Bank of America Corp. ....................... 337,410 5,935,042 Capital One Financial Corp. ................. 126,270 4,708,608 JPMorgan Chase & Co. ........................ 10,340 449,376 --------------- 11,093,026 --------------- CHEMICALS -- 0.3% Cytec Industries, Inc. ...................... 14,085 406,916 --------------- COAL -- 8.3% Arch Coal, Inc. ............................. 371,845 6,440,355 Consol Energy, Inc. ......................... 91,495 3,422,827 --------------- 9,863,182 --------------- COMPUTERS -- 5.9% Dell, Inc.* ................................. 439,233 6,953,058 --------------- ELECTRONICS -- 3.4% Avnet, Inc.* ................................ 149,490 3,983,909 --------------- ENERGY & UTILITIES -- 7.6% Allegheny Energy, Inc. ...................... 109,495 2,891,763 RRI Energy, Inc.* ........................... 1,038,904 6,171,090 --------------- 9,062,853 --------------- FOOD -- 2.5% Tyson Foods, Inc., Class A .................. 245,021 2,937,802 --------------- HEALTH CARE - PRODUCTS -- 1.3% Boston Scientific Corp.* .................... 133,595 1,569,741 --------------- HEALTH CARE - SERVICES -- 2.1% Brookdale Senior Living, Inc. ............... 154,710 2,458,342 --------------- HOME BUILDERS -- 6.6% NVR, Inc.* .................................. 6,969 4,705,817 Pulte Homes, Inc. ........................... 240,868 3,078,293 --------------- 7,784,110 ---------------
SHARES VALUE -------------- --------------- INSURANCE -- 9.1% Allstate Corp., (The) ....................... 109,240 $ 3,210,564 Brown & Brown, Inc. ......................... 107,050 2,127,084 Fidelity National Financial, Inc., Class A .. 40,466 607,799 Genworth Financial, Inc., Class A ........... 240,746 2,542,278 Hartford Financial Services Group, Inc. ..... 34,140 809,801 RenaissanceRe Holdings, Ltd. ................ 28,020 1,525,689 --------------- 10,823,215 --------------- LEISURE TIME -- 1.1% Carnival Corp. .............................. 43,410 1,269,743 --------------- LIFE & HEALTH INSURANCE -- 0.5% AFLAC, Inc. ................................. 15,950 647,889 --------------- MANUFACTURING -- 1.7% PACCAR, Inc. ................................ 55,350 2,002,010 --------------- MEDIA -- 1.0% Liberty Media Corp., Series A* .............. 60,297 1,151,070 --------------- OIL & GAS -- 12.2% Chesapeake Energy Corp. ..................... 349,331 7,978,719 EXCO Resources, Inc.* ....................... 13,335 195,491 Forest Oil Corp.* ........................... 349,334 5,491,530 Patterson-UTI Energy, Inc. .................. 58,470 777,066 --------------- 14,442,806 --------------- PHARMACEUTICALS -- 0.8% Omnicare, Inc. .............................. 42,865 981,180 --------------- REAL ESTATE INVESTMENT TRUSTS -- 7.4% Annaly Capital Management, Inc. ............. 335,803 5,822,823 MFA Financial, Inc. ......................... 163,380 1,293,970 Redwood Trust, Inc. ......................... 106,702 1,710,433 --------------- 8,827,226 --------------- RETAIL -- 2.2% Best Buy Co, Inc. ........................... 24,920 904,098 J.C. Penney Co., Inc. ....................... 57,096 1,715,164 --------------- 2,619,262 --------------- SEMICONDUCTORS -- 8.1% ASML Holding N.V ............................ 76,150 2,091,841 International Rectifier Corp.* .............. 238,798 4,482,238 Lam Research Corp.* ......................... 96,685 2,968,230 --------------- 9,542,309 ---------------
The accompanying notes are an integral part of the financial statements. 9 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2009
SHARES VALUE -------------- --------------- TELECOMMUNICATIONS -- 0.9% Motorola, Inc. .............................. 142,270 $ 1,021,499 --------------- TOTAL DOMESTIC COMMON STOCKS (Cost $107,631,743) ................... 115,800,666 --------------- CONVERTIBLE PREFERRED SHARES -- 0.4% AUTOMOBILE MANUFACTURERS -- 0.4% Motors Liquidation Co., Series C ............ 140,742 473,245 --------------- TOTAL CONVERTIBLE PREFERRED SHARES (Cost $2,085,733) ..................... 473,245 --------------- EXCHANGE TRADED FUND -- 2.3% FINANCE -- 2.3% iShares Russell 1000 Value Index Fund ............................... 50,090 2,690,835 --------------- TOTAL EXCHANGE TRADED FUND (Cost $2,310,480) ..................... 2,690,835 --------------- TOTAL INVESTMENTS -- 100.4% (Cost $112,027,956) ...................... 118,964,746 --------------- LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.4)% ......................... (497,740) --------------- NET ASSETS -- 100.0% ........................ $ 118,467,006 ---------------
* Non-income producing. The following is a summary of inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (See Note 1 to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUTS INPUTS --------------- ------------ ----------- ------------ Investments in Securities* $118,964,746 $118,491,501 $473,245 $-- ============ ============ ======== ===
* Please refer to the Portfolio of Investments for industry and security type breakouts. The accompanying notes are an integral part of the financial statements. 10 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS AUGUST 31, 2009
SHARES VALUE -------------- --------------- DOMESTIC COMMON STOCKS -- 95.6% AEROSPACE & DEFENSE -- 5.1% AAR Corp.* .................................. 173,690 $ 2,954,467 BE Aerospace, Inc.* ......................... 79,370 1,359,608 Triumph Group, Inc. ......................... 15,085 656,198 --------------- 4,970,273 --------------- AIRLINES -- 0.9% AirTran Holdings, Inc.* ..................... 131,710 875,871 --------------- APPAREL -- 1.2% Barry (R.G.) Corp.* ......................... 139,599 1,157,276 --------------- AUTOMOBILE MANUFACTURERS -- 0.9% Wabash National Corp. ....................... 366,034 885,802 --------------- AUTOMOBILE PARTS & EQUIPMENT -- 1.0% American Axle & Manufacturing Holdings, Inc. ............................ 38,369 237,120 Magna International, Inc., Class A .......... 15,950 729,075 --------------- 966,195 --------------- BANKS -- 4.2% Boston Private Financial Holdings, Inc. ..... 16,183 81,239 Citizens Republic Bancorp, Inc.* ............ 328,962 246,721 First BanCorp ............................... 365,515 1,165,993 South Financial Group, Inc. (The) ........... 890,810 1,567,826 Sterling Financial Corp. .................... 518,343 1,098,887 --------------- 4,160,666 --------------- BUILDING MATERIALS -- 1.8% Builders FirstSource, Inc.* ................. 143,158 1,100,885 Louisiana-Pacific Corp.* .................... 94,950 714,973 --------------- 1,815,858 --------------- CHEMICALS -- 0.5% A. Schulman, Inc. ........................... 25,495 512,195 --------------- COAL -- 9.8% Arch Coal, Inc. ............................. 273,960 4,744,987 Massey Energy Co. ........................... 181,435 4,913,260 --------------- 9,658,247 ---------------
SHARES VALUE -------------- --------------- COMMERCIAL SERVICES -- 5.8% Administaff, Inc. ........................... 80,045 $ 1,932,286 Aegean Marine Petroleum Network, Inc. ............................ 89,825 1,848,598 Alliance Semiconductor Corp. ................ 610,315 164,785 Hudson Highland Group, Inc.* ................ 470,735 1,769,964 --------------- 5,715,633 --------------- COMPUTERS -- 5.3% Insight Enterprises, Inc.* .................. 123,965 1,421,879 Ness Technologies, Inc.* .................... 157,378 950,563 Silicon Storage Technology, Inc.* ........... 246,248 450,634 Xyratex Ltd.* ............................... 369,360 2,430,389 --------------- 5,253,465 --------------- DISTRIBUTION/WHOLESALE -- 0.0% Building Materials Holding Corp.* ........... 102,118 10,212 --------------- ELECTRONICS -- 0.7% Arrow Electronics, Inc.* .................... 8,555 236,460 FARO Technologies, Inc.* .................... 27,563 468,847 --------------- 705,307 --------------- ENERGY & UTILITIES -- 3.1% Allegheny Energy, Inc. ...................... 31,900 842,479 RRI Energy, Inc.* ........................... 362,725 2,154,587 --------------- 2,997,066 --------------- FINANCIAL -- 0.8% Central Pacific Financial Corp. ............. 276,490 768,642 --------------- FOOD -- 0.7% Tyson Foods, Inc., Class A .................. 56,765 680,612 --------------- HEALTHCARE - PRODUCTS -- 1.5% Orthofix International N.V.* ................ 54,268 1,485,315 --------------- HOME BUILDERS -- 4.7% KB HOME ..................................... 8,360 152,236 NVR, Inc.* .................................. 6,155 4,156,164 Ryland Group, Inc. .......................... 14,090 322,943 --------------- 4,631,343 ---------------
The accompanying notes are an integral part of the financial statements. 11 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONTINUED) AUGUST 31, 2009
SHARES VALUE -------------- --------------- INDUSTRIAL -- 0.4% FreightCar America, Inc. .................... 22,375 $ 426,915 --------------- INSURANCE -- 2.8% Brown & Brown, Inc. ......................... 42,140 837,322 Genworth Financial, Inc., Class A ........... 176,920 1,868,275 --------------- 2,705,597 --------------- INTERNET -- 6.7% Internet Capital Group, Inc.* ............... 276,550 1,836,292 ModusLink Global Solutions, Inc.* ........... 354,375 2,544,412 Openwave Systems, Inc.* ..................... 790,235 2,188,951 --------------- 6,569,655 --------------- LEISURE TIME -- 1.0% Brunswick Corp. ............................. 110,770 1,029,053 --------------- OIL & GAS -- 7.6% Forest Oil Corp.* ........................... 194,289 3,054,223 SandRidge Energy, Inc.* ..................... 362,989 4,428,466 --------------- 7,482,689 --------------- REAL ESTATE -- 0.7% MI Developments, Inc., Class A .............. 32,380 435,835 Thomas Properties Group, Inc. ............... 137,905 295,117 --------------- 730,952 --------------- REAL ESTATE INVESTMENT TRUSTS -- 6.1% Anworth Mortgage Asset Corp. ................ 400,035 2,996,262 Chimera Investment Corp. .................... 139,145 528,751 Redwood Trust, Inc. ......................... 111,300 1,784,139 Winthrop Realty Trust ....................... 72,296 661,508 --------------- 5,970,660 --------------- RETAIL -- 2.9% AC Moore Arts & Crafts, Inc.* ............... 375,262 1,305,912 MarineMax, Inc.* ............................ 141,849 1,000,035 Pacific Sunwear of California, Inc.* ........ 132,350 584,987 --------------- 2,890,934 --------------- SAVINGS & LOANS -- 0.2% Washington Federal, Inc. .................... 12,190 180,900 ---------------
SHARES VALUE -------------- --------------- SEMICONDUCTORS -- 12.9% ASM International N.V.* ..................... 70,401 $ 1,289,042 Axcelis Technologies, Inc.* ................. 2,280,744 1,690,030 BE Semiconductor Industries N.V.* ........... 359,943 1,497,939 Entegris, Inc.* ............................. 1,349,579 5,398,316 International Rectifier Corp.* .............. 88,800 1,666,776 Lam Research Corp.* ......................... 21,440 658,208 Zilog, Inc.* ................................ 177,468 464,966 --------------- 12,665,277 --------------- SOFTWARE -- 1.3% Take-Two Interactive Software, Inc.* ........ 118,500 1,244,250 --------------- STATE COMMERCIAL BANKS -- 3.9% Regions Financial Corp. ..................... 420,095 2,461,757 Susquehanna Bancshares, Inc. ................ 234,160 1,367,494 --------------- 3,829,251 --------------- TELECOMMUNICATIONS -- 0.4% Netgear, Inc.* .............................. 20,380 348,090 --------------- TRANSPORTATION -- 0.7% Alexander & Baldwin, Inc. ................... 11,950 342,965 Atlas Air Worldwide Holdings, Inc.* ......... 13,075 326,091 --------------- 669,056 --------------- TOTAL DOMESTIC COMMON STOCKS (Cost $ 69,790,739) ................... 93,993,257 --------------- EXCHANGE TRADED FUND -- 2.1% FINANCE -- 2.1% iShares Russell 2000 Value Index Fund ....... 38,130 2,062,452 --------------- TOTAL EXCHANGE TRADED FUND (Cost $1,643,287) ..................... 2,062,452 ---------------
The accompanying notes are an integral part of the financial statements. 12 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND PORTFOLIO OF INVESTMENTS (CONCLUDED) AUGUST 31, 2009
PAR (000) VALUE -------------- --------------- CORPORATE BONDS -- 0.0% LandAmerica Financial Group, Inc. CONV ## + 3.25%, 05/15/34 .......................... $ 168 $ 5,025 --------------- TOTAL CORPORATE BONDS (Cost $47,437) ........................ 5,025 --------------- TOTAL INVESTMENTS -- 97.7% (Cost $71,481,463) ....................... 96,060,734 --------------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 2.3% ...................... 2,221,886 --------------- NET ASSETS -- 100.0% ........................ $ 98,282,620 ===============
* Non-income producing. + Security in default. ## --Security was purchased pursuant to Rule 144A under Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. As of August 31, 2009, this security amounted to 0.0% of net assets. CONV -- Convertible The following is a summary of inputs used, as of August 31, 2009, in valuing the Fund's investments carried at market value (See Note 1 to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICE INPUTS INPUTS --------------- ----------- ----------- ------------ Domestic Common Stocks* $93,993,257 $93,993,257 $ -- $-- Corporate Bonds 5,025 -- 5,025 -- Exchange Traded Fund 2,062,452 2,062,452 ----------- ----------- ------ --- Total $96,060,734 $96,055,709 $5,025 $-- =========== =========== ====== ===
* Please refer to the Portfolio of Investments for industry and security type breakouts. The accompanying notes are an integral part of the financial statements. 13 THE SCHNEIDER FUNDS STATEMENTS OF ASSETS & LIABILITIES AUGUST 31, 2009
SCHNEIDER SCHNEIDER SMALL CAP VALUE FUND VALUE FUND ------------- ------------ ASSETS Investments, at value + .................................... $ 118,964,746 $ 96,060,734 Cash and cash equivalents .................................. 712,114 1,690,818 Receivables Investments sold ........................................ 678,485 640,922 Capital shares sold ..................................... 754 182,764 Dividends and interest .................................. 88,237 47,638 Prepaid expenses and other assets .......................... 16,748 18,957 ------------- ------------ Total assets ......................................... 120,461,084 98,641,833 ------------- ------------ LIABILITIES Payables Investments purchased ................................... 968,749 202,102 Capital shares redeemed ................................. 864,231 48,767 Investment adviser ...................................... 61,804 50,907 Other accrued expenses and liabilities ..................... 99,294 57,437 ------------- ------------ Total liabilities .................................... 1,994,078 359,213 ------------- ------------ Net Assets ................................................. $ 118,467,006 $ 98,282,620 ============= ============ NET ASSETS CONSIST OF Par value .................................................. 9,762 7,961 Paid-in capital ............................................ 262,466,320 123,363,290 Undistributed net investment income ........................ 2,533,591 543,266 Accumulated net realized loss from investments ............. (153,479,457) (50,211,168) Net unrealized appreciation on investments ................. 6,936,790 24,579,271 ------------- ------------ Net Assets ........................................... $ 118,467,006 $ 98,282,620 ============= ============ Shares outstanding ($0.001 par value, 100,000,000 shares authorized) ...................................... 9,761,614 7,961,423 ------------- ------------ Net asset value, offering and redemption price per share ............................................... $ 12.14 $ 12.34 ============= ============ +Investment in securities, at cost ......................... $ 112,027,956 $ 71,481,463 ============= ============
The accompanying notes are an integral part of the financial statements. 14 THE SCHNEIDER FUNDS STATEMENTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2009
SCHNEIDER SCHNEIDER SMALL CAP VALUE FUND VALUE FUND ------------ ------------ INVESTMENT INCOME Dividends+ .................................................. $ 3,512,965 $ 1,761,078 Interest .................................................... 13,591 14,642 ------------ ------------ Total investment income .................................. 3,526,556 1,775,720 ------------ ------------ EXPENSES Advisory fees ............................................... 790,619 844,204 Administration and accounting fees .......................... 162,793 134,957 Transfer agent fees ......................................... 80,477 39,725 Custodian fees .............................................. 56,534 48,699 Directors' and officers' fees ............................... 52,712 34,777 Printing and shareholder reporting fees ..................... 45,228 12,506 Professional fees ........................................... 43,100 43,371 Registration and filing fees ................................ 26,816 27,187 Insurance fees .............................................. 26,258 10,015 Other expenses .............................................. 3,282 4,268 ------------ ------------ Total expenses before waivers and reimbursements ......... 1,287,819 1,199,709 Less: waivers and reimbursements ......................... (294,891) (240,350) ------------ ------------ Net expenses after waivers and reimbursements ............ 992,928 959,359 ------------ ------------ Net investment income ....................................... 2,533,628 816,361 ------------ ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS NET REALIZED GAIN/(LOSS) FROM: Investments .............................................. (97,077,057) (39,533,004) NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments .............................................. 34,119,050 39,577,628 ------------ ------------ Net realized and unrealized gain/(loss) on investments ...... (62,958,007) 44,624 ------------ ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ............................................. $(60,424,379) $ 860,985 ============ ============ +Net of foreign withholding taxes of ..................... $ (12,520) $ (15,451) ============ ============
The accompanying notes are an integral part of the financial statements. 15 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- ---------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income .................................... $ 2,533,628 $ 4,850,664 Net realized loss from investments ....................... (97,077,057) (51,673,779) Net change in unrealized appreciation/(depreciation) from investments ...................................... 34,119,050 (35,066,247) --------------- ------------ Net decrease in net assets resulting from operations ........ (60,424,379) (81,889,362) --------------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .................................... (4,861,935) (1,905,299) Net realized capital gains ............................... -- (15,318,154) --------------- ------------ Net decrease in net assets from dividends and distributions to shareholders ............................ (4,861,935) (17,223,453) --------------- ------------ CAPITAL TRANSACTIONS: Proceeds from shares sold ................................ 19,397,418 75,564,084 Reinvestment of distributions ............................ 3,890,232 15,913,569 Redemption fees* ......................................... 15,540 47,008 Shares redeemed .......................................... (64,586,179) 132,168,321) --------------- ------------ Net decrease in net assets from capital share transactions ....................................... (41,282,989) (40,643,660) --------------- ------------ Total decrease in net assets ................................ (106,569,303) 139,756,475) NET ASSETS: Beginning of year ........................................ 225,036,309 364,792,784 =============== ============ End of year .............................................. $ 118,467,006 $225,036,309 =============== ============ Undistributed net investment income, end of year ......... $ 2,533,591 $ 4,861,898 =============== ============ SHARE TRANSACTIONS: Shares sold .............................................. 1,955,016 3,604,263 Shares reinvested ........................................ 456,600 758,511 Shares redeemed .......................................... (6,393,319) (6,388,948) --------------- ------------ Total share transactions ................................. (3,981,703) (2,026,174) =============== ============
* There is a 1.00% redemption fee on shares redeemed which have been held less than 90 days in the Schneider Value Fund. The redemption fees are retained by the Fund for the benefit of the remaining shareholders and recorded as paid-in-capital. The accompanying notes are an integral part of the financial statements. 16 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR FOR THE YEAR ENDED ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income ..................................... $ 816,361 $ 838,861 Net realized loss from investments ........................ (39,533,004) (4,740,332) Net change in unrealized appreciation/(depreciation) from investments ....................................... 39,577,628 (17,482,692) ------------ ------------- Net increase/(decrease) in net assets resulting from operations ................................................ 860,985 (21,384,163) ------------ ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income ..................................... (1,113,054) (1,553,403) Net realized capital gains ................................ (12,861) (2,671,636) ------------ ------------- Net decrease in net assets from dividends and distributions to shareholders ........................................... (1,125,915) (4,225,039) ------------ ------------- CAPITAL TRANSACTIONS: Proceeds from shares sold ................................. 50,730,024 30,787,178 Reinvestment of distributions ............................. 979,117 3,932,266 Redemption fees* .......................................... 569,400 36,164 Shares redeemed ........................................... (45,421,894) (18,507,502) ------------ ------------- Net increase in net assets from capital share transactions ... 6,856,647 16,248,106 ------------ ------------- Total increase/(decrease) in net assets ...................... 6,591,717 (9,361,096) ------------ ------------- NET ASSETS: Beginning of year ......................................... 91,690,903 101,051,999 ------------ ------------- End of year ............................................... $ 98,282,620 $ 91,690,903 ============ ============= Undistributed net investment income, end of year .......... $ 543,266 $ 835,627 ============ ============= SHARE TRANSACTIONS: Shares sold ............................................... 5,988,310 1,898,558 Shares reinvested ......................................... 125,207 232,816 Shares redeemed ........................................... (4,456,499) (1,129,651) ------------ ------------- Total share transactions .................................. 1,657,018 1,001,723 ============ =============
* There is a 1.75% redemption fee on shares redeemed which have been held less than one year in the Schneider Small Cap Value. The redemption fees are retained by the Fund for the benefit of the remaining shareholders and recorded as paid-in-capital. The accompanying notes are an integral part of the financial statements. 17 THE SCHNEIDER FUNDS SCHNEIDER VALUE FUND FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share outstanding during each period, 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, ----------------------------------------------------- 2009 2008 2007 2006 2005 -------- -------- -------- -------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year .............. $ 16.37 $ 23.13 $ 21.16 $ 20.55 $ 18.22 -------- -------- -------- -------- ------- Net investment income ........................... 0.34 0.37 0.14 0.10 0.07 Net realized and unrealized gain/(loss) from investments and foreign currency transactions ................................. (4.14) (5.89) 2.99 1.99 3.40 -------- -------- -------- -------- ------- Net increase/(decrease) in net assets resulting from operations .................... (3.80) (5.52) 3.13 2.09 3.47 -------- -------- -------- -------- ------- Dividends and distributions to shareholders from: Net investment income ........................... (0.43) (0.14) (0.08) (0.08) (0.05) Net realized capital gains ...................... -- (1.10) (1.08) (1.40) (1.09) -------- -------- -------- -------- ------- Total dividends and distributions to shareholders ................................. (0.43) (1.24) (1.16) (1.48) (1.14) -------- -------- -------- -------- ------- Redemption fees+ ................................ -- -- -- -- -- -------- -------- -------- -------- ------- Net asset value, end of year .................... $ 12.14 $ 16.37 $ 23.13 $ 21.16 $ 20.55 ======== ======== ======== ======== ======= Total investment return(1) ...................... (22.06)% (25.05)% 14.88% 10.85% 19.37% ======== ======== ======== ======== ======= RATIO/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) ......... $118,467 $225,036 $364,793 $139,288 $61,146 Ratio of expenses to average net assets(2) ...... 0.88% 0.85% 0.85% 0.85% 0.85% Ratio of expenses to average net assets without waivers and expense reimbursements ............................... 1.14% 1.09% 1.12% 1.27% 1.38% Ratio of net investment income to average net assets(2) ................................ 2.24% 1.61% 0.77% 0.69% 0.41% Portfolio turnover rate ......................... 107.13% 101.98% 131.75% 104.92% 76.66%
- ---------- + Amount is less than $0.005 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. The accompanying notes are an integral part of the financial statements. 18 THE SCHNEIDER FUNDS SCHNEIDER SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS Contained below is per share operating performance data for a share outstanding during each period, 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, --------------------------------------------------- 2009 2008 2007 2006 2005 ------- ------- -------- -------- ------- PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year .............. $ 14.54 $ 19.06 $ 21.96 $ 24.94 $ 29.09 ------- ------- -------- -------- ------- Net investment income/(loss) .................... 0.12 0.16 0.43 0.05 (0.10) Net realized and unrealized gain/(loss) on investments and foreign currency transactions ................................. (2.20) (3.81) 0.15 1.66 8.01 ------- ------- -------- -------- ------- Net increase/(decrease) in net assets resulting from operations .................... (2.08) (3.65) 0.58 1.71 7.91 ------- ------- -------- -------- ------- Dividends and distributions to shareholders from: Net investment income ........................... (0.18) (0.32) (0.20) -- -- Net realized capital gains ...................... --+ (0.55) (3.28) (4.69) (12.06) ------- ------- -------- -------- ------- Total dividends and distributions to shareholders ................................. (0.18) (0.87) (3.48) (4.69) (12.06) ------- ------- -------- -------- ------- Redemption fees ................................. 0.06 --+ --+ --+ --+ ======= ======= ======== ======== ======= Net asset value, end of year .................... $ 12.34 $ 14.54 $ 19.06 $ 21.96 $ 24.94 ======= ======= ======== ======== ======= Total investment return(1) ...................... (13.20)% (19.78)% 0.72% 7.79% 31.57% ------- ------- -------- -------- ------- RATIO/SUPPLEMENTAL DATA Net assets, end of year (000's omitted) ......... $98,283 $91,691 $101,052 $105,092 $55,163 Ratio of expenses to average net assets(2) ...... 1.14% 1.10% 1.10% 1.10% 1.10% Ratio of expenses to average net assets without waivers and expense reimbursements ............................... 1.42% 1.49% 1.50% 1.56% 1.71% Ratio of net investment income to average net assets(2) ................................ 0.97% 0.92% 1.81% 0.29% (0.41)% Portfolio turnover rate ......................... 122.36% 116.34% 75.21% 91.45% 68.87%
- ---------- + Amount is less than $0.005 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. The accompanying notes are an integral part of the financial statements. 19 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2009 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 nineteen 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 30, 2002 and September 2, 1998, 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 78.973 billion shares are currently classified into one hundred and twenty-nine classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten 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. Effective September 1, 2008, the Fund adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) 20 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 In April 2009, FASB issued FASB Staff Position No. 157-4, "Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly", ("FSP 157-4"). FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157, when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs and valuation techniques used to measure fair value and changes in those techniques and related inputs during the period. FSP 157-4 expands the three-level hierarchy disclosure and the level three-roll forward disclosure for each major security type as described in paragraph 19 of FAS 115, Accounting for Certain Investments in Debt and Equity Securities. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Funds' investments as of August 31, 2009 is included with each Fund's Schedule of 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 and those differences could be significant. 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 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 the ex-dividend 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. 21 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 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. CASH AND CASH EQUIVALENTS -- The Fund considers liquid assets deposited with a bank, money market funds, and certain short term debt instruments with maturities of 3 months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. 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. INVESTMENT ADVISER AND OTHER SERVICES 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. From September 1, 2008 until December 31, 2008, the Adviser contractually agreed to limit the Value Fund's and the Small Cap Value Fund's total operating expenses to the extent that such expenses exceeded 0.85% and 1.10%, respectively, of the Fund's average daily net assets. Effective January 1, 2009 until December 31, 2009, the Adviser has contractually agreed to limit total operating expenses to the extent that such expenses exceed 0.90% and 1.15% for the Value Fund and Small Cap Value Fund, respectively. As necessary, this limitation is effected in waivers of advisory fees and reimbursements of other Fund expenses. For the year ended August 31, 2009, investment advisory fees and waivers of expenses were as follows:
GROSS ADVISORY FEES WAIVERS NET ADVISORY FEES ------------------- ---------- ----------------- Schneider Value Fund $790,619 $(294,891) $495,728 Schneider Small Cap Value Fund 844,204 (233,407) 610,797
The Funds will not pay SCM at a later time for any amounts it may waive or any amounts that SCM has assumed. PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as administrator for the Funds. For providing administration and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of each Fund's average daily net assets, and is subject to certain minimum monthly fees. PNC voluntarily agreed to waive $7,000 annually of its administration and accounting services fees for the Small Cap Value Fund. The waiver may end at any time. Included in the administration and accounting services fees and expenses, are fees for providing regulatory administration services to RBB. For providing these services, PNC is entitled to receive compensation as agreed to by the 22 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 Company and PNC. This fee is allocated to each portfolio of the Company in proportion to its net assets of the RBB funds. In addition, PNC serves as the Funds' transfer and dividend disbursing agent. For providing transfer agent services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of each Fund's average daily net assets, subject to certain minimum monthly fees. For providing custodian services to the Funds, PFPC Trust Company, which will be renamed PNC Trust Company effective June 7, 2010, an affiliate of PNC, is entitled to receive a monthly fee equal to an annual percentage rate of each Fund's average daily gross assets, subject to certain minimum monthly fees. PFPC Distributors, Inc., an affiliate of PNC, serves as the principal underwriter and distributor of the Funds' shares pursuant to a Distribution Agreement with RBB. 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Funds or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
PURCHASES SALES ------------ ------------ Schneider Value Fund $125,250,472 $155,739,063 Schneider Small Cap Value Fund 113,261,276 104,180,599
5. CAPITAL SHARE TRANSACTIONS As of August 31, 2009, 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) 14% Schneider Small Cap Value Fund (2 shareholders) 27%
6. FEDERAL INCOME TAX INFORMATION FASB Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the funds' tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2006-2009) 23 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 and has concluded that no provision for income tax is required in the Funds' financial statements. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). At August 31, 2009, 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 $131,911,392 $17,822,920 $(30,769,566) $(12,946,646) Schneider Small Cap Value Fund 77,230,311 31,622,780 (12,792,357) 18,830,423
Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. The following permanent differences as of August 31, 2009, primarily attributable to taxable interest on defaulted securities, were reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED INCOME (LOSS) GAIN/(LOSS) -------------- ------------ Schneider Small Cap Value Fund $4,332 $(4,332)
At August 31, 2009, the components of distributable earnings on a tax basis were as follows:
UNDISTRIBUTED ORDINARY UNDISTRIBUTED INCOME LONG-TERM GAINS ------------- --------------- Schneider Value Fund $2,533,591 $-- Schneider Small Cap Value Fund 543,266 --
24 THE SCHNEIDER FUNDS NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2009 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 income tax purposes. The tax character of dividends and distributions paid during the last two fiscal years were as follows:
ORDINARY LONG-TERM INCOME GAINS TOTAL ----------- ---------- ----------- Schneider Value Fund 2009 $ 4,861,935 $ -- $ 4,861,935 2008 11,583,307 5,640,146 17,223,453 Schneider Small Cap Value Fund 2009 $ 1,113,058 $ 12,857 $ 1,125,915 2008 1,553,403 2,671,636 4,225,039
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes. For federal income tax purposes, capital loss carryforwards are available to offset future capital gains. At August 31, 2009, the Schneider Value Fund and the Schneider Small Cap Value Fund had capital loss carryforwards of $87,755,969 and $12,220,752, respectively, that will expire as follows:
AUGUST 31, 2016 AUGUST 31, 2017 --------------- --------------- Schneider Value Fund $11,810,397 $75,945,572 Schneider Small Cap Value Fund -- 12,220,752
During the fiscal year ended August 31, 2009, the Funds' did not utilize any of their capital loss carryforwards. Under federal tax law, foreign currency and capital losses realized after October 31 may be deferred and treated as having arisen on the first day of the following fiscal year. For the year ended August 31, 2009, the Schneider Value Fund and the Schneider Small Cap Value Fund incurred post-October capital losses of $45,840,052 and $32,241,568, respectively. 7. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through October 22, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statement. 25 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 Value Fund and Schneider Small Cap Value Fund, separately managed portfolios of The RBB Fund, Inc. (the "Funds") at August 31, 2009, 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 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 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, 2009 by correspondence with the custodian, provide a reasonable basis for our opinion. (PRICEWATERHOUSECOOPERS LLP) Philadelphia, Pennsylvania October 22, 2009 26 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, 2009, the following dividends and distributions were paid by each of the Funds:
ORDINARY INCOME LONG-TERM GAINS --------------- --------------- Schneider Value Fund $4,861,935 $ -- Schneider Small Cap Value Fund 1,113,058 12,857
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 75% for the Schneider Value Fund and 71% for the Schneider Small Cap Value Fund. The percentage of total ordinary income dividends qualifying for the corporate dividends received deduction is 76% for the Schneider Value Fund and 70% for the Schneider Small Cap Value Fund. These amounts were reported to shareholders as income in 2008. Because each Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2009. 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 2010. 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. 27 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 (202) 551-8090. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS SCHNEIDER CAPITAL MANAGEMENT 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 SCM and the Company (the "Advisory Agreements") on behalf of the Schneider Small Cap Value Fund and Schneider Value Fund at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 SCM 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 Board 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. Among other things, the Board considered (i) the nature, extent, and quality of SCM's services provided to the Funds; (ii) descriptions of the experience and qualifications of SCM's personnel providing those services; (iii) SCM's investment philosophies and processes; (iv) SCM's assets under management and client descriptions; (v) SCM'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) SCM's current advisory fee arrangements with the Company and other similarly managed clients; (vii) SCM's compliance procedures; (viii) SCM'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 each Fund's management fees and total expense ratio to those of its 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. As part of their review, the Board considered the nature, extent and quality of the services provided by SCM. The Board concluded that SCM had substantial resources to provide services to the Funds and that SCM's services had been acceptable. 28 THE SCHNEIDER FUNDS OTHER INFORMATION (CONCLUDED) (UNAUDITED) The Board also considered the investment performance of the Funds and SCM. Information on the Funds' investment performance was provided for one, three, and five year periods, as applicable. The Board considered the Funds' investment performance in light of their investment objectives and investment strategies. The Board concluded that the investment performance of each of the Funds as compared to their respective benchmarks and Lipper peer groups was acceptable. In reaching these conclusions, the Board also considered the recent extraordinary market conditions. The Board also considered the advisory fee rates payable by the Funds under the Advisory Agreements. In this regard, information on the fees paid by the Funds and the Funds' total operating expense ratios (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that advisory fees, before and after waivers, and actual total expenses of the Funds were all lower than their respective peer group medians. In addition, the Board noted that SCM had contractually agreed to waive management fees and reimburse expenses through December 31, 2009 to limit total annual operating expenses to agreed upon levels for each Fund. After reviewing the information regarding the SCM's costs, profitability and economies of scale, and after considering SCM's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Funds were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 29 THE SCHNEIDER FUNDS FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below.
NUMBER OF PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS DATE OF BIRTH HELD WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - -------------------- -------------- --------------- --------------------------------------- ------------- -------------------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services 19 Kalmar Pooled Investment 103 Bellevue Parkway organizations from 1997 to present. Trust; (registered Wilmington, DE 19809 investment company) WT DOB: 3/43 Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox Chase 19 None 103 Bellevue Parkway Cancer Center (biomedical research and Wilmington, DE 19809 medical care) (2000-2004). DOB: 12/35 Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital 19 None 103 Bellevue Parkway Partners, L.P. (an investment Wilmington, DE 19809 Director 1991 to present partnership) from DOB: 5/48 2000 to 2006. Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 19 MTI Holding Group, Inc. 103 Bellevue Parkway President, MTI Holding Group, Inc. (formerly known as Moyco Wilmington, DE 19809 (formerly known as Moyco Technologies, Technologies, Inc.) DOB: 3/34 Inc.) (manufacturer of precision coated and industrial abrasives).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS DATE OF BIRTH HELD WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - -------------------- -------------- --------------- --------------------------------------- ------------- -------------------------- DISINTERESTED DIRECTORS Robert A. Straniere Director 2006 to present Since 2009, Administrative Law Judge, 19 Reich and Tang Group 103 Bellevue Parkway New York City. Founding Partner, (asset management); The Wilmington, DE 19809 Straniere Law Firm (1980 to date); SPARX Asia Funds Group DOB: 3/41 Partner, Gotham Strategies (consulting (registered investment firm) (2005 to date); Partner, The company) Gotham Global Group (consulting firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Partner, Kanter-Davidoff (law firm) (2006 to present).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS DATE OF BIRTH HELD WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* HELD BY DIRECTOR - -------------------- -------------- --------------- --------------------------------------- ------------- -------------------------- INTERESTED DIRECTORS(2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice Chairman, 19 Comcast Corporation; 103 Bellevue Parkway Comcast Corporation (cable television AMDOCS Limited (service Wilmington, DE 19809 and communications). provider to telecommuni- DOB: 7/33 cations companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice President 19 Kensington Funds (regis- 103 Bellevue Parkway and prior thereto, Executive Vice tered investment Wilmington, DE 19809 President of Oppenheimer & Co., Inc., company) 6 Portfolios DOB: 4/38 formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. J. Richard Carnall Director 2002 to present Director of Haydon Bolts, Inc. (bolt 19 Cornerstone Bank 103 Bellevue Parkway manufacturer) and Parkway Real Estate Wilmington, DE 19809 Company (subsidiary of Haydon Bolts, DOB: 9/38 Inc.) since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 32 THE SCHNEIDER FUNDS FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN TERM OF OFFICE FUND COMPLEX OTHER NAME, ADDRESS, AND POSITION(S) AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY DIRECTORSHIPS DATE OF BIRTH HELD WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR HELD BY DIRECTOR - -------------------- -------------- --------------- --------------------------------------- ------------- -------------------------- OFFICERS Salvatore Faia, President and President June President, Vigilant Compliance Services N/A N/A Esquire, CPA Chief 2009 to present since 2004; Senior Legal Counsel, PNC Vigilant Compliance Compliance and Chief Global Investment Servicing (U.S.), Inc. Services 713 Chelsea Officer Compliance from 2002 to 2004; and Director of Road Mullica Hill, Officer 2004 to Energy Income Partnership since 2005. NJ 08062 present DOB: 12/62 Joel Weiss Treasurer June 2009 to Vice President and Managing Director, N/A N/A 103 Bellevue Parkway present PNC Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. since 1993 DOB: 1/63 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and N/A N/A 103 Bellevue Parkway Counsel, PNC Global Investment Wilmington, DE 19809 Servicing (U.S.), Inc. (financial DOB: 7/74 services company); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of PNC N/A N/A 103 Bellevue Parkway Treasurer Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. (financial services company) DOB: 10/60 Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath LLP N/A N/A One Logan Square Secretary (law firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 7/59
(1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. 33 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: - 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 - 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. 34 [THIS PAGE INTENTIONALLY LEFT BLANK.] THE SCHNEIDER FUNDS OF THE RBB FUND, INC. SCHNEIDER VALUE FUND SCHNEIDER SMALL CAP VALUE FUND ANNUAL REPORT AUGUST 31, 2009 (SCHNEIDER CAPITAL MANAGEMENT LOGO) 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. INVESTMENT ADVISER Schneider Capital Management 460 E. Swedesford Road Suite 1080 Wayne, PA 19087 ADMINISTRATOR PNC Global Investment Servicing (U.S.), Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.), 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 36 YEAR ENDED AUGUST 31, 2009 TO: SHAREHOLDERS OF SENBANC FUND Investors, generally, are linear, arithmetic thinkers. Non-linear logarithmic solutions are not intuitive. Investors have to be intuitive because of a complete absence of data available for the purposes of prediction. Future data points can only be derived by linear extension from the past. Human activity does not correlate with linear extension, and it is this conflict that creates employment for financial analysts, economists, and pundits. Failure of prediction on the macro level inevitably includes failure of prediction on the micro level. Senbanc's portfolio is dominated by large banks that were required to accept government equity funding calculated based on the government's (linear) expectations of the direction of the economy. This infusion of equity increased interest costs for these banks, while simultaneously lowering leverage, at a time when loan demand was falling. This is the exact reverse of the simplest prudent business plan a viable bank would entertain in such an environment. Hidden regulatory costs of this mandated capital have been measured as too great to bear, and many of the banks in receipt of TARP funding have raised or are in the process of raising private capital to free themselves from additional government intervention. Larger banks, having repaid the TARP funding and now reporting strong earnings, stand accused of benefitting from government largesse to make a profit. The business of banking is fundamental to our economy; there were excesses, reserves were built up to protect capital, the economy is recovering, and those institutions with strong capital, who invested in failing institutions as a business risk, are benefitting their shareholders. Senbanc's portfolio is dominated by well-capitalized banks that have absorbed losses with minimal erosion of that capital. Reported earnings have suffered, of course, as operating earnings have been shifted, pre-tax, to build reserves for loan losses. Capital-rich banks dominate Senbanc's portfolio because credit worthiness is a key component in the assessment of market risk. Strong capital allows these corporations to survive until market conditions improve -- those with the strength of earnings to build substantial excess capital use that same business acumen to enhance their business portfolios with the acquisition of distressed companies at the least favorable, but most opportune times. This is capitalism. Those large well-capitalized banks kept their capital strength intact as their stock prices plummeted in the face of declining confidence, protective dividend cuts and declining reported earnings. Banks that would normally be valued at 1.6x to 2.0x tangible book value are now selling at 0.8x that same tangible book value per share -- levels unseen for banks of this size and quality since October 1990. We expect consecutive quarterly earnings improvement for the banks we own, on average, with positive year over year comparisons likely, beginning in the third quarter. Damage to investor confidence has been severe and unprecedented in recent times, but we have the patience and the discipline to hold our positions as we believe improving fundamentals will repair the damage and instill the confidence of investors in the banking system. Collapsed inventories for manufactured goods of every kind indicate a faster than expected reversal. Housing stock -- new and existing homes -- is not being replenished at a rate necessary to prevent a housing squeeze by the end of 2010. Rising housing prices and continued strong money supply growth could mean early release of foreclosed housing and upward repricing of securitized mortgage portfolios. In this event excess reserves created to match reduced mortgage portfolio values would flow rapidly back into bank earnings. We believe that even with a rising tide of perception raising the majority of bank stock prices through the remainder of 2009 and throughout 2010, we do not expect valuations to fully reflect results for the higher-performing banks in our portfolio until 2011. Very truly yours, /s/ Alan F. Morel Alan F. Morel Hilliard Lyons Research Advisors Portfolio Manager Senbanc Fund 1 SENBANC FUND GROWTH OF $10,000 VS. THE NASDAQ BANK INDEX AND THE S&P 500(R) INDEX (PERFORMANCE GRAPH)
Date Load NAV NASDAQ S&P - ---------- ----- ----- ------- ------- 08/31/1999 9779 10000 10000 10000 09/30/1999 9509 9723 9716.32 9726 10/31/1999 9910 10133 10418.7 10341.7 11/30/1999 9759 9979 10232.5 10551.6 12/31/1999 9235 9444 9834.95 11173.1 01/31/2000 9175 9382 9242.26 10612.2 02/29/2000 8881 9082 8453.26 10411.6 03/31/2000 9003 9206 8963.36 11429.9 04/30/2000 8942 9144 8757.03 11085.8 05/31/2000 9225 9433 9148.05 10858.6 06/30/2000 8807 9006 8827.6 11126.8 07/31/2000 9073 9277 9189.49 10953.2 08/31/2000 9757 9977 9901.92 11633.4 09/30/2000 10023 10249 10557.4 11019.2 10/31/2000 10053 10280 10418.4 10972.9 11/30/2000 10186 10416 10489.1 10108.2 12/31/2000 10755 10998 11579.8 10157.8 01/31/2001 11387 11644 11692.4 10518.3 02/28/2001 11294 11549 11466.4 9559.07 03/31/2001 11263 11517 11309.5 8953.03 04/30/2001 11573 11834 11599.2 9648.68 05/31/2001 12288 12565 12122.4 9713.32 06/30/2001 12474 12755 12722 9477.29 07/31/2001 12702 12988 13146.1 9383.96 08/31/2001 12671 12956 12679.4 8796.52 09/30/2001 12205 12480 12498.3 8085.76 10/31/2001 12049 12321 12052.2 8240.2 11/30/2001 12339 12618 12568.7 8872.22 12/31/2001 12977 13270 13032.5 8950.3 01/31/2002 13168 13465 13346 8819.63 02/28/2002 13506 13811 13595.1 8649.41 03/31/2002 14396 14721 14356.9 8974.62 04/30/2002 15072 15412 14924.1 8430.49 05/31/2002 15196 15539 14839.4 8368.11 06/30/2002 15173 15516 14845.4 7772.3 07/31/2002 14374 14698 14248.5 7166.84 08/31/2002 14858 15193 14649.5 7214.14 09/30/2002 14272 14594 13649.8 6429.96 10/31/2002 14543 14871 13923.5 6995.8 11/30/2002 14971 15308 13983.7 7407.85 12/31/2002 15546 15896 13937.9 6972.27 01/31/2003 15830 16187 13884 6789.59 02/28/2003 16173 16538 13899.8 6687.75 03/31/2003 16149 16513 13693.1 6752.62 04/30/2003 17155 17542 14511.5 7309.04 05/31/2003 17569 17965 15540.7 7694.22 06/30/2003 17580 17977 15542.2 7792.71 07/31/2003 18409 18824 16164.1 7929.86 08/31/2003 18527 18945 16477.9 8084.49 09/30/2003 18633 19054 16484.3 7998.8 10/31/2003 19509 19949 17731.5 8451.53 11/30/2003 20029 20481 18259.2 8525.9 12/31/2003 20617 21082 18543.5 8972.66 01/31/2004 20805 21274 18776.7 9137.35 02/29/2004 21557 22043 19080.8 9264.35 03/31/2004 21619 22107 18972.3 9124.46 04/30/2004 20454 20916 18007 8981.21 05/31/2004 20918 21390 18482.6 9104.25 06/30/2004 20717 21185 18833.1 9281.35 07/31/2004 20642 21108 18470.5 8974.13 08/31/2004 21018 21492 19042.9 9010.03 09/30/2004 21406 21889 19366.5 9107.34 10/31/2004 21995 22491 20001.9 9246.68 11/30/2004 22458 22965 21039.3 9621.17 12/31/2004 23063 23583 21078 9948.29 01/31/2005 22468 22975 20201.2 9705.55 02/28/2005 22171 22671 19909 9909.37 03/31/2005 21576 22063 19552.3 9733.97 04/30/2005 21103 21579 18941.9 9549.03 05/31/2005 21481 21966 19607.5 9852.69 06/30/2005 21806 22298 20177.4 9866.48 07/31/2005 22495 23003 21150.2 10233.5 08/31/2005 21995 22491 20680.8 10140.4 09/30/2005 21373 21855 20180.4 10222.5 10/31/2005 21535 22021 20592.1 10051.8 11/30/2005 22279 22782 21094.5 10431.8 12/31/2005 22114 22613 20670.5 10434.9 01/31/2006 22628 23138 21137.6 10711.4 02/28/2006 23002 23521 21365.9 10740.3 03/31/2006 23086 23606 21889.4 10874.6 04/30/2006 23613 24145 21992.3 11020.3 05/31/2006 22780 23294 21664.6 10702.9 06/30/2006 22531 23039 21725.2 10717.9 07/31/2006 23016 23535 22014.2 10784.4 08/31/2006 22988 23507 22231.6 11041 09/30/2006 23418 23947 22403.3 11325.9 10/31/2006 23724 24259 22803.6 11695.1 11/30/2006 23502 24032 22984.9 11917.3 12/31/2006 24181 24726 23522 12084.2 01/31/2007 24311 24860 23200.4 12266.6 02/28/2007 23732 24267 22924.1 12026.2 03/31/2007 23486 24016 22603.1 12160.9 04/30/2007 23312 23838 22210.7 12699.6 05/31/2007 23529 24060 22646.4 13142.8 06/30/2007 22631 23142 21962.7 12924.7 07/31/2007 21227 21706 20251 12524 08/31/2007 21270 21750 21097.1 12711.9 09/30/2007 21126 21602 21192.9 13187.3 10/31/2007 19982 20433 20615.7 13397.1 11/30/2007 18823 19248 19840.7 12837 12/31/2007 17424 17817 18841 12747.9 01/31/2008 18446 18862 19383.2 11983.3 02/29/2008 16531 16904 17746.1 11593.9 03/31/2008 16174 16539 18183.2 11543.8 04/30/2008 16807 17186 18271.8 12106 05/31/2008 15266 15610 17807.3 12262.8 06/30/2008 12037 12309 14742.6 11229 07/31/2008 13076 13371 16197.8 11134.6 08/31/2008 13384 13686 16844.2 11295.6 09/30/2008 13303 13603 17567.2 10289.1 10/31/2008 11843 12110 16316.7 8561.02 11/30/2008 10010 10235 14916 7946.77 12/31/2008 9485 9699 15050.9 8031.32 01/31/2009 7707 7880 11785.4 7354.36 02/28/2009 6521 6668 10419.3 6571.27 03/31/2009 7486 7655 11295.1 7146.91 04/30/2009 8384 8573 11892.2 7830.94 05/31/2009 9045 9249 12118.5 8268.93 06/30/2009 8638 8833 11652.4 8285.3 07/31/2009 9333 9543 12653.6 8912 08/31/2009 9841 10063 12762.2 9233.72
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, ARE 1.79%. 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 RBB Fund, 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 NASDAQ-listed 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, 2009 (UNAUDITED)
% of Industry Classification Net Assets - ----------------------- ---------- Savings, Credit & Other Financial Institutions 92.9% State & National Banks 7.1 ----- Total Investments 100.0 Liabilities in Excess of Other Assets 0.0 ----- 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, 2009 to August 31, 2009, 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 3/01/09 8/31/09 During Period* ----------------- -------------- -------------- Actual .................................... $1,000.00 $1,474.60 $10.73 Hypothetical (5% return before expenses) .. 1,000.00 1,016.43 8.78
- ---------- * Expenses are equal to the Fund's annualized six-month expense ratio of 1.72%, 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 value is based on the actual six-month total return of 47.46%. 3 SENBANC FUND SCHEDULE OF INVESTMENTS AUGUST 31, 2009 COMMON STOCK -- 100.0%
SHARES DESCRIPTION VALUE - ------ ----------- ------------ SAVINGS, CREDIT & OTHER FINANCIAL INSTITUTIONS -- 92.9% 15,655 American River Bankshares ............................ $ 125,240 26,900 Associated Banc-Corp. ................................ 278,953 71,600 Bank Holdings (The)* ................................. 37,948 116,400 Bank of America Corp. ................................ 2,047,476 42,478 C&F Financial Corp. .................................. 762,905 87,500 Capital Bank Corp. ................................... 437,500 52,398 Centrue Financial Corp. .............................. 196,492 72,800 Citizens Republic Bancorp, Inc.* ..................... 54,600 45,400 CityBank ............................................. 139,832 35,700 Comerica, Inc. ....................................... 952,119 331,300 Corus Bankshares, Inc.* .............................. 89,451 4,630 Crescent Banking Co. ................................. 8,334 42,600 Financial Institutions, Inc. ......................... 515,460 40,500 First United Corp. ................................... 422,010 87,368 Hampton Roads Bankshares, Inc. ....................... 265,599 234,000 JPMorgan Chase & Co. ................................. 10,169,640 180,400 KeyCorp .............................................. 1,201,464 3,917 MainSource Financial Group, Inc. ..................... 25,225 172,111 National Bankshares, Inc. ............................ 4,373,341 186,199 Northrim BanCorp, Inc. ............................... 2,811,605 276,928 PAB Bankshares, Inc.* ................................ 949,863 15,000 Pacific Capital Bancorp N.A. ......................... 36,450 122,900 Pacific Premier Bancorp, Inc.* ....................... 513,722 25,200 PacWest Bancorp ...................................... 496,692 26,600 Peoples Bancorp of North Carolina, Inc. .............. 172,102 12,000 Peoples Financial Corp. .............................. 225,360 101,094 Premier Financial Bancorp ............................ 733,942 186,800 Regions Financial Corp. .............................. 1,094,648 11,700 Umpqua Holdings Corp. ................................ 120,627 5,472 United Security Bancshares, Inc. ..................... 129,577 ------------ 29,388,177 ------------
See Notes to Financial Statements. 4 SENBANC FUND SCHEDULE OF INVESTMENTS (CONCLUDED) AUGUST 31, 2009 COMMON STOCK (CONTINUED)
SHARES DESCRIPTION VALUE - ------ ----------- ------------ STATE & NATIONAL BANKS -- 7.1% 55,899 Bancorp, Inc. (The)* ................................. $369,492 40,700 Cascade Financial Corp. .............................. 68,783 11,801 Cowlitz Bancorp* ..................................... 18,174 59,900 East West Bancorp, Inc. .............................. 551,679 58,600 First Regional Bancorp* .............................. 64,460 68,200 Rainier Pacific Financial Group, Inc. ................ 93,434 67,897 Rurban Financial Corp. ............................... 549,966 50,400 Summit Financial Group, Inc. ......................... 277,200 26,100 Synovus Financial Corp. .............................. 96,570 100,499 Temecula Valley Bancorp, Inc. ........................ 1,005 118,032 Vineyard National Bancorp* ........................... 11,213 23,700 Yadkin Valley Financial Corp. ........................ 147,177 ------------ 2,249,153 ------------ TOTAL COMMON STOCK (COST $62,447,624) ............. 31,637,330 ------------ TOTAL INVESTMENTS -- 100.0% (COST $62,447,624) ................................ 31,637,330 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS -- 0.0% ..... (11,778) ------------ NET ASSETS -- 100.0% ............................. $ 31,625,552 ============
* Non-income producing security. The following is a summary of the inputs used, as of August 31, 2009, in valuing the Fund's investments carried at value (See Note 1 in Notes to Financial Statements):
LEVEL 2 LEVEL 3 TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT VALUE AT QUOTED OBSERVABLE UNOBSERVABLE AUGUST 31, 2009 PRICES INPUTS INPUTS --------------- ----------- ----------- ------------ Investments in Securities* $31,637,330 $31,637,330 $-- $-- =========== =========== === ===
* Please refer to the Schedule of Investments for industry and security type breakouts. See Notes to Financial Statements. 5 SENBANC FUND STATEMENT OF ASSETS & LIABILITIES AUGUST 31, 2009 ASSETS Investments, at value (Cost $62,447,624) ............ $ 31,637,330 Cash and cash equivalents ........................... 148,716 Receivables Capital shares sold .............................. 22,637 Investments sold ................................. 13,665 Dividends and interest ........................... 2,079 Prepaid expenses and other assets ................... 14,447 ------------ Total assets .................................. 31,838,874 ------------ LIABILITIES Payables Capital shares redeemed .......................... 75,660 Distribution fees ................................ 48,340 Professional fees ................................ 30,612 Investment advisory fees ......................... 16,045 Transfer agent fees .............................. 12,459 Administration and accounting fees ............... 11,062 Custodian fees ................................... 5,903 Directors' and officers' fees .................... 4,764 Other accrued expenses and liabilities .............. 8,477 ------------ Total liabilities ............................. 213,322 ------------ Net Assets ............................................. $ 31,625,552 ============ NET ASSETS CONSIST OF Par value ........................................... $ 5,441 Paid-in capital ..................................... 78,319,235 Undistributed net investment income ................. 145,047 Accumulated net realized loss from investments ...... (16,033,877) Net unrealized depreciation on investments .......... (30,810,294) ------------ Net Assets .......................................... $ 31,625,552 ============ Shares outstanding ($0.001 par value, 50,000,000 shares authorized) ............................... 5,441,019 ------------ Net asset value, offering and redemption price per share ............................................... $ 5.81 ============ Maximum offering price per share (NAV / 1 - 2.25%) ..... $ 5.94 ============
See Notes to Financial Statements. 6 SENBANC FUND STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2009 INVESTMENT INCOME Dividends ........................................... $ 1,013,169 Interest ............................................ 14,363 ------------ Total investment income .......................... 1,027,532 ------------ EXPENSES Advisory fees ....................................... 194,725 Distribution fees ................................... 168,374 Transfer agent fees ................................. 119,068 Administration and accounting fees .................. 107,134 Professional fees ................................... 36,924 Printing and shareholder reporting fees ............. 30,852 Custodian fees ...................................... 23,679 Directors' and officers' fees ....................... 22,113 Registration and filing fees ........................ 18,752 Insurance fees ...................................... 9,522 Other expenses ...................................... 2,898 ------------ Total expenses before waivers and reimbursements.. 734,041 Less: waivers and reimbursements ................. (170,616) ------------ Net expenses after waivers and reimbursements .... 563,425 ------------ Net investment income ............................... 464,107 ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS NET REALIZED GAIN/(LOSS) FROM: Investments ...................................... (9,750,866) NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) ON: Investments ...................................... (4,149,144) ------------ Net realized and unrealized loss from investments ... (13,900,010) ------------ NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $(13,435,903) ============
See Notes to Financial Statements. 7 SENBANC FUND STATEMENTS OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2009 AUGUST 31, 2008 --------------- --------------- INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: Net investment income .................................. $ 464,107 $ 2,056,071 Net realized loss from investments ..................... (9,750,866) (5,510,341) Net change in unrealized depreciation from investments.. (4,149,144) (31,531,724) ------------ ------------ Net decrease in net assets resulting from operations ...... (13,435,903) (34,985,994) ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income .................................. (1,363,146) (3,969,785) Net realized capital gains ............................. (9,202) (4,489,732) ------------ ------------ Net decrease in net assets from dividends and distributions to shareholders ........................................ (1,372,348) (8,459,517) ------------ ------------ CAPITAL TRANSACTIONS: Proceeds from shares sold .............................. 1,528,070 4,914,054 Reinvestment of distributions .......................... 1,273,840 7,947,115 Shares redeemed ........................................ (8,234,912) (28,667,954) ------------ ------------ Net decrease in net assets from capital transactions ...... (5,433,002) (15,806,785) ------------ ------------ Total decrease in net assets .............................. (20,241,253) (59,252,296) NET ASSETS: Beginning of year ...................................... 51,866,805 111,119,101 ------------ ------------ End of year ............................................ $ 31,625,552 $ 51,866,805 ============ ============ Undistributed net investment income, end of year .......... $ 145,047 $ 1,044,108 ============ ============ SHARE TRANSACTIONS: Shares sold ............................................ 273,976 491,710 Shares reinvested ...................................... 230,768 732,453 Shares redeemed ........................................ (1,353,080) (2,498,242) ------------ ------------ Total share transactions .................................. (848,336) (1,274,079) ============ ============
See Notes to Financial Statements. 8 SENBANC FUND FINANCIAL HIGHLIGHTS
FOR THE FOR THE FOR THE FOR THE FOR THE PERIOD FOR THE FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR JULY 1, 2005 FISCAL YEAR ENDED ENDED ENDED ENDED THROUGH ENDED AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, JUNE 30, 2009 2008 2007 2006 2005* 2005 ----------- ----------- ----------- ----------- -------------- ----------- PER SHARE OPERATING PERFORMANCE Net asset value: Beginning of period....................... $ 8.25 $ 14.69 $ 16.57 $ 16.27 $ 16.13 $ 16.54 ------- ------- -------- -------- -------- -------- Net investment income........................ 0.10 0.39 0.41 0.29 0.03 0.15 Net realized and unrealized gain/(loss) on investments............................ (2.30) (5.52) (1.56) 0.44 0.11 0.78 ------- ------- -------- -------- -------- -------- Total from investment operations............. (2.20) (5.13) (1.15) 0.73 0.14 0.93 ------- ------- -------- -------- -------- -------- Less distributions from: Net investment income........................ (0.24) (0.61) (0.31) (0.12) -- (0.10) Net realized gain on investments............. --**** (0.70) (0.42) (0.31) -- (1.24) ------- ------- -------- -------- -------- -------- Total distributions.......................... (0.24) (1.31) (0.73) (0.43) -- (1.34) ------- ------- -------- -------- -------- -------- Net asset value: End of period............................. $ 5.81 $ 8.25 $ 14.69 $ 16.57 $ 16.27 $ 16.13 ------- ------- -------- -------- -------- -------- Total investment return...................... (26.47)% (37.08)% (7.47)% 4.52% 0.87%** 5.25% (excludes sales charge) RATIOS/SUPPLEMENTAL DATA Net assets, end of period (000's omitted).... $31,626 $51,867 $111,119 $185,593 $230,250 $231,651 Ratio of expenses to average net assets, including waivers............. 1.73% 1.75% 1.53% 1.38% 1.43%*** 1.40% Ratio of expenses to average net assets, excluding waivers............. 2.26% 1.79% 1.53% 1.38% 1.43%*** 1.40% Ratio of net investment income/(loss) to average net assets, including waivers.. 1.43% 2.79% 1.84% 1.53% 0.93%*** 0.91% Ratio of net investment income/(loss) to average net assets, excluding waivers.. 0.90% 2.75% 1.84% 1.53% 0.93%*** 0.91% Portfolio turnover rate...................... 3.11% 11.01% 9.74% 7.47% 0.94% 19.90%
- ---------- * 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. **** Less than $0.005 per share. See Notes to Financial Statements. 9 SENBANC FUND NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2009 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 nineteen 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 78.973 billion shares are currently classified into one hundred and twenty-nine classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into ten 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 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 under the amortized cost method, which approximates fair value. 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. Effective September 1, 2008, the Fund adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards No. 157 ("SFAS 157"), Fair Value Measurements. This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. The three levels of the fair value hierarchy under SFAS 157 are described below: - Level 1 -- quoted prices in active markets for identical securities - Level 2 -- other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) 10 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 - Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments) In April 2009, FASB issued FASB Staff Position No. 157-4, ("FSP 157-4") Determining Fair Value when the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. FSP 157-4 is effective for fiscal years and interim periods ended after June 15, 2009. FSP 157-4 provides additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level of activity for the asset or liability have significantly decreased. FSP 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 requires entities to describe the inputs and valuation techniques used to measure fair value and changes in those techniques and related inputs during the period. FSP 157-4 expands the three-level hierarchy disclosure and the level three-roll forward disclosure for each major security type as described in paragraph 19 of Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. A summary of the inputs used to value the Fund's investments as of August 31, 2009 is included with the Fund's Schedule of 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 and those differences could be significant. 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 NAV 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 the ex-dividend 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. 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. 11 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 CASH AND CASH EQUIVALENTS -- The Fund considers liquid assets deposited with a bank, money market funds, and certain short term debt instruments with maturities of 3 months or less to be cash equivalents. These investments represent amounts held with financial institutions that are readily accessible to pay Fund expenses or purchase investments. Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value. 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. INVESTMENT ADVISER AND OTHER SERVICES Hilliard Lyons Research Advisors (the "Adviser"), a division of J.J.B. Hilliard, W.L. Lyons, LLC, 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. The Adviser has voluntarily agreed to limit the Fund's total operating expenses to 1.75%. This limit is calculated daily based on the Fund's average daily net assets. This limitation is effected in waivers of advisory fees and reimbursement of expenses exceeding the advisory fees as necessary. The Adviser may terminate the voluntary limit at any time upon notice to the Company's Board of Directors. PNC Global Investment Servicing (U.S.), Inc. ("PNC"), a member of The PNC Financial Services Group, Inc., serves as administrator for the Fund. For providing administrative and accounting services, PNC is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets subject to certain minimum monthly fees. Included in the administration and accounting fees shown on the Statement of Operations are fees for providing regulatory administration services to RBB. For providing those services, PNC is entitled to receive compensation as agreed to by the Company and PNC. This fee is allocated to the Fund in proportion to its net assets of the Company. In addition, PNC serves as the Fund's transfer and dividend disbursing agent. For providing transfer agent services, PNC is entitled to receive a monthly fee, equal to an annual percentage rate of the Fund's average daily net assets subject to certain minimum monthly fees. PFPC Trust Company ("PFPC Trust") is a member of The PNC Financial Services Group, Inc. and provides certain custodial services to the Fund. PFPC Trust is entitled to receive a monthly fee equal to an annual percentage rate of the Fund's average daily net assets and is subject to certain minimum monthly fees. PFPC Distributors, Inc. ("PFPC Distributors"), an affiliate of PNC, provides certain administrative services to the Fund. The Board of Directors has adopted a distribution plan pursuant to Rule 12b-1 under the 1940 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, 2009, PFPC Distributors earned $3,481 in underwriting concessions. Commissions on sales of $28,676 were paid by the Adviser for the year ended August 31, 2009. 12 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2009 3. DIRECTOR COMPENSATION The Directors of the Company receive an annual retainer, meeting fees and out of pocket expenses for meetings attended. The aggregate remuneration paid to the Directors by the Company during the fiscal year ended August 31, 2009 was $444,181. Certain employees of PNC are Officers of the Company. They are not compensated by the Fund or the Company. 4. INVESTMENT IN SECURITIES For the year ended August 31, 2009, aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
Investment Securities Purchases Sales - ---------- -------- $5,365,773 $967,452
5. FEDERAL INCOME TAX INFORMATION FASB Interpretation No. 48, ("FIN 48") Accounting for Uncertainty in Income Taxes, sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years August 31, 2006-2009) and has concluded that no provision for income tax is required in the Fund's financial statements. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. However, management's conclusions regarding the adoption of FIN 48 may be subject to review and adjustment at a later date based on factors including, but not limited to, further implementation of guidance from the FASB, new tax laws, regulations and administrative interpretations (including court decisions). At August 31, 2009, federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Fund were as follows: Cost of investments for tax purposes ............... $ 62,447,624 ------------ Gross tax unrealized appreciation .................. $ 2,116,765 Gross tax unrealized depreciation .................. (32,927,059) ------------ Net tax unrealized depreciation on investments ..... $(30,810,294) ============
Distributions to shareholders from net investment income and realized gains are determined in accordance with federal income tax regulations, which may differ from net investment income and realized gains recognized for financial reporting purposes. Accordingly, the character of distributions and composition of net assets for tax purposes may differ from those reflected in the accompanying financial statements. To the extent these differences are permanent, such amounts are reclassified within the capital accounts based on the tax treatment; temporary differences do not require such reclassification. 13 SENBANC FUND NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2009 The following permanent differences as of August 31, 2009, attributable to the redesignation of dividends paid, were reclassified to the following accounts:
UNDISTRIBUTED ACCUMULATED NET INVESTMENT NET REALIZED PAID-IN INCOME/(LOSS) GAIN/(LOSS) CAPITAL - -------------- ------------ -------- $(22) $22 $--
As of August 31, 2009, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income ...................... $145,047 Undistributed long-term capital gain ............... - -------- Total distributable earnings ....................... $145,047
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 income tax purposes. The tax character of dividends and distributions paid were as follows:
For the Years Ended August 31, August 31, 2009 2008 ---------- ---------- Distributions paid from: Ordinary income .................. $1,363,168 $4,414,263 Long-term capital gains .......... 9,180 4,045,254 ---------- ---------- $1,372,348 $8,459,517 ========== ==========
Dividends paid from short-term capital gains are treated as ordinary income dividends for federal income tax purposes. For federal income tax purposes, capital loss carryforwards are available to offset future capital gains. As of August 31, 2009, the Fund had a capital loss carryforward of $14,466,794 that will expire on August 31, 2017. 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, 2009, the Fund deferred post-October capital losses of $1,567,083. 6. INDUSTRY CONCENTRATION RISK Since the Fund's investments are concentrated in the banking industry, as well as certain single large portfolio holdings, 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 or single security; 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 or smaller concentrations in single issuers. 7. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Fund through October 26, 2009, the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements. 14 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 the Senbanc Fund, one of the portfolios constituting The RBB Fund, Inc. (the "Fund"), as of August 31, 2009, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the 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. 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, 2009, 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 26, 2009 15 SENBANC FUND SUPPLEMENTAL INFORMATION AUGUST 31, 2009 (UNAUDITED) 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, 2009, the following dividend and distribution amounts were paid by the Fund:
ORDINARY INCOME - ----------------------- Net Investment Short-Term Long-Term Income Gains Gains - ---------- ---------- --------- $1,363,168 $-- $9,180
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 2008. Because the Fund's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2009. 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 2010. 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. 16 SENBANC FUND OTHER INFORMATION AUGUST 31, 2009 (UNAUDITED) 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 Senbanc Fund at (877) 264-5346, 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 (202) 551-8090. APPROVAL OF INVESTMENT, ADVISORY AGREEMENT As required by the 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 agreement between the Adviser and the Company (the "Advisory Agreement") on behalf of the Senbanc Fund at a meeting of the Board held on May 7, 2009. At this meeting, the Board, including all of the Independent Directors, 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 Board 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. Among other things, the Board 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 advisory fee arrangement 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. As part of its review, the Board considered the nature, extent and quality of the services provided by the Adviser. The Board concluded that the Adviser had substantial resources to provide services to the Fund and that the Adviser's services had been acceptable. 17 SENBANC FUND OTHER INFORMATION AUGUST 31, 2009 (UNAUDITED) The Board also considered the investment performance of the Fund and the Adviser. Information on the Fund's investment performance was provided for one, three, and five year periods. The Board considered the Fund's investment performance in light of its investment objective and investment strategies. The Board concluded that the investment performance of the Fund as compared to its benchmark and Lipper peer group was acceptable. In reaching this conclusion, the Board also considered the recent extraordinary market conditions and the Fund's policy to hold 80% of its assets in financial and bank stocks. The Board also considered the advisory fee rate payable by the Fund under the Advisory Agreement. In this regard, information on the fees paid by the Fund and the Fund's total operating expense ratio (before and after fee waivers and expense reimbursements) were compared to similar information for mutual funds advised by other, unaffiliated investment advisory firms. The Board noted that the advisory fees of the Fund, before and after waivers, were the lowest in its peer group. In addition, the Board noted that the Adviser was voluntarily waiving management fees and reimbursing expenses to limit total annual operating expenses to 1.75% of the Fund's average daily net assets and that the Adviser expects to continue these fee waivers and expense reimbursements. After reviewing the information regarding the Adviser's costs, profitability and economies of scale, and after considering the Adviser's services, the Board, including all of the Independent Directors, concluded that the investment advisory fees paid by the Fund were fair and reasonable and that the Advisory Agreement should be approved and continued for an additional one-year period ending August 16, 2010. 18 FUND MANAGEMENT (UNAUDITED) The business and affairs of the Company are managed under the direction of the Company's Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below. The statement of additional information ("SAI") includes additional information about the Directors and is available without charge, upon request, by calling (800) 444-1854.
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR - -------------------- ----------------- --------------- ----------------------------------------- ------------- ---------------- DISINTERESTED DIRECTORS Nicholas A. Giordano Director 2006 to present Consultant, financial services organiza- 19 Kalmar Pooled 103 Bellevue Parkway tions from 1997 to present. Investment Wilmington, DE 19809 Trust; (regis- DOB: 03/43 tered investment company) WT Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corpor- ation (body worn device company) Francis J. McKay Director 1988 to present Retired; Vice President, Fox Chase Cancer 19 None 103 Bellevue Parkway Center (biomedical research and medical Wilmington, DE 19809 care) (2000-2004). DOB: 12/35 Arnold M. Reichman Chairman 2005 to present Director, Gabelli Group Capital Partners, 19 None 103 Bellevue Parkway L.P. (an investment partnership) from Wilmington, DE 19809 Director 1991 to present 2000 to 2006. DOB: 05/48 Marvin E. Sternberg Director 1991 to present Since 1974, Chairman, Director and 19 MTI Holding 103 Bellevue Parkway President, MTI Holding Group, Inc. Group, Inc. Wilmington, DE 19809 (formerly known as Moyco Technologies, (formerly known DOB: 03/34 Inc.) (manufacturer of precision coated as Moyco and industrial abrasives). Technologies, Inc.)
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR - -------------------- ----------------- --------------- ----------------------------------------- ------------- ---------------- DISINTERESTED DIRECTORS Robert A. Straniere Director 2006 to present Since 2009, Administrative Law Judge, 19 Reich and Tang 103 Bellevue Parkway New York City. Founding Partner, Group (asset Wilmington, DE 19809 Straniere Law Firm (1980 to date); management); DOB: 03/41 Partner, Gotham Strategies (consulting The SPARX Asia firm) (2005 to date); Partner, The Gotham Funds Group Global Group (consulting firm) (2005 to (registered date); President, The New York City Hot investment Dog Company (2005 to date); Partner, company) Kanter-Davidoff (law firm) (2006 to present).
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 FUND MANAGEMENT (CONTINUED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR* DIRECTOR - -------------------- ----------------- --------------- ----------------------------------------- ------------- ---------------- INTERESTED DIRECTORS(2) Julian A. Brodsky Director 1988 to present Since 1969, Director and Vice Chairman, 19 Comcast 103 Bellevue Parkway Comcast Corporation (cable television and Corporation; Wilmington, DE 19809 communications). AMDOCS Limited DOB: 07/33 (service provider to telecommuni- cations companies) Robert Sablowsky Director 1991 to present Since July 2002, Senior Vice President 19 Kensington 103 Bellevue Parkway and prior thereto, Executive Vice Funds (regis- Wilmington, DE 19809 President of Oppenheimer & Co., Inc., tered invest- DOB: 04/38 formerly Fahnestock & Co., Inc. (a ment company) registered broker-dealer). Since November 6 Portfolios 2004, Director of Kensington Funds. J. Richard Carnall Director 2002 to present Director of Haydon Bolts, Inc. (bolt 19 Cornerstone 103 Bellevue Parkway manufacturer) and Parkway Real Estate Bank Wilmington, DE 19809 Company (subsidiary of Haydon Bolts, DOB: 09/38 Inc.) since 1984; and Director of Cornerstone Bank since March 2004.
* Each Director oversees nineteen portfolios of the Company that are currently offered for sale. (1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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. Brodsky, Carnall and Sablowsky are considered "interested persons" of the Company as that term is defined in the 1940 Act and are referred to as "Interested Directors." Mr. Brodsky is an "Interested Director" of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Company's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an "Interested Director" of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Company's Money Market Portfolio, BlackRock Institutional Management Corporation, and the Company's principal underwriter, PFPC Distributors, Inc., are indirect subsidiaries of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an "Interested Director" of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. 21 FUND MANAGEMENT (CONCLUDED) (UNAUDITED)
NUMBER OF PORTFOLIOS IN OTHER TERM OF OFFICE FUND COMPLEX DIRECTORSHIPS NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND DATE OF BIRTH WITH FUND TIME SERVED (1) DURING PAST 5 YEARS DIRECTOR DIRECTOR - -------------------- ----------------- --------------- ----------------------------------------- ------------- ---------------- OFFICERS Salvatore Faia, President and President June President, Vigilant Compliance Services N/A N/A Esquire, CPA Chief 2009 to present since 2004; Senior Legal Counsel, PNC Vigilant Compliance Compliance and Chief Global Investment Servicing (U.S.), Inc. Services Officer Compliance from 2002 to 2004; and Director of Energy 713 Chelsea Road Officer 2004 to Income Partnership since 2005. Mullica Hill, NJ present 08062 DOB: 12/62 Joel Weiss Treasurer June 2009 to Vice President and Managing Director, N/A N/A 103 Bellevue Parkway present PNC Global Investment Servicing (U.S.) Wilmington, DE 19809 Inc. since 1993 DOB: 01/63 Jennifer Rogers Secretary 2007 to present Since 2005, Vice President and Counsel, N/A N/A 103 Bellevue Parkway PNC Global Investment Servicing (U.S.), Wilmington, DE 19809 Inc. (financial services company); DOB: 07/74 Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. James G. Shaw Assistant 2005 to present Since 1995, Vice President of PNC Global N/A N/A 103 Bellevue Parkway Treasurer Investment Servicing (U.S.) Inc. Wilmington, DE 19809 (financial services company) DOB: 10/60 Michael P. Malloy Assistant 1999 to present Partner, Drinker Biddle & Reath LLP (law N/A N/A One Logan Square Secretary firm) since 1993 18th and Cherry Streets Philadelphia, PA 19103 DOB: 07/59
(1) Subject to the Company's Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, 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 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: - 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 - Information about your transactions with the Fund. We restrict access to your personal 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. 23 INVESTMENT ADVISER Hilliard Lyons Research Advisors 500 West Jefferson Street Louisville, KY 40202 ADMINISTRATOR PNC Global Investment Servicing (U.S.), Inc. 301 Bellevue Parkway Wilmington, DE 19809 TRANSFER AGENT PNC Global Investment Servicing (U.S.), Inc. 101 Sabin Street Pawtucket, RI 02860 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 19103-3984 LEGAL COUNSEL Drinker Biddle & Reath LLP One Logan Square 18th and Cherry Streets Philadelphia, PA 19103-6996 (GRAPHIC) (SENBANC FUND LOGO) SENBANC OF THE RBB FUND, INC. ANNUAL REPORT AUGUST 31, 2009 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. 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. Nicholas A. Giordano, Francis J. McKay, and Marvin E. Sternberg are "independent." Julian A. Brodsky is not "independent" because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the registrant's Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase & Co. 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 $451,080 for 2008 and $434,480 for 2009. 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 $0 for 2008 and $0 for 2009. 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 $10,200 for 2008 and $12,000 for 2009. These fees were for the preparation and review of excise tax returns. 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 $0 for 2008 and $0 for 2009. (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 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 $52,890 for 2008 and $0 for 2009. (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. INVESTMENTS. (a) 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. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not 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/ Salvatore Faia --------------------------------- Salvatore Faia, President (principal executive officer) Date November 4, 2009 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/ Salvatore Faia --------------------------------- Salvatore Faia, President (principal executive officer) Date November 4, 2009 By (Signature and Title)* /s/ Joel Weiss --------------------------------- Joel Weiss, Treasurer (principal financial officer) Date October 30, 2009 * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 cert302.txt 302 CERT CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Salvatore Faia, 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 4, 2009 /s/ Salvatore Faia ------------------------------------ Salvatore Faia, President (principal executive officer) CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT I, Joel Weiss, 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: October 30, 2009 /s/ Joel Weiss ------------------------------------ Joel Weiss, Treasurer (principal financial officer) EX-99.906CERT 3 cert906.txt 906 CERT CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT I, Salvatore Faia, President 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, 2009 (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 4, 2009 /s/ Salvatore Faia ------------------------------------ Salvatore Faia, President (principal executive officer) I, Joel Weiss, 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, 2009 (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: October 30, 2009 /s/ Joel Weiss ------------------------------------ Joel Weiss, Treasurer (principal financial officer) THESE CERTIFICATIONS 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. Section 1350 AND ARE NOT BEING FILED AS PART OF THE REPORT OR AS A SEPARATE DISCLOSURE DOCUMENT. EX-99.CODE ETH 4 code.txt CODE OF ETHICS 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: - honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; - 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*; - compliance with applicable laws and governmental rules and regulations; - the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and - 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 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 - ---------- * 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. 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: - 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; - 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; - 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 - 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: - service as a director on the board of any public or private company; - the receipt of any non-nominal gifts in excess of $250.00; - 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; - 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; - 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 - 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: - 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; - 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; - 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 - 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** - 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. - The Company's Audit Committee may consult Company counsel in order to effectively discharge its responsibilities. - ---------- ** The Audit Committee may delegate its responsibilities and investigation procedures to the Chairman of the Audit Committee. 2. INVESTIGATION PROCEDURES** The Company will follow these procedures in investigating and enforcing the Code: - The Audit Committee will take all appropriate action to investigate any potential violations of the Code; - If, after such investigation, the Audit Committee believes that no violation has occurred, the Audit Committee is not required to take any further action; - Any matter that the Audit Committee believes is a violation of this Code will be reported to the Board; and - 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 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 - ---------- ** The Audit Committee may delegate its responsibilities and investigation procedures to the Chairman of the Audit Committee. (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 Perimeter Capital Management, LLC 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 -----END PRIVACY-ENHANCED MESSAGE-----