N-30D 1 g02-0912.txt BEAR STEARNS AR [GRAPHICS OMITTED] BEAR STEARNS MONEY MARKET PORTFOLIO Annual Report August 31, 2002 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) 533-7719. October 2002 THE BEDFORD FAMILY THE RBB FUND, INC. ANNUAL INVESTMENT ADVISER'S REPORT As if to confirm last year's recession, the nation's gross domestic product was revised in July to show three consecutive quarters of negative growth during 2001. Early this year, the economy seemed poised to recover, as first quarter GDP surged by 5%. Unfortunately, during the second quarter, GDP rose only 1.1%, led by a contraction in durable goods orders and a slowdown in consumer and government spending. The reemergence of economic weakness caused a severe flattening in the money market yield curve as the likelihood of higher short-term interest rates gave way to prospects of renewed Fed easing. Further dampening market sentiment during the period was a series of corporate accounting and governance issues that led to a sharp decline in the equity markets. On a positive note, inflation remained well within the Fed's comfort zone. The GDP price deflator rose only 1.2% in the second quarter and Fed Chairman Greenspan called the news on inflation "remarkably quiescent." Faced with softness in the markets and low inflation, the Fed kept monetary policy unchanged through August, maintaining the forty-one year low, 1.75% federal funds rate. As mentioned previously in the Fund's semi-annual report, investment strategy was influenced by the loss of approximately $900 million in assets during the month of March. Subsequent to the decline, the average weighted maturity of the Fund was shortened to the forty-day range to maintain an appropriate level of liquidity and lessen the volatility on net asset value. Concerns over credit quality continued to permeate the money markets, and only the highest quality instruments were purchased by the Fund. Government obligations were often bought in lieu of commercial paper. On August 31, the Fund's assets stood at $297.1 million and the net one-day yield was 1.53%. For the twelve months ended August 31, 2002, the RBB Money Market Fund was cited by IMONEYNET, INC. as a top ten performer in its retail money fund category. BlackRock Institutional Management Corporation (For questions regarding your account, please dial toll-free 800-430-9618 or contact your broker.) 2 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS AUGUST 31, 2002 PAR (000) VALUE ------- ------------ CERTIFICATES OF DEPOSIT--15.2% DOMESTIC CERTIFICATES OF DEPOSIT--2.4% U.S. Bank National Association 3.540% 09/03/02 ............................. $ 4,000 $ 4,000,351 1.850% 10/07/02 ............................. 3,000 3,000,000 ------------ 7,000,351 ------------ EURODOLLAR CERTIFICATES OF DEPOSIT--12.8% Credit Agricole Indosuez 3.625% 09/06/02 ............................. 15,000 14,999,980 Lloyds Bank P.L.C. 1.740% 10/28/02 ............................. 10,000 10,000,000 Natexis Banques Populaires 1.800% 10/11/02 ............................. 11,000 11,000,000 Westdeutsche Landesbank Girozentrale 2.170% 08/11/03 ............................. 2,000 2,000,000 ------------ 37,999,980 ------------ TOTAL CERTIFICATES OF DEPOSIT (Cost $45,000,331) ...................... 45,000,331 ------------ COMMERCIAL PAPER--39.0% ASSET BACKED SECURITIES--23.7% Bavaria Universal Funding 1.820% 09/10/02 ............................. 9,097 9,092,861 CC (USA), Inc. 1.780% 11/27/02 ............................. 13,000 12,944,078 Concord Minutemen Capital Co., LLC 1.750% 11/20/02 ............................. 5,450 5,428,806 Crown Point Capital Co. 1.800% 10/18/02 ............................. 3,000 2,992,950 1.800% 10/21/02 ............................. 4,000 3,990,000 Discover Card Master Trust 1.800% 10/16/02 ............................. 13,000 12,970,750 Emerald Corp. 1.800% 09/12/02 ............................. 3,000 2,998,350 1.807% 09/18/02 ............................. 10,000 9,991,469 Moat Funding LLC 1.810% 09/25/02 ............................. 10,000 9,987,933 ------------ 70,397,197 ------------ BANKS--0.5% Depfa Bank Europe P.L.C 1.850% 09/17/02 ............................. 1,700 1,698,602 ------------ CANNED, FROZEN, PRESERVED FRUIT--1.7% Sara Lee Corp. 1.820% 09/24/02 ............................. 5,000 4,994,186 ------------ CHEMICALS & ALLIED PRODUCTS--1.7% BASF (AG) 1.830% 09/20/02 ............................. 5,000 4,995,171 ------------ PERSONAL CREDIT INSTITUTIONS--4.0% Toyota Credit Puerto Rico 1.760% 10/11/02 ............................. 12,000 11,976,533 ------------ PAR (000) VALUE ------- ------------ PHARMACEUTICAL PREPARATIONS--3.7% Wyeth 1.880% 09/16/02 ............................. $11,000 $ 10,991,384 ------------ SHORT-TERM BUSINESS CREDIT INSTITUTIONS--3.7% GE Capital International Funding 1.760% 12/19/02 ............................. 3,000 2,984,013 1.700% 02/14/03 ............................. 7,000 6,945,128 GE Capital Services 1.930% 12/10/02 ............................. 1,000 994,639 ------------ 10,923,780 ------------ TOTAL COMMERCIAL PAPER (Cost $115,976,853) ..................... 115,976,853 ------------ MUNICIPAL BONDS--2.9% INDIANA--0.2% Bremen IDR Bond VRDN (Universal Bearing, Inc. Project) Series 1996 B (Society National Bank, Cleveland LOC)+ 1.900% 09/05/02 ............................. 515 515,000 ------------ KENTUCKY--1.4% Boone County Taxable IDR Refunding Bonds VRDN (Square D Company Project) Series 1994-B (Societe Generale LOC)+ 1.900% 09/04/02 ............................. 4,200 4,200,000 ------------ MISSISSIPPI--1.3% Mississippi Business Finance Corp. IDR RB (Choctaw Foods, Inc.) Series 1995 (Suntrust Bank, N.A., LOC)+ 1.850% 09/04/02 ............................. 3,900 3,900,000 ------------ TOTAL MUNICIPAL BONDS (Cost $8,615,000) ....................... 8,615,000 ------------ VARIABLE RATE OBLIGATIONS--20.3% BANKS--5.7% Wachovia Corp.++ 2.129% 09/18/02 ............................. 10,000 10,017,046 Wells Fargo & Co.++ 1.870% 10/30/02 ............................. 7,000 7,001,759 ------------ 17,018,805 ------------ SECURITY BROKERS & DEALERS--14.6% Bear Stearns Companies, Inc. (The)++ 1.860% 09/03/02 ............................. 10,000 10,000,000 Lehman Brothers Holdings++ 1.840% 09/03/02 ............................. 8,000 8,000,000 Merrill Lynch & Co., Inc.++ 2.020% 09/24/02 ............................. 11,317 11,327,485 See Accompanying Notes to Financial Statements. 3 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF NET ASSETS (CONTINUED) AUGUST 31, 2002 PAR (000) VALUE ------- ------------ SECURITY BROKERS & DEALERS--(CONTINUED) Salomon Smith Barney Holdings, Inc.++ 2.134% 10/24/02 ............................. $10,000 $ 10,026,978 1.788% 10/28/02 ............................. 4,000 4,000,000 ------------ 43,354,463 ------------ TOTAL VARIABLE RATE OBLIGATIONS (Cost $60,373,268) ...................... 60,373,268 ------------ AGENCY OBLIGATIONS--3.7% Federal Home Loan Mortgage Corporation 1.880% 11/07/02 ............................. 5,000 4,982,506 2.120% 09/26/03 ............................. 6,000 6,000,000 ------------ TOTAL AGENCY OBLIGATIONS (Cost $10,982,506) ...................... 10,982,506 ------------ REPURCHASE AGREEMENTS--20.7% Morgan Stanley & Co., Inc. (Tri-Party Agreement dated 08/30/02 to be repurchased at $25,005,222.22 collateralized by $25,125,000.00 Federal Gold Strip Principal due 07/15/26 to 06/01/31. Market Value of collateral is $25,878,750.) 1.880% 09/03/02 ............................. 25,000 25,000,000 UBS Warburg LLC (Tri-Party Agreement dated 08/30/02 to be repurchased at $36,607,686.00 collateralized by $16,281,733.56 Federal Home Loan Mortgage Corp. at a rate of 6.5% due 09/15/26, and $21,416,295.85 Federal National Mortgage Corp. due 04/25/30. Market Value of collateral is $37,499,941.28) 1.890% 09/03/02 ............................. 36,600 36,600,000 ------------ TOTAL REPURCHASE AGREEMENTS (Cost $61,600,000) ...................... 61,600,000 ------------ VALUE ------------ TOTAL INVESTMENTS AT VALUE--101.8% (Cost $302,547,958) ......................... $302,547,958 ------------ LIABILITIES IN EXCESS OF OTHER ASSETS--(1.8)% Interest receivable and other Assets ...................................... 1,019,553 Payable for Securities Purchased ............... (6,000,000) Dividends payable .............................. (83,305) Accrued expenses ............................... (394,029 ------------ (5,457,781) NET ASSETS (Applicable to 52,855,520 Bedford shares, 244,095,529 Sansom Street shares and 800 other shares)--100.0% .............. $297,090,177 ============ NET ASSET VALUE, Offering and Redemption Price Per Share ($297,090,177 / 296,951,849) ................ $1.00 ===== + Variable Rate Demand Note -- The interest rate shown is the rate as of August 31, 2002 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, 2002 and the maturity date shown is the shorter of the next interest rate readjustment date or the maturity date. INVESTMENT ABBREVIATIONS IDR ................... Industrial Development Revenue LOC ................................. Letter of Credit RB ...................................... Revenue Bond VRDN ....................... Variable Rate Demand Note See Accompanying Notes to Financial Statements. 4 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2002 Investment Income Interest ................................................ $21,040,090 ----------- Expenses Distribution fees ....................................... 3,251,617 Investment advisory fees ................................ 3,037,792 Registration fees ....................................... 377,982 Printing fees ........................................... 307,112 Legal fees .............................................. 282,488 Transfer agent fees ..................................... 165,271 Custodian fees .......................................... 138,277 Audit fees .............................................. 137,616 Directors' fees ......................................... 80,060 Insurance expense ....................................... 24,331 Miscellaneous ........................................... 14,511 Service organization fees ............................... 14,151 ----------- Total Expenses ..................................... 7,831,208 Less fees waived ........................................ (926,847) Less expense reimbursement by advisor ................... (683,979) ----------- Net total expenses ................................. 6,220,382 ----------- Net investment income ...................................... 14,819,708 ----------- Realized gain on investments ............................... 135,451 ----------- Net increase in net assets resulting from operations ....... $14,955,159 =========== See Accompanying Notes to Financial Statements. 5 THE BEDFORD FAMILY THE RBB FUND, INC. MONEY MARKET PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2002 AUGUST 31, 2001 --------------- --------------- Increase (decrease) in net assets: Operations: Net investment income .................................... $ 14,819,708 $ 59,582,670 Net gain on investments .................................. 135,451 105,064 -------------- -------------- Net increase in net assets resulting from operations ..... 14,955,159 59,687,734 -------------- -------------- Distributions to shareholders: Dividends to shareholders from Net Investment Income: Bedford shares ......................................... (6,602,799) (24,842,700) Cash Preservation shares ............................... (2,033) (13,247) Bear Stearns shares .................................... (7,224) -- Principal shares ....................................... (3,345,540) (12,476,504) Sansom Street shares ................................... (4,862,112) (12,942,542) Select shares .......................................... -- (9,307,677) -------------- -------------- Total Dividends to shareholders ...................... (14,819,708) (59,582,670) -------------- -------------- Net capital share transactions ............................. (878,950,617) (228,925,598) -------------- -------------- Total decrease in net assets ............................... (878,815,166) (228,820,534) Net Assets: Beginning of year ........................................ 1,175,905,343 1,404,725,877 -------------- -------------- End of year .............................................. $ 297,090,177 $1,175,905,343 ============== ==============
See Accompanying Notes to Financial Statements. 6 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, 2002 AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 --------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year .................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income ................ 0.0157 0.0460 0.0512 0.0425 0.0473 -------- -------- -------- -------- -------- Total from investment operations ........................ 0.0157 0.0460 0.0512 0.0425 0.0473 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) .................. (0.0157) (0.0460) (0.0512) (0.0425) (0.0473) -------- -------- -------- -------- -------- Total distributions ................. (0.0157) (0.0460) (0.0512) (0.0425) (0.0473) -------- -------- -------- -------- -------- Net asset value, end of year ........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return ........................... 1.59% 4.70% 5.24% 4.34% 4.84% Ratios /Supplemental Data Net assets, end of year (000) ........ $ 52,878 $676,964 $423,977 $360,123 $762,739 Ratios of expenses to average net assets(b) ....................... 1.00% 1.00% .97% .97% .97% Ratios of net investment income to average net assets ............... 1.75% 4.46% 5.15% 4.25% 4.73% (a) Financial Highlights relate solely to the Bedford Class of shares within this 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 1.25%, 1.19%, 1.05%, 1.08% and 1.10% for the years ended August 31, 2002, 2001, 2000, 1999 and 1998, respectively.
See Accompanying Notes to Financial Statements. 7 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2002 NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The RBB Fund, Inc. ("RBB") was incorporated under the laws of the State of Maryland on February 29, 1988, and is registered under the Investment Company Act of 1940, as amended, (the "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 thirteen investment portfolios, including the Bedford Money Market Portfolio. The Fund has authorized capital of thirty billion shares of common stock of which 21.073 billion shares are currently classified into ninety-five classes of Common Stock. Each class represents an interest in an active or inactive RBB investment portfolio. The active classes have been grouped into six separate "families," all of which have begun investment operations. 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 accrued when earned. 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 director 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. All distributions from net investment income are taxed as ordinary income. 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 continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code and make the requisite distributions to its shareholders which will be sufficient to relieve it from Federal income and excise taxes. E) REPURCHASE AGREEMENTS -- Money market instruments may be purchased subject to the seller's agreement to repurchase them at an agreed upon date and price. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price plus accrued interest. If the value of the underlying securities falls below 102% of the value of the 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. 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. 8 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2002 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 portfolio described herein and also serves as administrator for the Money Market Portfolio. For the Money Market Portfolio, 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 portfolio, paid out of the fee paid to BIMC. For its advisory services, BIMC is entitled to receive the following fees, computed daily and payable monthly, and based on the portfolio's average daily net assets: PORTFOLIO ANNUAL RATE ---------------------- --------------------------------------------- Money Market Portfolio .45% of first $250 million of net assets; .40% of next $250 million of net assets; .35% of net assets in excess of $500 million. BIMC may, at its discretion, voluntarily waive all or any portion of its advisory fee for this portfolio. For each class of shares within the portfolio, the net advisory fee charged to each class is the same on a relative basis. For the year ended August 31, 2002, advisory fees and waivers for the investment portfolio were as follows:
GROSS NET ADVISORY ADVISORY FEE WAIVER FEE ---------- --------- ---------- Money Market Portfolio $3,037,792 $(788,747) $2,249,045
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, 2002, the expense caps were as follows: PORTFOLIO CLASS OF SHARES EXPENSE CAP ---------------------- --------------- ----------- Money Market Portfolio Bedford 1.00% Sansom Street .49 Reimbursed expenses for the year ended August 31, 2002 were $683,979 for the Money Market Portfolio. PFPC Trust Co. serves as custodian for the Fund's portfolio. As compensation for such custodial services, PFPC Trust Co. is entitled to receive the following fees, computed daily and payable monthly, and based on the portfolio's average gross assets: PORTFOLIO ANNUAL RATE ---------------------- ------------------------------------------------ Money Market Portfolio .25% of first $50 million of gross assets; .02% of next $50 million of gross assets; .015% of gross assets in excess of $100 million. 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. 9 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2002 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, 2002, transfer agency fees and waivers for each class of shares within the investment portfolio were as follows:
GROSS NET TRANSFER AGENCY TRANSFER AGENCY FEE WAIVER FEE --------------- ---------- --------------- Money Market Portfolio Bedford Class $127,250 $(127,250) -- Cash Preservation Class 3,835 (3,696) $ 139 Bear Stearns Class -- -- -- Principal Class 4,404 (4,404) -- Sansom Street Class 29,782 (2,750) 27,032 -------- --------- ------- Total Money Market Portfolio $165,271 $ 138,100 $27,171 ======== ========= ========
The Fund, on behalf of each class of shares within the investment portfolio, has adopted Distribution Plans pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended. The Fund has entered into a Distribution Contract with PFPC Distributors Inc. ("PFPC Distributors"). PFPC Distributors is a wholly-owned subsidiary of PFPC Worldwide Inc., an indirect majority-owned subsidiary of The PNC Financial Services Group, Inc. The plans provide for each class to make monthly payments, based on average net assets, to PFPC Distributors of up to .65% on an annualized basis for the Bedford, Cash Preservation, Bear Stearns and Principal Classes and up to .20% on an annualized basis for the Sansom Street Class. For the year ended August 31, 2002, distribution fees paid to PFPC Distributors for each class were as follows: DISTRIBUTION FEE ------------- Money Market Portfolio Bedford Class $2,455,545 Cash Preservation Class 449 Bear Stearns Class 2,838 Principal Class 677,143 Sansom Street Class 115,642 ---------- Total Money Market Portfolio $3,251,617 ========== 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, 2002, service organization fees were $14,151 for the Money Market Portfolio. 10 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2002 NOTE 3. CAPITAL SHARES Transactions in capital shares (at $1 per capital share) for each year were as follows:
MONEY MARKET PORTFOLIO ----------------------------------------- FOR THE FOR THE YEAR ENDED YEAR ENDED AUGUST 31, 2002 AUGUST 31, 2001 --------------- --------------- VALUE VALUE --------------- --------------- Shares sold: Bedford Class $ 574,531,230 $ 977,375,528 Cash Preservation Class**** 81,222 239,568 Bear Stearns Class** 13,403,021 -- Principal Class*** 339,878,249 574,335,866 Sansom Street Class 1,682,808,874 1,562,347,829 Select Class* -- 947,199,090 --------------- --------------- Total Shares Sold 2,610,702,596 4,061,497,881 Shares issued on reinvestment of dividends: Bedford Class 7,167,536 25,009,271 Cash Preservation Class**** 2,178 13,843 Bear Stearns Class** 7,224 -- Principal Class*** 3,597,374 12,586,542 Sansom Street Class 312,927 725,168 --------------- --------------- Total Shares Reinvested 11,087,239 38,334,824 Shares repurchased: Bedford Class (1,205,804,868) (780,367,053) Cash Preservation Class**** (277,939) (471,279) Bear Stearns Class** (13,410,245) -- Principal Class*** (640,588,392) (507,329,527) Sansom Street Class (1,640,659,008) (1,688,185,685) Select Class* -- (1,352,404,759) --------------- --------------- Total Shares Repurchased (3,500,740,452) (4,328,758,303) --------------- --------------- Net increase (decrease) $ (878,950,617) $ (228,925,598) =============== =============== Bedford Shares authorized 1,500,000,000 1,500,000,000 =============== =============== * The Select Class of shares was liquidated on January 31, 2001 ** The Bear Stearns Class of shares began operations on November 28, 2001, and was liquidated June 28, 2002. *** The Principal Class of shares was liquidated on March 25, 2002. **** The Cash Preservation Class of shares was liquidated on April 30, 2002.
NOTE 4. NET ASSETS At August 31, 2002, net assets consisted of the following: MONEY MARKET PORTFOLIO ------------ Paid-in capital $296,951,848 Accumulated net realized gain/(loss) on investments 138,329 ------------ Total net assets $297,090,177 ============ 11 THE BEDFORD FAMILY THE RBB FUND, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) AUGUST 31, 2002 NOTE 5. OTHER FINANCIAL HIGHLIGHTS The Fund currently offers one other class of shares representing interest in the Money Market Portfolio: Sansom Street. The Sansom Street class is marketed to different types of investors. Such information is available in the annual report of its respective family. The financial highlights of the Sansom Street Class 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, 2002 AUGUST 31, 2001 AUGUST 31, 2000 AUGUST 31, 1999 AUGUST 31, 1998 ---------------- --------------- --------------- --------------- --------------- Net asset value, beginning of year .... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 -------- -------- -------- -------- -------- Income from investment operations: Net investment income .............. 0.0209 0.0511 0.0560 0.0473 0.0520 -------- -------- -------- -------- -------- Total net income from investment operations ..................... 0.0209 0.0511 0.0560 0.0473 0.0520 -------- -------- -------- -------- -------- Less distributions Dividends (from net investment income) (0.0209) (0.0511) (0.0560) (0.0473) (0.0520) -------- -------- -------- -------- -------- Total distributions .............. (0.0209) (0.0511) (0.0560) (0.0473) (0.0520) -------- -------- -------- -------- -------- Net asset value, end of year .......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return .......................... 2.11% 5.23% 5.75% 4.83% 5.34% Ratios /Supplemental Data Net assets, end of year (000) ...... $244,212 $201,632 $326,745 $841,887 $684,066 Ratios of expenses to average net assets(b) ........................ .49% .49% .49% .49% .49% Ratios of net investment income to average net assets ............... 2.10% 5.23% 5.42% 4.73% 5.20% (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 .64%, .61%, .61%, .62% and .62% for the years ended August 31, 2002, 2001, 2000, 1999 and 1998, respectively.
12 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and Board of Directors of The RBB Fund, Inc.: In our opinion, the accompanying statement 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 Portfolio, a separately managed portfolio of The RBB Fund, Inc. (the "Fund") at August 31, 2002, 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 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, 2002, by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Philadelphia, Pennsylvania October 16, 2002 13 THE BEDFORD FAMILY THE RBB FUND, INC. FUND MANAGEMENT (UNAUDITED) Information pertaining to the Directors and Officers of the Fund is set forth below. The statement of additional information (SAI) includes additional information about the Directors and is available without charge, upon request, by calling (800) 533-7719.
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND AGE WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Julian A. Brodsky - 69 Director - Until successor is Director and Vice Chairman, 13 Director, Comcast Corporation elected and Comcast Corporation (cable Comcast 1500 Market Street, qualified or until television and communications) Corporation; 35th Fl. his death, since 1969. Director, Philadelphia, PA 19102 resignation or NDS Group,PLC removal. (provider of systems and - 1988 to present applications for digital pay TV). ------------------------------------------------------------------------------------------------------------------------------------ Francis J. McKay - 66 Director - Until successor is Executive Vice President, Fox 13 None Fox Chase Cancer Center elected and Chase Cancer Center 7701 Burholme Avenue qualified or until (biomedical research and Philadelphia, PA 19111 his death, medical care) since 1963. resignation or removal. - 1988 to present ------------------------------------------------------------------------------------------------------------------------------------ Arnold M. Reichman - 54 Director - Until successor is Director, Gabelli Partners, 13 None 106 Pierreport Street elected and L.P. (an investment Brooklyn, NY 11201 qualified or until partnership) since December his death, 2000; Chief Operating Officer resignation or and member of the Board of removal. Directors of Outercurve Technologies (wireless - 1991 to present enabling services) until April 2001; Chief Operating Officer and member of the Executive Operating Committee of Warburg Pincus Asset Management, Inc.; Executive Officer and Director of Credit Suisse Asset Management Securities, Inc. (formerly Counsellors Securities, Inc.) and Director/Trustee of various investment companies advised by Warburg Pincus Asset Management, Inc. until September 15, 1999; Managing Director of Warburg Pincus Asset Management, Inc. until 1997. ------------------------------------------------------------------------------------------------------------------------------------ Marvin E. Sternberg - 68 Director - Until successor is Chairman, Director and 13 Chairman Moyco Technologies, Inc. elected and President, Moyco Technologies, and Director, 200 Commerce Drive qualified or until Inc. (manufacturer of Moyco Inc. Montgomeryville, PA 18936 his death, precision coated and Technologies, resignation or industrial abrasives) since Inc. removal. 1974; Director, Pennsylvania Business Bank since 1999. - 1988 to present ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Robert Sablowsky** - 64 Director - Until successor is Senior Vice President of 13 None Fahnestock & Company, Inc. elected and Fahnestock & Co., Inc. 125 Broad Street qualified or until (financial services) since New York, NY 10004 his death, 2002 and employed by resignation or Fahnestock & Co., Inc. for removal. greater than 5 years. - 1991 to present ------------------------------------------------------------------------------------------------------------------------------------
14 THE BEDFORD FAMILY THE RBB FUND, INC. FUND MANAGEMENT (CONTINUED) (UNAUDITED)
------------------------------------------------------------------------------------------------------------------------------------ NUMBER OF TERM OF OFFICE PORTFOLIOS IN OTHER NAME, ADDRESS, POSITION(S) HELD AND LENGTH OF PRINCIPAL OCCUPATION(S) FUND COMPLEX DIRECTORSHIPS AND AGE WITH FUND TIME SERVED DURING PAST 5 YEARS OVERSEEN BY HELD BY DIRECTOR DIRECTOR ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ J. Richard Carnall** - 64 Director and - Until successor is Director of PFPC Inc. 13 None 86 New Freedom Road Chairman of elected and (financial services) since Medford, NJ 08055 the Board qualified or until 1987; Chairman and Chief his death, Executive Officer of PFPC Inc. resignation or from 1987 to 2002; Executive removal. Vice President of PNC Bank, National Association from 1981 - August 2002 to to 2002; Director of PFPC present International Ltd. (financial services) from 1993 to 2002; Director of PFPC International (Cayman) Ltd. (financial services) from 1996 to 2002; Director of International Dollar Reserve Fund, Ltd. (Cayman Mutual Fund Company) from 1993 to 2002; Governor of the Investment Company Institute (investment company industry trade organization) from 1996 to 2002; Director of PNC Asset Management, Inc. (investment advisory) from 1994 to 1998; Director of PNC National Bank from 1995 to 1997; Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984. Mr. Carnall provides consulting services from time to time to PFPC Inc. ------------------------------------------------------------------------------------------------------------------------------------ OFFICER(S) WHO ARE NOT DIRECTORS ------------------------------------------------------------------------------------------------------------------------------------ Edward J. Roach - 78 President and - Until successor is Certified Public Accountant; N/A N/A 400 Bellevue Parkway Treasurer elected by the Vice Chairman of the Board, 4th Floor board. Fox Chase Cancer Center Wilmington, DE 19809 (biomedical research and - 1991 and 1988 medical care); Trustee respectively Emeritus, Pennsylvania School for the Deaf; Trustee Emeritus, Immaculata University; President or Vice President and Treasurer of various investment companies advised by subsidiaries of PNC Bank Corp. from 1981 to 1997; Managing General Partner and President of Chestnut Street Exchange Fund; Director of the Bradford Funds, Inc. from 1996 to 2000. ------------------------------------------------------------------------------------------------------------------------------------ Timothy K. Biedrzycki - 54 Secretary and - Until successor is Director and Vice President, N/A N/A 400 Bellevue Parkway Assistant elected by the Fund Accounting and 4th Floor Treasurer board. Administration of PFPC Inc. Wilmington, DE 19809 since 1998; Director and Vice - 2000 and 1998 President, Fund Accounting and respectively Administration of Federated Services Company (financial services) from 1994 to 1997. ------------------------------------------------------------------------------------------------------------------------------------ ** Mr. Carnall is considered 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. Carnall also owns shares of PFPC Inc., the Company's administrator. Mr. Sablowsky is considered an "interested Director" of the Company by virtue of his position as an officer of a registered broker-dealer.
15 SHAREHOLDER VOTING RESULTS (UNAUDITED) On August 30, 2002 a meeting of shareholders of The RBB Fund, Inc. (the "Fund") was held. The purpose of the meeting was to elect the following individuals as directors of the Fund: Julian A. Brodsky J. Richard Carnall Francis J. McKay Arnold M. Reichman Robert Sablowsky Marvin E. Sternberg The results were as follows:
SHARES VOTED SHARES VOTED SHARES TOTAL SHARE DIRECTOR: IN FAVOR: AGAINST: ABSTAINED: VOTES: ------------------- --------------- ------------ ----------- --------------- Julian A. Brodsky 211,501,409.867 0 498,490.822 211,999,900.689 J. Richard Carnall 211,476,781.686 0 523,119.003 211,999,900.689 Francis J. McKay 211,582,965.318 0 416,935.371 211,999,900.689 Arnold M. Reichman 211,544,328.943 0 455,571.746 211,999,900.689 Robert Sablowsky 211,574,208.446 0 425,692.243 211,999,900.689 Marvin E. Sternberg 211,510,809.394 0 489,091.295 211,999,900.689
16 THE BEAR STEARNS FUNDS 575 LEXINGTON AVENUE NEW YORK, NY 10167 1.800.766.4111 MONEY MARKET PORTFOLIO INVESTMENT ADVISER BlackRock Institutional Management Corporation 100 Bellevue Parkway Wilmington, DE 19809 ADMINISTRATOR/TRANSFER AGENT PFPC Inc. 400 Bellevue Parkway Wilmington, DE 19809 DISTRIBUTOR PFPC Distributors, Inc. 3200 Horizon Dr. King of Prussia, PA 19406 CUSTODIAN PFPC Trust Company 8800 Tinicum Blvd. Suite 200 Philadelphia, PA 19153 INDEPENDENT ACCOUNTANTS 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