N-30D 1 g01-1322.txt RBB--MORGAN KEEGAN MOR 2001 ANNUAL REPORT [GRAPHIC OMITTED] MORGAN KEEGAN MOR ACCOUNT ANNUAL REPORT FOR BEDFORD SHARES AUGUST 31, 2001 MONEY MARKET PORTFOLIO MUNICIPAL MONEY MARKET PORTFOLIO GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO THE BEDFORD FAMILY THE RBB FUND, INC. PRIVACY NOTICE The BEDFORD FAMILY of The RBB Fund, Inc. (the "Fund") is committed to protecting the confidentiality and security of your private investment records and personal information. Our policies and procedures are designed to safeguard your information and to permit only appropriate and authorized access to and use of this information. In order to carry out the functions necessary to service your investment account, our service providers collect certain nonpublic personal information from you from the following sources: o Information we receive from you over the telephone, on applications, e-mails or other forms (e.g., your name, social security number and address); and o Information about your transactions with the Fund We restrict access to your personal and account information to those service providers and their employees who need to know that information to service your account. The Fund may also share all of the information (as described above) that we collect with companies that perform marketing services on our behalf or with other financial institutions with whom we have joint marketing agreements who may suggest additional Fund services or other investment products which may be of interest to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your nonpublic personal information. You can be assured that the Fund considers your data to be private and confidential, and we will not disclose any nonpublic personal information about you to any unaffiliated third parties, except as permitted by law. If you decide to close your account(s) or become an inactive customer, we will adhere to the privacy policies and practices as described in this notice. If you have any questions or comments about our privacy practices, please call us at (800) 290-2358. April 2001 THE BEDFORD FAMILY THE RBB FUND, INC. ANNUAL INVESTMENT ADVISER'S REPORT The U.S. economy slowed dramatically during the twelve months ended August 2001, as the excess capacity of prior years was pared down. Inventories and business spending on capital equipment fell sharply. The nation's gross domestic product in the second quarter of 2001 was revised down to 0.3% versus a robust 5.6% in the same quarter a year earlier. The strength in the economy remained the consumer, whose continued willingness to spend we believe kept the overall economy from joining the manufacturing sector in the midst of a recession. However, the jump in the unemployment rate to 4.9% in August was seen as a very real threat to the continuation of consumer confidence and spending. Inflation remained tame during the year, providing a positive background for the markets and a boost to investor sentiment, as both consumer and producer prices trended lower. The GDP price deflator, a measure of the rate of inflation, rose an annualized 2.1% in the second quarter versus 3.3% in the first quarter. The encouraging news on the inflation front was a key to Federal Reserve monetary policy. On seven separate occasions through August, the Fed reduced the federal funds rate from 6.5% to 3.5%, in an aggressive series of rate cuts aimed at rekindling the economy. As money market yields declined, the RBB Money Market Portfolio and the RBB Government Money Market Portfolio extended their average weighted maturities to the 60-day range. In addition, yield spreads between various taxable money market securities narrowed during the last six months and with only a few basis points between commercial paper and government securities, the Money Market and Government Obligations Portfolios frequently invested in agency discount notes to increase credit quality while maintaining yields. On August 31, 2001, assets in the RBB Money Market and RBB Government Portfolios were $1.18 billion and $127.8 million, respectively. Yields on municipal money market securities also declined this year, dictated largely by the Fed's accommodative monetary policy. One-year notes fell from about 3.20% in January to about 2.50% in August. At the same time, yields on variable rate demand notes continued to trade in a range of approximately 2-4%, based on changing supply and demand factors. The average weighted maturity of RBB Municipal Money Market Portfolio was lengthened from the 30-40 day range early in the year to the 50-60 day range as rates fell. The issuance of new municipal notes in July provided the Portfolio with ample opportunities to extend and diversify. On August 31, the Municipal Money Market Portfolio had assets of $155.3 million. The September 11th terrorist attacks on the U.S. were an unprecendented shock to our nation and the financial markets. We are very fortunate to be able to report that all our employees are safe, that our systems have remained fully operational and that the custody and safekeeping of the Fund's assets have not been affected. BlackRock Institutional Management Corporation (Please dial toll-free 800-430-9618 for questions regarding your account or contact your broker.) 2 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of The RBB Fund, Inc.: In our opinion, the accompanying statements of net assets 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 Money Market, Municipal Money Market and Government Obligations Money Market Portfolios, separately managed portfolios of The RBB Fund, Inc. (the "Fund") at August 31, 2001, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the 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 auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2001 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 15, 2001 3 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2001 PAR (000) VALUE --------- -------------- CERTIFICATES OF DEPOSIT--14.7% DOMESTIC CERTIFICATES OF DEPOSIT--6.4% Household Bank FSB 3.550% 10/12/01 ............................. $25,000 $ 24,999,434 Washington Mutual Bank 3.720% 10/18/01 ............................. 50,000 49,998,706 -------------- 74,998,140 -------------- YANKEE DOLLAR CERTIFICATES OF DEPOSIT--8.3% Canadian Imperial Bank of Commerce 4.610% 09/28/01 ............................. 11,000 11,000,000 4.270% 04/23/02 ............................. 10,000 9,999,968 4.295% 04/23/02 ............................. 10,000 9,999,377 Royal Bank of Canada 4.028% 07/15/02 ............................. 13,000 12,999,726 3.805% 07/26/02 ............................. 6,000 5,998,426 Svenska Handelsbanken 5.000% 02/07/02 ............................. 30,000 30,060,467 4.040% 07/12/02 ............................. 12,000 12,001,003 Toronto-Dominion Bank (The) 4.045% 07/30/02 ............................. 5,000 4,995,347 -------------- 97,054,314 -------------- TOTAL CERTIFICATES OF DEPOSIT (Cost $172,052,454) ..................... 172,052,454 -------------- COMMERCIAL PAPER--48.0% ABRASIVE ASBESTOS & MISC. NONMETALLIC MINERAL PRODUCTS--2.1% Compagnie de Saint-Gobain SA 3.670% 10/12/01 ............................. 25,000 24,895,507 -------------- ASSET BACKED SECURITIES--21.4% Amstel Funding Corp. 3.730% 10/03/01 ............................. 15,000 14,950,267 Barton Capital Corp. 3.580% 10/04/01 ............................. 7,725 7,699,649 Dakota Notes Program 3.580% 10/05/01 ............................. 40,000 39,864,755 Edison Asset Securitization LLC. 3.470% 10/22/01 ............................. 45,000 44,778,787 Fairway Funding Ltd. 3.560% 09/14/01 ............................. 33,522 33,478,905 3.750% 09/14/01 ............................. 25,000 24,966,146 Four Winds Funding Corp. 3.720% 09/04/01 ............................. 55,000 54,982,950 PAR (000) VALUE --------- -------------- ASSET BACKED SECURITIES--(CONTINUED) Moriarty Ltd. 4.480% 09/27/01 ............................. $11,000 $ 10,964,409 Pennine Funding LLC. 3.570% 10/04/01 ............................. 20,078 20,012,295 -------------- 251,698,163 -------------- BANKS--8.0% AB Spintab (A-1, P-1) 3.660% 10/12/01 ............................. 25,000 24,895,792 Depfa-Bank Europe PLC. 3.600% 12/17/01 ............................. 25,000 24,732,500 4.550% 09/26/01 ............................. 15,000 14,952,604 UBS Finance (Delaware) Inc. 4.420% 10/09/01 ............................. 15,000 14,930,017 4.330% 10/11/01 ............................. 15,000 14,927,833 -------------- 94,438,746 -------------- FOOD & KINDRED PRODUCTS--2.9% Diageo Capital PLC. 3.550% 01/17/02 ............................. 34,000 33,537,317 -------------- HOSPITAL & MEDICAL SERVICE PLANS--2.3% United Healthcare Corp. 3.780% 09/04/01 ............................. 26,500 26,491,652 -------------- PERSONAL CREDIT INSTITUTIONS--0.8% Ford Motor Credit Company 3.560% 10/12/01 ............................. 10,000 9,959,455 -------------- PHARMACEUTICAL PREPARATIONS--4.2% American Home Products Corp. 3.670% 10/12/01 ............................. 25,000 24,895,507 3.630% 10/26/01 ............................. 25,000 24,861,354 -------------- 49,756,861 -------------- SHORT-TERM BUSINESS CREDIT INSTITUTIONS--2.1% CIT Group, Inc. 3.580% 10/24/01 ............................. 25,000 24,868,236 -------------- TELEPHONE COMMUNICATIONS--4.2% AT&T Corp. 3.700% 09/24/01 ............................. 50,000 49,881,805 -------------- TOTAL COMMERCIAL PAPER (Cost $565,527,742) ..................... 565,527,742 -------------- See Accompanying Notes to Financial Statements. 4 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONTINUED) AUGUST 31, 2001 PAR (000) VALUE --------- -------------- U.S. GOVERNMENT AGENCY OBLIGATIONS--6.5% FNMA 4.310% 11/08/01 ............................. $11,688 $ 11,592,847 4.270% 12/19/01 ............................. 16,500 16,286,678 4.510% 02/08/02 ............................. 23,000 22,538,978 4.150% 02/08/02 ............................. 10,000 9,815,556 4.210% 03/08/02 ............................. 5,000 4,890,072 6.750% 08/15/02 ............................. 10,000 10,269,789 -------------- TOTAL AGENCY OBLIGATIONS (Cost $75,393,920) ...................... 75,393,920 -------------- MUNICIPAL BONDS--4.2% FLORIDA--0.1% Coral Springs VRDN IDR (Alliance Corp.) (Suntrust Bank, Central FL LOC) Series 1995+ 3.650% 09/05/01 ............................. 1,700 1,700,000 -------------- GEORGIA--0.7% De Kalb County Development Authority VRDN Series 1995 B (Emory University Project)+ 3.600% 09/07/01 ............................. 8,880 8,880,000 -------------- ILLINOIS--0.4% Illinois Health Facilities Authority VRDN (The Streeterville Corp. Project) Series 1993-B (Bank One N.A. LOC)+ 3.650% 09/05/01 ............................. 4,400 4,400,000 -------------- INDIANA--0.1% Bremen IDR Bond VRDN Series 1996 B (Society National Bank, Cleveland LOC)+ 3.650% 09/06/01 ............................. 1,040 1,040,000 -------------- KENTUCKY--0.4% Boone County Taxable IDR Refunding Bonds VRDN (Square D Company Project) Series 1994-B (Societe Generale LOC)+ 3.650% 09/05/01 ............................. 4,200 4,200,000 -------------- PAR (000) VALUE --------- -------------- MISSISSIPPI--0.8% Mississippi Business Finance Corp., IDR Bond VRDN (Choctaw Foods Inc. Project) Series 1995 (Rabobank Nederland LOC)+ 3.650% 09/07/01 ............................. $ 4,400 $ 4,400,000 Mississippi Business Finance Corp., IDR Bond VRDN (Dana Lighting Inc.) (Suntrust Bank, Central FL LOC) Series 1995+ 3.650% 09/07/01 ............................. 5,100 5,100,000 -------------- 9,500,000 -------------- NORTH CAROLINA--0.4% City of Asheville VRDN (Wachovia Bank LOC)+ 3.550% 09/05/01 ............................. 5,000 5,000,000 -------------- TEXAS--1.3% South Central Texas Industrial Development Corp. Taxable IDR Revenue Bond VRDN (Rohr Industries Project) Series 1990 (NBD Bank N.A. LOC)+ 3.650% 09/05/01 ............................. 14,800 14,800,000 -------------- TOTAL MUNICIPAL BONDS (Cost $49,520,000) ...................... 49,520,000 -------------- VARIABLE RATE OBLIGATIONS--19.1% BANKS--7.5% Citigroup Inc.++ 3.643% 09/12/01 ............................. 41,000 41,000,000 First Union National Bank++ 3.690% 09/10/01 ............................. 15,000 15,000,000 3.600% 09/25/01 ............................. 20,000 20,000,000 Natexis Banque Populares++ 3.530% 09/28/01 ............................. 12,000 11,997,297 -------------- 87,997,297 -------------- See Accompanying Notes to Financial Statements. 5 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONCLUDED) AUGUST 31, 2001 PAR (000) VALUE --------- -------------- LIFE INSURANCE--4.4% Prudential Funding Corporation++ 3.660% 11/16/01 ............................. $11,500 $ 11,506,295 Transamerica Life Insurance & Annuity Co.++ 4.140% 09/04/01 ............................. 40,000 40,000,000 -------------- 51,506,295 -------------- SECURITY BROKERS & DEALERS--7.2% Lehman Brothers Holdings, Inc.++ 3.570% 09/04/01 ............................. 30,000 30,000,000 Merrill Lynch & Co. Inc.++ 3.569% 11/14/01 ............................. 40,000 40,000,746 Salomon Smith Barney Holdings Inc.++ 3.888% 10/08/01 ............................. 15,000 15,001,519 -------------- 85,002,265 -------------- TOTAL VARIABLE RATE OBLIGATIONS (Cost $224,505,857) ..................... 224,505,857 -------------- MEDIUM TERM NOTES--5.5% General Electric Capital Corp. 3.815% 07/30/02 ............................. 10,000 10,000,000 Goldman Sachs Group Inc. 3.910% 09/10/01 ............................. 15,000 15,000,000 3.740% 04/30/02 ............................. 24,000 24,000,000 Merrill Lynch & Co. Inc. 4.300% 04/24/02 ............................. 7,000 7,000,000 Textron Inc. 6.750% 09/15/02 ............................. 8,400 8,655,577 -------------- TOTAL MEDIUM TERM NOTES (Cost $64,655,577) 64,655,577 -------------- PAR (000) VALUE --------- -------------- REPURCHASE AGREEMENTS--1.8% Morgan Stanley & Co. Inc. (Agreement dated 08/31/01 to be repurchased at $21,508,791 collateralized by $112,201 Federal Home Loan Mortgage Corporation Collateralized Mortgage Obligation at a rate of 8.00% due 03/01/30, and $22,037,971 Federal National Mortgage Corporation Strips due 12/15/27. Market Value of collateral is $22,150,172.) 3.680% 09/04/01 ............................. $21,500 $ 21,500,000 -------------- TOTAL REPURCHASE AGREEMENTS (Cost $21,500,000) ...................... 21,500,000 -------------- TOTAL INVESTMENTS AT VALUE -- 99.8% (Cost $1,173,155,550*) ...................... 1,173,155,550 -------------- OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.2% ...................... 2,749,793 -------------- NET ASSETS (Applicable to 676,961,621 Bedford shares, 194,539 Cash Preservation shares, 201,632,735 Sansom Street shares, 297,112,771 Principal Shares, and 800 other shares) -- 100.0% $1,175,905,343 ============== NET ASSET VALUE, Offering and Redemption Price Per Share ($1,175,905,343 / 1,175,902,466) $1.00 ===== * Also cost for Federal income tax purposes. + Variable Rate Demand Note -- The interest rate shown is the rate as of August 31, 2001 and the maturity date shown is the longer of the next interest rate readjustment date or the date the principal amount shown can be recovered through demand. ++ Variable Rate Obligations -- The interest rate shown is the rate as of August 31, 2001 and the maturity date shown is the next interest rate readjustment date or the maturity date. INVESTMENT ABBREVIATIONS VRDN ............................. Variable Rate Demand Note LOC ....................................... Letter of Credit IDR ......................... Industrial Development Revenue See Accompanying Notes to Financial Statements. 6 THE BEDFORD FAMILY THE RBB FUND, INC. MUNICIPAL MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2001 PAR (000) VALUE --------- -------------- MUNICIPAL BONDS--99.3% ALABAMA--5.4% Columbia IDA PCR RB Series 1998 DN (Southtrust Bank LOC)+ 2.700% 09/04/01 ............................. $ 3,500 $ 3,500,000 Homewood Educational-Samford University Educational Facilities RB DN Series 2000+ 2.550% 09/04/01 ............................. 950 950,000 Jefferson County GO Warrants 2001 B DN (Morgan Guaranty LOC)+ 2.550% 09/04/01 ............................. 400 400,000 Steele IDA RB Series 2001 AMT DN (Southtrust Bank LOC)+ 2.300% 09/07/01 ............................. 2,000 2,000,000 Tuscaloosa County IDA RB Series 2000 A AMT DN (SouthTrust Bank LOC)+ 2.260% 09/07/01 ............................. 1,585 1,585,000 ------------ 8,435,000 ------------ ARIZONA--0.6% Cochise County PCR RB Solid Waste Disposal Pooled Series 1994 A AMT MB (National Rural Utilities LOC)++ 3.650% 09/01/01 ............................. 1,000 1,000,000 ------------ FLORIDA--1.3% Putnam County Development Authority PCR RB MB Series H 1984 (National Rural Utilities Co-op Seminole Electric Project)++ 3.250% 09/15/01 ............................. 2,000 2,000,000 ------------ GEORGIA--0.2% Chatham County School District GO Bonds Series 1995 B MB 5.200% 08/01/02 ............................. 300 307,156 ------------ HAWAII--1.9% Hawaii State Airport Zurich Capital Markets Receipts, Series ZTC 24 AMT DN (FGIC, ZCM Matched Funding)+ 2.210% 09/07/01 ............................. 1,000 1,000,000 PAR (000) VALUE --------- -------------- HAWAII--(CONTINUED) Hawaii State Housing Finance & Development Corporation Rental Housing System RB DN Series 1990 B (Ind. Bank of Japan LOC)+ 2.600% 09/07/01 ............................. $ 1,900 $ 1,900,000 ------------ 2,900,000 ------------ ILLINOIS--15.5% Addison, Village Of, Dupage County, IDA RB AMT DN 1988 (General Binding Corp. Project) (ABN AMRO Bank LOC)+ 2.320% 09/07/01 ............................. 1,300 1,300,000 Chicago Guernsey Bel Inc. Industrial Development RB AMT Series 1996 B DN (ABN Amro BANK LOC)+ 2.130% 09/07/01 ............................. 1,400 1,400,000 Chicago O'Hare International Airport ZTC 26 AMT DN (Ambac Insurance, ZCM Matched Funding)+ 2.210% 09/07/01 ............................. 2,900 2,900,000 Chicago O'Hare International Airport ZTC Series 8 AMT DN (Ambac Insurance, ZCM Matched Funding)+ 2.210% 09/07/01 ............................. 4,980 4,980,000 Chicago Skyway Toll Bridge ZTC Series 3 DN (Ambac Insurance, ZCM Matched Funding)+ 2.110% 09/07/01 ............................. 365 365,000 Chicago, City Of, IDA RB AMT DN (Goose Island Beer O. Project) (ABN AMRO Bank LOC)+ 2.320% 09/07/01 ............................. 1,700 1,700,000 Cook County GO MB Series 1991 (Kredietbank LOC) 6.750% 11/01/01 ............................. 2,000 2,051,361 Du Page County - Trust Certificates B Series - A Bear Stearns Municipal Securities Trust Receipts Series 9010 ClA DN (Financial Security Assurance - Bear Stearns)+ 2.170% 09/07/01 ............................. 2,000 2,000,000 See Accompanying Notes to Financial Statements. 7 THE BEDFORD FAMILY THE RBB FUND, INC. MUNICIPAL MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONTINUED) AUGUST 31, 2001 PAR (000) VALUE --------- -------------- ILLINOIS--(CONTINUED) Illinois Development Finance Authority Multifamily RB DN P Floats Pt-515 (Merrill Lynch & Co. Inc. LOC)+ 2.280% 09/07/01 ............................. $ 7,350 $ 7,350,000 ------------ 24,046,361 ------------ INDIANA--6.7% Bremen IDA RB Series 1996 A AMT DN (Universal Bearings, Inc. Project Private Placement) (Keybank LOC)+ 2.330% 09/07/01 ............................. 3,100 3,100,000 Indiana Development Finance Authority IDA RB DN (Enterprise Center I Project) (Bank One, Illinois LOC)+ 2.150% 09/07/01 ............................. 2,900 2,900,000 Indiana Development Finance Authority Economic Development AMT RB DN (Saroyan Hardwoods Inc. Project) (FifthThird Bank LOC)+ 2.350% 09/07/01 ............................. 1,400 1,400,000 Indiana Development Finance Authority IDA RB AMT DN (Enterprise Center II Project) (Bank One Illinois LOC)+ 2.110% 09/07/01 ............................. 3,000 3,000,000 ------------ 10,400,000 ------------ KENTUCKY--5.6% Green County School District School Building RB MB (Lease-Backed) 2001 4.500% 04/01/02 ............................. 165 165,930 Henderson Industrial Building RB AMT DN 1997 (Shamrock Technologies) (First Union National Bank LOC)+ 2.350% 09/07/01 ............................. 2,391 2,391,000 Jefferson County RB Series 1999A AMT DN (Atlas Manufacturing Industrial Building) (Bank One Kentucky LOC)+ 2.350% 09/07/01 ............................. 4,075 4,075,000 PAR (000) VALUE --------- -------------- KENTUCKY--(CONTINUED) Kentucky Development Financial Authority RB MB Series 1991 6.750% 11/01/01 ............................. $ 2,000 $ 2,050,696 ------------ 8,682,626 ------------ LOUISIANA--0.4% Louisiana Public Facilities Authority Hospital Refunding RB Series 1992 MB (Financial Security Assurance LOC) 6.300% 05/15/02 ............................. 535 558,401 ------------ MAINE--1.3% Maine Municipal Bond Bank Refunding RB Series 1993 A MB 4.800% 11/01/01 ............................. 2,075 2,080,239 ------------ MARYLAND--1.8% Maryland State Economic Development Corp. RB AMT (John Schmitz & Sons Inc. Project) DN (Allfirst Bank LOC)+ 2.210% 09/07/01 ............................. 2,810 2,810,000 ------------ MICHIGAN--8.0% Michigan Municipal Bond Authority MB Series 2001 A 4.000% 04/11/02 ............................. 3,585 3,604,450 Michigan State Strategic Fund Limited AMT DN (Banc One, Kay Screen Printing Project, LOC)+ 2.350% 09/07/01 ............................. 1,600 1,600,000 Michigan State Strategic Fund Limited Obligation RB Series 2000 AMT DN (Comerica Bank LOC)+ 2.200% 09/07/01 ............................. 2,590 2,590,000 Michigan State Strategic Fund Saginaw Pro Limited Obligation RB Series 2001 AMT DN (Comerica Bank Detroit LOC)+ 2.200% 09/07/01 ............................. 3,500 3,500,000 See Accompanying Notes to Financial Statements. 8 THE BEDFORD FAMILY THE RBB FUND, INC. MUNICIPAL MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONTINUED) AUGUST 31, 2001 PAR (000) VALUE --------- -------------- MICHIGAN--(CONTINUED) Oakland County Economic Development Corp. Glass & Mirror Limited Obligation RB Series 2000 AMT DN (Banc One LOC)+ 2.200% 09/07/01 ............................. $ 1,200 $ 1,200,000 ------------ 12,494,450 ------------ MISSOURI--3.8% Bridgeton IDA RB AMT DN (Commerce Bank, N.A. Gold Dust LLC Project, LOC)+ 2.210% 09/07/01 ............................. 1,225 1,225,000 Maries County IDA RB (Kingsford) Tax-Exempt Adjustable Mode Solid Waste Series 1993 AMT DN (Clorox LOC)+ 2.200% 09/07/01 ............................. 1,900 1,900,000 St. Charles IDA Variable Rate Land Development Co. AMT DN (Commerce Bank, N.A. LOC)+ 2.350% 09/07/01 ............................. 2,800 2,800,000 ------------ 5,925,000 ------------ NEW HAMPSHIRE--0.6% New Hampshire State Housing Finance Authority AMT DN - First Union Merlots Series 2001 A-51 Merlot 2001A-51 (First Union National Bank LOC)+ 2.260% 09/07/01 ............................. 1,000 1,000,000 ------------ NEW JERSEY--1.5% New Jersey Economic Development Authority Natural Gas Facilities Refunding RB Series 1995 A (Societe Generale LOC)+ 2.550% 09/04/01 ............................. 1,300 1,300,000 Secaucus BAN Series 2001 3.300% 01/18/02 ............................. 1,000 1,001,974 ------------ 2,301,974 ------------ PAR (000) VALUE --------- -------------- NEW YORK--1.2% Ulster County IDA RB 1998A AMT DN (Viking Industries, Inc. Project) (Key Corp. Bank N.A. LOC)+ 2.330% 09/07/01 ............................. $ 1,785 $ 1,785,000 ------------ NORTH CAROLINA--1.2% Gates County Industrial Facilities PCR RB AMT DN (Coxe-Lewis Project) (First Union National Bank LOC)+ 2.350% 09/07/01 ............................. 1,650 1,650,000 Guilford County Industrial Facilities PCR RB DN Series 2000 (Bank of America LOC)+ 2.200% 09/07/01 ............................. 50 50,000 Lee County Industrial Facilities PCR RB AMT Series 1999 DN (Var-Arden Corp Project) (Comerica Bank Detroit LOC)+ 2.200% 09/07/01 ............................. 200 200,000 ------------ 1,900,000 ------------ OHIO--13.0% American Municipal Power Inc. BAN 2.850% 08/22/02 ............................. 1,000 1,000,000 Brecksville BAN Series 2001 3.200% 09/04/01 ............................. 700 700,015 Butler County BAN Series 2001B 2.970% 06/13/02 ............................. 1,000 1,001,973 Cuyahoga County (Cleveland Gear) IDA RB Series 1998 AMT DN (Key Corp. Bank N.A. LOC)+ 2.330% 09/07/01 ............................. 1,200 1,200,000 Forest Park BAN Series 2000 5.260% 10/11/01 ............................. 1,200 1,201,019 Highland Heights BAN Series 2001 3.500% 12/13/01 ............................. 1,500 1,502,491 Jackson Center School District Sheldy County BAN Series 2001 3.530% 12/13/01 ............................. 1,195 1,197,253 Jefferson County BAN Series 2000 4.980% 11/15/01 ............................. 2,000 2,000,705 Lyndhurst BAN Series 2001 3.600% 03/14/02 ............................. 1,350 1,351,734 See Accompanying Notes to Financial Statements. 9 THE BEDFORD FAMILY THE RBB FUND, INC. MUNICIPAL MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONTINUED) AUGUST 31, 2001 PAR (000) VALUE --------- -------------- OHIO--(CONTINUED) Marysville Vehicle and Equipment GO Notes Series 2001 MB 3.660% 03/14/02 ............................. $ 1,065 $ 1,066,419 Ohio State Water Development Authority Solid Waste Facilities Revenue BAN Series 2001A 2.850% 08/01/02 ............................. 2,000 2,000,000 Olmsted Falls BAN Series 2000 4.700% 10/26/01 ............................. 650 650,234 Parma Heights BAN Series 2000 4.650% 09/21/01 ............................. 700 700,473 Sandusky BAN Series 2000 3.875% 09/12/01 ............................. 625 625,130 Stark County BAN Series 2001 3.500% 12/26/01 ............................. 1,000 1,002,494 Toledo BAN Series 2001 3.500% 10/25/01 ............................. 1,000 1,000,652 Trumbull County IDA RB Series 1995 AMT DN (Society National Bank LOC)+ 2.330% 09/07/01 ............................. 1,955 1,955,000 ------------ 20,155,592 ------------ OKLAHOMA--1.8% Muskogee Industrial Trust PCR RB Series 1995 A DN (Oklahoma Gas and Electric Co. LOC)+ 2.150% 09/07/01 ............................. 1,500 1,500,000 Oklahoma County Finance Authority IDA RB AMT Series 1998 DN (Southwest Electric Co. Project) (Bank One Oklahoma LOC)+ 2.350% 09/07/01 ............................. 1,250 1,250,000 ------------ 2,750,000 ------------ SOUTH CAROLINA--1.3% Greer Combined Utility System RB BAN Series 2001-A 3.250% 06/03/02 ............................. 1,000 1,003,294 PAR (000) VALUE --------- -------------- SOUTH CAROLINA--(CONTINUED) Western Regional Sewer Authority System RB Series 2001 MB (Financial Security Assurance LOC) 4.000% 03/01/02 ............................. $ 1,000 $ 1,004,357 ------------ 2,007,651 ------------ TENNESSEE--5.4% City of Jackson IDA RB AMT DN (Quadion Corporation Project) (Suntrust Bank, N.A. LOC)+ 2.300% 09/07/01 ............................. 2,600 2,600,000 Morristown IDA AMT DN (Petoskey Plastic Project) (Comerica Bank LOC)+ 2.300% 09/07/01 ............................. 5,735 5,735,000 ------------ 8,335,000 ------------ TEXAS--7.9% Austin Airport System Revenue Financial Sevices Department AMT First Union 2A-7 Merlots Series 2000 J DN (MBIA Insurance, First Union LOC)+ 2.260% 09/07/01 ............................. 3,000 3,000,000 Corpus Christi GO Bonds Series 1992 MB (FGIC Insurance LOC)++ 6.700% 03/01/02 ............................. 975 1,001,727 Denton IDA AMT DN (Hartzell Manufacturing Inc. Project) (National City Bank of Cleveland LOC)+ 2.450% 09/07/01 ............................. 1,300 1,300,000 Texas State Housing & Finance Authority Pt-1280 Community Affairs DN (Merril Lynch LOC)+ 2.310% 09/07/01 ............................. 1,000 1,000,000 Texas State Municipal Trust Certification ZTC 5 College Student Loan RB AMT DN Series 2000 (ZCM Matched Funding LOC)+ 2.210% 09/07/01 ............................. 5,990 5,990,000 ------------ 12,291,727 ------------ See Accompanying Notes to Financial Statements. 10 THE BEDFORD FAMILY THE RBB FUND, INC. MUNICIPAL MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONTINUED) AUGUST 31, 2001 PAR (000) VALUE --------- -------------- VIRGINIA--1.5% Dinwiddie County IDA Exempt Facility RB DN Series 1998 A (Bank of America LOC)+ 2.650% 09/04/01 ............................. $ 300 $ 300,000 Smyth County IDA RB AMT DN (Summit Properties Project) (Fifth Third Bank LOC)+ 2.250% 09/07/01 ............................. 100 100,000 Virginia State Housing Authority, Stem Commonwealth Mortgage Bonds Series C MB++ 2.700% 10/11/01 ............................. 2,000 2,000,000 ------------ 2,400,000 ------------ WASHINGTON--2.3% Port Douglas County Development Corp. RB Series 1996 AMT DN (Key Bank N.A. LOC)+ 2.230% 09/07/01 ............................. 2,640 2,640,000 Port Seattle RB Series D AMT MB 5.500% 02/01/02 ............................. 1,000 1,008,782 ------------ 3,648,782 ------------ WISCONSIN--9.1% Beloit School District TRAN Series 2000 4.550% 10/26/01 ............................. 500 500,036 Menasha Joint School District BAN Series 2001 3.120% 06/17/02 ............................. 1,000 1,000,979 Mequon, City of, IDA RB AMT DN (Johnson Level GRW Investment Project) (Bank One Wisconsin LOC)+ 2.350% 09/07/01 ............................. 1,090 1,090,000 Oak Creek IDA RB Series 2001 AMT DN (Bank One Wisconsin LOC)+ 2.350% 09/07/01 ............................. 1,000 1,000,000 PAR (000) VALUE --------- -------------- WISCONSIN--(CONTINUED) Waukesha School District TRAN Series 2001 3.000% 08/21/02 ............................. $ 2,000 $ 2,007,179 Whitewater IDA RB - Husco International I AMT DN (ABN Amro LOC)+ 2.130% 09/07/01 ............................. 2,000 2,000,000 Wisconscin State Health & Educational Facilities Authority RB Series 1992 MB (FGIC Insurance LOC) 6.500% 08/15/02 ............................. 2,000 2,109,191 Wisconsin Housing & Economic Development Authority MB P-Floats PT-323 AMT DN (Transamerica Life And Annuity Company) 2.180% 09/07/01 ............................. 3,330 3,330,000 Wisconsin State GO Bonds MB Series 1992 A+ 6.300% 05/01/02 ............................. 1,000 1,020,372 ------------ 14,057,757 ------------ TOTAL MUNICIPAL BONDS (Cost $154,272,716) ..................... 154,272,716 ------------ TOTAL INVESTMENTS AT VALUE -- 99.3% (Cost $154,272,716*) ........................ 154,272,716 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.7% ...................... 1,060,112 ------------ NET ASSETS (Applicable to 155,328,829 Bedford shares, 115,584 Cash Preservation shares, and 800 other shares) -- 100.0% ............. $155,332,828 ============ NET ASSET VALUE, Offering and redemption price per share ($155,332,828 / 155,445,213) ................ $1.00 ===== See Accompanying Notes to Financial Statements. 11 THE BEDFORD FAMILY THE RBB FUND, INC. MUNICIPAL MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONCLUDED) AUGUST 31, 2001 * Also cost for Federal income tax purposes. + Variable Rate Demand Notes -- The interest rate shown is the rate as of August 31, 2001 and the maturity shown is the longer of the next interest readjustment date or the date the principal amount shown can be recovered through demand. ++ Put Bonds -- Maturity date is the put date. INVESTMENT ABBREVIATIONS AMT .................................Alternative Minimum Tax BAN ..................................Bond Anticipation Note DN ..............................................Demand Note GO ......................................General Obligations LOC ........................................Letter of Credit IDA ........................Industrial Development Authority MB ...........................................Municipal Bond PCR ...............................Pollution Control Revenue RAN ...............................Revenue Anticipation Note RAW ...........................Revenue Anticipation Warrants RB .............................................Revenue Bond TAN ...................................Tax Anticipation Note TECP ............................Tax Exempt Commercial Paper TRAN ......................Tax and Revenue Anticipation Note See Accompanying Notes to Financial Statements. 12 THE BEDFORD FAMILY THE RBB FUND, INC. GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2001 PAR (000) VALUE --------- -------------- AGENCY OBLIGATIONS--46.1% FEDERAL FARM CREDIT BANK--3.1% 6.100% 09/24/01 ............................. $ 2,000 $ 2,001,323 5.520% 02/25/02 ............................. 2,000 2,018,596 ------------ 4,019,919 ------------ FEDERAL HOME LOAN BANK--3.0% 3.670% 09/12/01 ............................. 3,850 3,845,683 ------------ FEDERAL HOME LOAN MORTGAGE CORPORATION--9.0% 3.680% 09/13/01 ............................. 3,000 2,996,320 3.590% 10/18/01 ............................. 3,000 2,985,939 6.520% 01/02/02 ............................. 2,585 2,597,573 4.580% 02/28/02 ............................. 3,000 2,931,300 ------------ 11,511,132 ------------ FEDERAL NATIONAL MORTGAGE ASSOCIATION--31.0% 4.695% 09/06/01 ............................. 5,000 4,996,740 3.560% 09/13/01 ............................. 5,000 4,994,067 4.100% 10/11/01 ............................. 5,000 4,977,222 3.530% 10/11/01 ............................. 2,000 1,992,155 4.270% 12/19/01 ............................. 3,000 2,961,214 4.780% 01/11/02 ............................. 3,000 2,947,420 3.850% 05/03/02 ............................. 3,000 2,921,717 3.790% 05/31/02 ............................. 8,000 7,770,915 3.950% 07/05/02 ............................. 1,000 999,626 3.375% 08/09/02 ............................. 2,000 1,935,875 6.750% 08/15/02 ............................. 3,000 3,084,808 ------------ 39,581,759 ------------ TOTAL AGENCY OBLIGATIONS (Cost $58,958,493) ...................... 58,958,493 ------------ VARIABLE RATE OBLIGATIONS--35.2% FEDERAL FARM CREDIT BANK--3.9% 3.513% 09/11/01+ ............................ 5,000 5,000,000 ------------ FEDERAL HOME LOAN BANK--11.7% 3.495% 09/20/01+ ............................ 5,000 4,998,914 3.570% 10/12/01+ ............................ 5,000 4,999,617 3.540% 10/19/01+ ............................ 5,000 4,999,551 ------------ 14,998,082 ------------ PAR (000) VALUE --------- -------------- FEDERAL NATIONAL MORTGAGE ASSOCIATION--7.9% 3.790% 09/04/01+ ............................ $ 5,000 $ 4,999,508 3.630% 10/08/01+ ............................ 5,000 4,996,229 ------------ 9,995,737 ------------ STUDENT LOAN MARKETING ASSOCIATION--11.7% 3.776% 09/04/01+ ............................ 10,000 9,999,167 3.876% 09/04/01+ ............................ 5,000 5,000,999 ------------ 15,000,166 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $44,993,985) ...................... 44,993,985 ------------ REPURCHASE AGREEMENTS--18.6% J.P. Morgan Securities Inc. (Agreement dated 08/31/01 to be repurchased at $8,803,698 collateralized by $8,716,000 Federal Home Loan Bank Bond 5.625% to 5.75% due 03/15/09 to 03/15/11. Market Value of collateral is $9,068,210.) 3.680% 09/04/01 ............................. 8,800 8,800,000 UBS Warburg LLC (Agreement dated 08/24/01 to be repurchased at $15,045,338 collateralized by $15,540,000 par Federal National Mortgage Corporation Collateralized Mortgage Obligation at a rate of 6.50% due 06/01/31. Market Value of collateral is $15,454,186.) 3.510% 09/24/01 ............................. 15,000 15,000,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $23,800,000) ...................... 23,800,000 ------------ See Accompanying Notes to Financial Statements. 13 THE BEDFORD FAMILY THE RBB FUND, INC. GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONCLUDED) AUGUST 31, 2001 VALUE ------------- TOTAL INVESTMENTS AT VALUE -- 99.9% (Cost $127,752,478*) ........................ $127,752,478 ------------ OTHER ASSETS IN EXCESS OF LIABILITIES -- 0.1% ...................... 52,820 ------------ NET ASSETS (Applicable to 127,863,342 Bedford shares and 800 other shares) -- 100.0% ................. $127,805,298 ============ NET ASSET VALUE, Offering and redemption price per share ($127,805,299 / 127,864,142) ................ $1.00 ===== * Also cost for Federal income tax purposes. + Variable Rate Obligations -- The interest rate is the rate as of August 31, 2001 and the maturity date shown is the longer of the next interest readjustment date or the maturity date. See Accompanying Notes to Financial Statements. 14 THE BEDFORD FAMILY THE RBB FUND, INC. STATEMENTS OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2001
GOVERNMENT MUNICIPAL OBLIGATIONS MONEY MARKET MONEY MARKET MONEY MARKET PORTFOLIO PORTFOLIO PORTFOLIO ----------- ---------- ---------- Investment Income Interest ................................................ $68,795,929 $5,485,034 $6,292,583 ----------- ---------- ---------- Expenses Distribution fees ....................................... 4,804,602 954,855 775,772 Investment advisory fees ................................ 4,622,883 514,091 536,815 Transfer agent fees ..................................... 369,390 39,563 17,614 Printing fees ........................................... 298,558 83,069 38,113 Registration fees ....................................... 257,511 94,890 40,024 Custodian fees .......................................... 199,876 40,024 33,031 Legal fees .............................................. 193,455 30,466 4,042 Audit fees .............................................. 167,023 13,954 1,850 Directors' fees ......................................... 94,907 6,478 2,750 Insurance expense ....................................... 90,630 2,815 2,090 Service organization fees ............................... 13,772 -- -- Miscellaneous ........................................... 2,300 2,100 3,490 Administration fees ..................................... -- 146,883 -- ----------- ---------- ---------- Total expenses ..................................... 11,114,907 1,929,188 1,455,591 Less fees waived ........................................ (1,878,434) (581,829) (262,095) Less expense reimbursement by advisor ................... (23,214) (24,441) -- ----------- ---------- ---------- Net expenses ....................................... 9,213,259 1,322,918 1,193,496 ----------- ---------- ---------- Net investment income ...................................... 59,582,670 4,162,116 5,099,087 ----------- ---------- ---------- Realized gain/(loss) on investments ........................ 105,064 (37,788) (826) ----------- ---------- ---------- Net increase in net assets resulting from operations ....... $59,687,734 $4,124,328 $5,098,261 =========== ========== ==========
See Accompanying Notes to Financial Statements. 15 THE BEDFORD FAMILY THE RBB FUND, INC. STATEMENTS OF CHANGES IN NET ASSETS
MUNICIPAL MONEY MONEY MARKET PORTFOLIO MARKET PORTFOLIO -------------------------------- --------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ............ $ 59,582,670 $ 142,300,137 $ 4,162,116 $ 6,958,598 Net gain (loss) on investments ... 105,064 (46,157) (37,788) -- --------------- --------------- ------------- ------------- Net increase in net assets resulting from operations ...... 59,687,734 142,253,980 4,124,328 6,958,598 --------------- --------------- ------------- ------------- Distributions to shareholders: Dividends to shareholders from Net Investment Income: Bedford shares ................. (24,842,700) (21,820,881) (4,156,763) (3,912,970) Cash Preservation shares ....... (13,247) (14,538) (5,353) (6,360) Janney Montgomery Scott shares ....................... -- (55,534,937) -- (3,039,268) Principal shares ............... (12,476,504) (11,383,856) -- -- Sansom Street shares ........... (12,942,542) (31,566,483) -- -- Select shares .................. (9,307,677) (21,979,442) -- -- --------------- --------------- ------------- ------------- Total Dividends to shareholders ............... (59,582,670) (142,300,137) (4,162,116) (6,958,598) --------------- --------------- ------------- ------------- Net capital share transactions ..... (228,925,598) (1,334,348,297) 33,081,455 (142,742,303) --------------- --------------- ------------- ------------- Total increase/(decrease) in net assets ....................... (228,820,534) (1,334,394,454) 33,043,667 (142,742,303) Net Assets: Beginning of year ................ 1,404,725,877 2,739,120,331 122,289,161 265,031,464 --------------- --------------- ------------- ------------- End of year ...................... $ 1,175,905,343 $ 1,404,725,877 $ 155,332,828 $ 122,289,161 =============== =============== ============= =============
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO --------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2001 AUGUST 31, 2000 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income ............. $ 5,099,087 $ 22,009,006 Net gain (loss) on investments .... (826) (776) ------------- ------------- Net increase in net assets resulting from operations ....... 5,098,261 22,008,230 ------------- ------------- Distributions to shareholders: Dividends to shareholders from Net Investment Income: Bedford shares .................. (5,099,087) (5,029,950) Cash Preservation shares ........ -- -- Janney Montgomery Scott shares ........................ -- (16,979,056) Principal shares ................ -- -- Sansom Street shares ............ -- -- Select shares ................... -- -- ------------- ------------- Total Dividends to shareholders ................ (5,099,087) (22,009,006) ------------- ------------- Net capital share transactions ...... 34,006,121 (388,595,430) ------------- ------------- Total increase/(decrease) in net assets ........................ 34,005,295 (388,596,206) Net Assets: Beginning of year ................. 93,800,003 482,396,209 ------------- ------------- End of year ....................... $ 127,805,298 $ 93,800,003 ============= =============
See Accompanying Notes to Financial Statements. 16 THE BEDFORD FAMILY THE RBB FUND, INC. FINANCIAL HIGHLIGHTS (a) (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
MONEY MARKET PORTFOLIO ------------------------------------------------------------ FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ---------- Net asset value, beginning of year ............ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Income from investment operations: Net investment income ........ 0.0460 0.0512 0.0425 0.0473 0.0462 ------- ------- ------- ------- ------- Total net income from investment operations ................ 0.0460 0.0512 0.0425 0.0473 0.0462 ------- ------- ------- ------- ------- Less distributions Dividends (from net investment income) .......... (0.0460) (0.0512) (0.0425) (0.0473) (0.0462) ------- ------- ------- ------- ------- Total distributions ......... (0.0460) (0.0512) (0.0425) (0.0473) (0.0462) ------- ------- ------- ------- ------- Net asset value, end of year .................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return ................. 4.70% 5.24% 4.34% 4.84% 4.72% Ratios /Supplemental Data Net assets, end of year (000) ........... $676,964 $423,977 $360,123 $762,739 $1,392,911 Ratios of expenses to average net assets .......... 1.00%(b) .97%(b) .97%(b) .97%(b) .97%(b) Ratios of net investment income to average net assets .................. 4.46% 5.15% 4.25% 4.73% 4.62%
MUNICIPAL MONEY MARKET PORTFOLIO -------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31, 2001 2000 1999 1998 1997 ---------- ---------- ---------- ---------- ------------ Net asset value, beginning of year ....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ------- ------- ------- ------- ------- Income from investment operations: Net investment income ... 0.0286 0.0301 0.0243 0.0286 0.0285 ------- ------- ------- ------- ------- Total net income from investment operations ........... 0.0286 0.0301 0.0243 0.0286 0.0285 ------- ------- ------- ------- ------- Less distributions Dividends (from net investment income) ..... (0.0286) (0.0301) (0.0243) (0.0286) (0.0285) ------- ------- ------- ------- ------- Total distributions .... (0.0286) (0.0301) (0.0243) (0.0286) (0.0285) ------- ------- ------- ------- ------- Net asset value, end of year ............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======= ======= ======= ======= ======= Total Return ............ 2.90% 3.05% 2.46% 2.97% 2.88% Ratios /Supplemental Data Net assets, end of year (000) ...... $155,217 $131,201 $150,278 $147,633 $213,034 Ratios of expenses to average net assets ..... .90%(b) .89%(b) .89%(b) .89%(b) .85%(b) Ratios of net investment income to average net assets ............. 2.83% 2.98% 2.43% 2.86% 2.85% (a) Financial Highlights relate solely to the Bedford Class of shares within each portfolio. (b) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been 1.19%, 1.05%, 1.08%, 1.10% and 1.12% for the years ended August 31, 2001, 2000, 1999, 1998 and 1997, respectively. For the Municipal Money Market Portfolio, the ratios of expenses to average net assets would have been 1.29%, 1.21%, 1.15%, 1.15% and 1.14% for the years ended August 31, 2001, 2000, 1999, 1998 and 1997, respectively.
See Accompanying Notes to Financial Statements. 17 THE BEDFORD FAMILY THE RBB FUND, INC. FINANCIAL HIGHLIGHTS (a) (FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO ---------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997 ---------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ........................... 0.0441 0.0492 0.0409 0.0464 0.0449 -------- -------- -------- -------- -------- Total net income from investment operations . 0.0441 0.0492 0.0409 0.0464 0.0449 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .......... (0.0441) (0.0492) (0.0409) (0.0464) (0.0449) -------- -------- -------- -------- -------- Total distributions ......................... (0.0441) (0.0492) (0.0409) (0.0464) (0.0449) -------- -------- -------- -------- -------- Net asset value, end of year ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ...................................... 4.50% 5.03% 4.17% 4.74% 4.59% Ratios /Supplemental Data Net assets, end of year (000) ................... $127,805 $102,322 $113,050 $128,447 $209,715 Ratios of expenses to average net assets ........ 1.00%(b) .977%(b) .975%(b) .975%(b) .975%(b) Ratios of net investment income to average net assets .................................... 4.27% 4.92% 4.09% 4.63% 4.49% (a) Financial Highlights relate solely to the Bedford Class of shares within each portfolio. (b) Without the waiver of advisory, administration and transfer agent fees and without the reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Government Obligations Money Market Portfolio would have been 1.22%, 1.12%, 1.13%, 1.10% and 1.09% for the years ended August 31, 2001, 2000, 1999, 1998 and 1997, respectively.
See Accompanying Notes to Financial Statements. 18 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Fund was incorporated in Maryland on February 29, 1988. The Fund has authorized capital of thirty billion shares of common stock of which 20.97 billion shares are currently classified into ninety-four classes. Each class represents an interest in one of fourteen investment portfolios of the Fund. The classes have been grouped into fourteen separate "families", eight of which have begun investment operations: the Bedford Family, the Sansom Street Family, the Cash Preservation Family, the Principal Family, the n/i numeric investors Family, the Boston Partners Family, the Bogle Family and the Schneider Family. The Bedford Family represents interests in three portfolios, which are covered in this report. A) SECURITY VALUATION -- Portfolio securities are valued under the amortized cost method, which approximates current market value. Under this method, securities are valued at cost when purchased and thereafter a constant proportionate amortization of any discount or premium is recorded until maturity of the security. Regular review and monitoring of the valuation is performed, to ensure that cost continues to approximate market value and to avoid dilution or other unfair results to shareholders. The Portfolio seeks to maintain net asset value per share at $1.00. B) SECURITY TRANSACTIONS, INVESTMENT INCOME, AND EXPENSES -- Security transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis. Certain expenses, principally distribution, transfer agency and printing, are class specific expenses and vary by class. Expenses not directly attributable to a specific portfolio or class are allocated based on relative net assets of each portfolio and class, respectively. Expenses incurred on behalf of a specific class, fund or fund family are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all of the RBB families (such as trustee or professional fees) are charged to all funds in proportion to their net assets of the RBB funds. C) DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income are declared daily, recorded on the ex-date and paid monthly. Any net realized capital gains are distributed at least annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. D) FEDERAL TAXES -- No provision is made for Federal taxes. It is the Fund's intention to have each portfolio to continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholders which will be sufficient to relieve it from Federal income and excise taxes. E) REPURCHASE AGREEMENTS -- Money market instruments may be purchased subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the underlying securities fall below 102% of the value of the purchase price plus accrued interest, the Fund will require the seller to deposit additional collateral by the next Fund business day. In the event that the seller under the agreement defaults on its repurchase obligation or fails to deposit sufficient collateral, the Fund 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 Fund's custodian or a third party sub-custodian. 19 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) F) USE OF ESTIMATES -- The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Pursuant to Investment Advisory Agreements, BlackRock Institutional Management Corp. ("BIMC"), an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc., serves as investment adviser to the portfolios described herein. For its advisory services, BIMC is entitled to receive the following fees, computed daily and payable monthly, and based on the portfolio's average daily net assets: PORTFOLIO ANNUAL RATE --------------------------- --------------------------------------------- Money Market and Government .45% of first $250 million of net assets; Obligations Money Market .40% of next $250 million of net assets; Portfolios .35% of net assets in excess of $500 million. Municipal Money Market .35% of first $250 million of net assets; Portfolio .30% of next $250 million of net assets; .25% of net assets in excess of $500 million. BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for these portfolios. For each class of shares within a respective portfolio, the net advisory fee charged to each class is the same on a relative basis. For the year ended August 31, 2001, advisory fees and waivers for the investment portfolios were as follows:
GROSS NET ADVISORY ADVISORY FEE WAIVER FEE ---------- ------------ ----------- Money Market Portfolio $4,622,883 $(1,375,781) $3,247,102 Municipal Money Market Portfolio 514,091 (509,969) 4,122 Government Obligations Money Market Portfolio 536,815 (262,095) 274,720
BIMC also serves as administrator for the Money Market and the Government Obligations Money Market Portfolios. For the Money Market and Government Obligations Money Market Portfolios, BIMC and PFPC, Inc. ("PFPC") have entered into a delegation agreement, wherein PFPC has agreed to perform Administration and Accounting services for an annual fee of .10% of the average net assets of the portfolios, paid out of the fee paid to BIMC. 20 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) In addition, PFPC serves as administrator for the Municipal Money Market Portfolio. The administration fee is computed daily and payable monthly at an annual rate of .10% of the Portfolio's average daily net assets. PFPC may, at its discretion, voluntarily waive all or any portion of its administration fee for the Portfolio. For the year ended August 31, 2001, the administration fee and waiver for the portfolio were as follows:
GROSS NET ADMINISTRATION ADMINISTRATION FEE WAIVER FEE --------------- ---------- -------------- Municipal Money Market Portfolio $146,883 $(56,806) $90,077
The investment advisor/administrator may voluntarily waive and/or reimburse each portfolio for the amount, if any, by which the total operating and management expenses exceed the expense cap. For the year ended August 31, 2001, the expense caps were as follows:
PORTFOLIO CLASS OF SHARES EXPENSE CAP ---------- ------------------ ----------- Money Market Portfolio Bedford 1.00% Cash Preservation .98 Sansom Street .49 Principal .77 Municipal Money Market Portfolio Bedford .90% Cash Preservation .98 Government Obligations Money Market Portfolio Bedford 1.00%
For the year ended August 31, 2001 waived expenses were $264,231 for the Money Market Portfolio. Reimbursed expenses for the year ended August 31, 2001 were $23,214 and $24,441 for the Money Market Portfolio and Municipal Money Market Portfolio, respectively. PFPC Trust Co. serves as custodian for each of the Fund's portfolios. PFPC serves as each class's transfer and dividend disbursing agent. Both PFPC Trust Co. and PFPC are wholly-owned subsidiaries of PFPC Worldwide Inc., an indirect majority owned subsidiary of The PNC Financial Services Group, Inc. 21 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) PFPC may, at its discretion, voluntarily waive all or any portion of its transfer agency fee for any class of shares. For the year ended August 31, 2001, transfer agency fees and waivers for each class of shares within the three investment portfolios were as follows:
GROSS NET TRANSFER AGENCY TRANSFER AGENCY FEE WAIVER FEE --------------- -------------- ----------------- Money Market Portfolio Bedford Class $204,798 $(204,798) $ -- Cash Preservation Class 7,932 (7,932) -- Principal Class 7,800 -- 7,800 Sansom Street Class 145,465 (24,317) 121,148 Select Class* 3,395 (1,375) 2,020 -------- --------- -------- Total Money Market Portfolio $369,390 $(238,422) $130,968 ======== ========= ======== Municipal Money Market Portfolio Bedford Class $ 23,792 $ -- $ 23,792 Cash Preservation Class 15,771 (15,054) 717 -------- --------- -------- Total Municipal Money Market Portfolio $ 39,563 $ (15,054) $ 24,509 ======== ========= ======== Government Obligations Money Market Portfolio Bedford Class $ 17,614 $ -- $ 17,614 ======== ========= ======== * The Select Class of shares was liquidated on January 31, 2001.
The Fund, on behalf of each class of shares within the three investment portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended. The Fund has entered into Distribution Contracts with PFPC Distributors Inc. ("PFPC Distributors"). PFPC Distributors is a wholly-owned subsidiary of PFPC Worldwide Inc., an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc. The contracts provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to .65% on an annualized basis for the Bedford, Cash Preservation, and Principal Classes and up to .20% on an annualized basis for the Sansom Street Class. Prior to January 2, 2001, Provident Distributors, Inc. ("PDI") served as the Fund's distributor pursuant to the same compensation arrangement as PFPC Distributors. 22 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED) For the period September 1, 2000 through January 1, 2001, distribution fees paid to PDI for each class were as follows:
DISTRIBUTION FEE -------------- Money Market Portfolio Bedford Class $1,006,789 Cash Preservation Class 417 Principal Class 303,527 Sansom Street Class 46,718 ---------- Total Money Market Portfolio $1,357,451 ========== Municipal Money Market Portfolio Bedford Class $ 296,131 Cash Preservation Class 270 ---------- Total Municipal Money Market Portfolio $ 296,401 ========== Government Obligations Money Market Portfolio Bedford Class $ 209,734 ==========
For the period January 2, 2001 through August 31, 2001, distribution fees paid to PFPC Distributors for each class were as follows:
DISTRIBUTION FEE ------------- Money Market Portfolio Bedford Class $2,612,966 Cash Preservation Class 680 Principal Class 756,602 Sansom Street Class 76,903 ---------- Total Money Market Portfolio $3,447,151 ========== Municipal Money Market Portfolio Bedford Class $ 657,962 Cash Preservation Class 492 ---------- Total Municipal Money Market Portfolio $ 658,454 ========== Government Obligations Money Market Portfolio Bedford Class $ 566,038 ==========
The Fund has entered into service agreements with banks affiliated with PNC Bank who render support services to customers who are the beneficial owners of the Sansom Street Class in consideration of the payment of .10% of the daily net asset value of such shares. For the year ended August 31, 2001 service organization fees were $13,772 for the Money Market Portfolio. 23 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
MONEY MARKET PORTFOLIO MUNICIPAL MONEY MARKET PORTFOLIO -------------------------------------- --------------------------------- FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 2001 AUGUST 31, 2000 --------------- ---------------- --------------- --------------- VALUE VALUE VALUE VALUE --------------- ---------------- ------------- ------------- Shares sold: Bedford Class $ 977,375,528 $ 866,092,657 $ 301,784,487 $ 240,430,505 Cash Preservation Class 239,568 462,203 67,547 62,468 Janney Montgomery Scott Class* -- 5,748,987,958 -- 389,880,620 Principal Class 574,335,866 534,885,343 -- -- Sansom Street Class 1,562,347,829 3,118,553,510 -- -- Select Class** 947,199,090 2,969,370,240 -- -- --------------- ---------------- ------------- ------------- Total Shares Sold 4,061,497,881 13,238,351,911 301,852,034 630,373,593 Shares issued on reinvestment of dividends: Bedford Class 25,009,271 21,403,595 4,192,079 3,875,706 Cash Preservation Class 13,843 13,920 5,358 6,129 Janney Montgomery Scott Class* -- 54,694,717 -- 3,013,665 Principal Class 12,586,542 11,245,950 -- -- Sansom Street Class 725,168 13,899,819 -- -- --------------- ---------------- ------------- ------------- Total Shares Reinvested 38,334,824 101,258,001 4,197,437 6,895,500 Shares repurchased: Bedford Class (780,367,053) (792,698,785) (272,811,440) (272,492,533) Cash Preservation Class (471,279) (194,641) (156,576) (83,714) Janney Montgomery Scott Class* -- (6,892,100,877) -- (507,435,149) Principal Class (507,329,527) (547,145,226) -- -- Sansom Street Class (1,688,185,685) (3,647,602,057) -- -- Select Class** (1,352,404,759) (2,794,216,623) -- -- --------------- ---------------- ------------- ------------- Total Shares Repurchased (4,328,758,303) (14,673,958,209) (272,968,016) (780,011,396) --------------- ---------------- ------------- ------------- Net increase (decrease) $ (228,925,598) $ (1,334,348,297) $ 33,081,455 $(142,742,303) =============== ================ ============= ============= Bedford Shares authorized 1,500,000,000 1,500,000,000 500,000,000 500,000,000 =============== ================ ============= ============= * The Janney Montgomery Scott Class of shares was liquidated on July 31, 2000. ** The Select Class of shares was liquidated on January 31, 2001.
24 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 3. CAPITAL SHARES (CONTINUED)
GOVERNMENT OBLIGATIONS MONEY MARKET PORTFOLIO --------------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2001 AUGUST 31, 2000 --------------- ---------------- VALUE VALUE ------------- --------------- Shares sold: Bedford Class $ 262,525,402 $ 270,056,423 Janney Montgomery Scott Class* -- 1,451,470,056 ------------- --------------- Total Shares Sold 262,525,402 1,721,526,479 Shares issued on reinvestment of dividends: Bedford Class 5,144,971 4,991,533 Janney Montgomery Scott Class* -- 16,792,074 ------------- --------------- Total Shares Reinvested 5,144,971 21,783,607 Shares repurchased: Bedford Class (233,664,252) (294,238,125) Janney Montgomery Scott Class* -- (1,837,667,391) ------------- --------------- Total Shares Repurchased (233,664,252) (2,131,905,516) ------------- --------------- Net increase (decrease) $ 34,006,121 $ (388,595,430) ============= =============== Bedford Shares authorized 500,000,000 500,000,000 ============= =============== * The Janney Montgomery Scott Class of shares was liquidated on July 31, 2000.
NOTE 4. NET ASSETS At August 31, 2001, net assets consisted of the following:
GOVERNMENT MUNICIPAL OBLIGATIONS MONEY MARKET MONEY MARKET MONEY MARKET PORTFOLIO PORTFOLIO PORTFOLIO -------------- ------------ ------------ Paid-in capital $1,175,902,466 $155,388,051 $127,864,242 Accumulated net realized gain/(loss) on investments 2,877 (55,223) (58,944) -------------- ------------ ------------ Total net assets $1,175,905,343 $155,332,828 $127,805,298 ============== ============ ============
NOTE 5. CAPITAL LOSS CARRYOVER At August 31, 2001 capital loss carryovers were available to offset future realized gains as follows: $55,223 in the Municipal Money Market Portfolio of which, $9,789 expires in 2002, $674 expires in 2004, $3,917 expires in 2005, $3,055 expires in 2006, and $37,788 expires in 2010; $58,944 in the Government Obligations Money Market Portfolio of which $12,149 expires in 2004, $1,291 expires in 2005, $5,792 expires in 2006, $37,984 expires in 2007, $776 expires in 2008, and $952 expires in 2010. The Municipal Money Market Portfolio had $1,058 of capital loss carryover that expired in 2001, and was reclassified to paid-in capital. 25 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2001 NOTE 6. OTHER FINANCIAL HIGHLIGHTS The Fund currently offers three other classes of shares representing interest in the Money Market Portfolio: Cash Preservation, Sansom Street, and Principal. The Fund currently offers one other class of shares representing interest in the Municipal Money Market Portfolio: Cash Preservation. Each class is marketed to different types of investors. Financial Highlights of the Cash Preservation class is not represented in this report due to its immateriality. Such information is available in the annual report of its respective family. The financial highlights of certain of the other classes are as follows: THE SANSOM STREET FAMILY (a)
MONEY MARKET PORTFOLIO ------------------------------------------------------------------------------------- FOR THE FOR THE FOR THE FOR THE FOR THE YEAR YEAR YEAR YEAR YEAR ENDED ENDED ENDED ENDED ENDED AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 AUGUST 31, 1997 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income .................... 0.0511 0.0560 0.0473 0.0520 0.0510 -------- -------- -------- -------- -------- Total net income from investment operations ........................... 0.0511 0.0560 0.0473 0.0520 0.0510 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) ... (0.0511) (0.0560) (0.0473) (0.0520) (0.0510) -------- -------- -------- -------- -------- Total distributions .................... (0.0511) (0.0560) (0.0473) (0.0520) (0.0510) -------- -------- -------- -------- -------- Net asset value, end of year ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ................................ 5.23% 5.75% 4.83% 5.34% 5.22% Ratios /Supplemental Data Net assets, end of year (000) ............ $201,632 $326,745 $841,887 $684,066 $570,018 Ratios of expenses to average net assets . .49%(b) .49%(b) .49%(b) .49%(b) .49%(b) Ratios of net investment income to average net assets ..................... 5.23% 5.42% 4.73% 5.20% 5.10% (a) Financial highlights relate solely to the Sansom Street Class of shares within the portfolio. (b) Without the waiver of advisory fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been .61%, .61%, .62%, .62% and .64% for the years ended August 31, 2001, 2000, 1999, 1998 and 1997, respectively.
26 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONCLUDED) AUGUST 31, 2001 NOTE 6. OTHER FINANCIAL HIGHLIGHTS (CONTINUED) THE PRINCIPAL FAMILY (a)
MONEY MARKET PORTFOLIO ------------------------------------------------------ FOR THE FOR THE YEAR YEAR FOR THE PERIOD ENDED ENDED JUNE 1, 1999 TO AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 1999(b) --------------- --------------- ------------------ Net asset value, beginning of year or period ....... $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- Income from investment operations: Net investment income ........................... 0.0483 0.0532 0.0110 -------- -------- -------- Total net income from investment operations ... 0.0483 0.0532 0.0110 -------- -------- -------- Less distributions Dividends (from net investment income) .......... (0.0483) (0.0532) (0.0110) -------- -------- -------- Total distributions ........................... (0.0483) (0.0532) (0.0110) -------- -------- -------- Net asset value, end of year or period ............. $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Total Return ....................................... 4.94% 5.46% 1.10%(e) Ratios /Supplemental Data Net assets, end of period (000) ................. $297,115 $217,520 $218,530 Ratios of expenses to average net assets ........ .77%(c) .77%(c) .77%(c)(d) Ratios of net investment income to average net assets ............................ 4.71% 5.32% 4.36%(d) (a) Financial highlights relate solely to the Principal Family of shares within the portfolio. (b) On June 1, 1999 the Money Market Portfolio's Principal Class began operations. (c) Without the waiver of advisory and transfer agent fees and reimbursement of certain operating expenses, the ratios of expenses to average net assets for the Money Market Portfolio would have been .88%, .85% and .85% for the periods ended August 31, 2001, 2000 and 1999, respectively. (d) Annualized. (e) Non-Annualized.
27 TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED) In the twelve months ended August 31, 2001 (the end of the Fund's fiscal year), 100% of the dividends paid by the Municipal Money Market Portfolio were exempt-interest dividends for purposes of federal income taxes and free from such taxes. However, approximately 59.7% of such dividends were attributable to interest on private activity bonds, which must be included in federal alternative minimum taxable income for the purpose of determining liability for federal alternative minimum tax. In January 2002, you will be furnished with a schedule showing the yearly percentage breakdown by state or U.S. possession of the source of interest earned by the Municipal Money Market Portfolio in calendar year 2001. It is suggested that you consult your tax adviser concerning the applicability of state and local taxes to dividends paid by the Fund during the year. 28 Morgan Keegan & Company, Inc./Morgan Keegan Tower/Fifty Front Street/Memphis, Tennessee 38103