[Logo Graphic Omitted]
RBB
FAMILY OF MUTUAL FUNDS
A TRADITION OF BUILDING WEALTH
Government Securities Portfolio
Annual Report
August 31, 1997
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
ANNUAL INVESTMENT ADVISER'S REPORT
GOVERNMENT SECURITIES PORTFOLIO
During the period September 1, 1996 through August 31, 1997, economic
conditions were conducive to declining interest rates. With the exception of a
"pre-emptive" move by the Federal Open Market Committee in March of 1997 to
counter the potential threat of inflation, the rate of inflation year to date
has declined below Fed expectation as of this writing. For the period September
1, 1996 and ending August 31, 1997, the yield curve, as measured by the 3-month
to 30-year Treasury issues, has flattened 44 basis points to 140 from 184. For
fixed income investors, the intermediate area of the Treasury curve provided the
best returns for this period.
The Government Securities Portfolio was fully invested during this period
with cash levels below 5% and the average maturity within a narrow band of 6.6
to 7.1 years.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN THE GOVERNMENT SECURITIES PORTFOLIO, AND THE LEHMAN
BROTHERS INTERMEDIATE GOVERNMENT INDEX
FROM INCEPTION 8/1/91 AND AT EACH FISCAL YEAR END
-----------------------------------
AVERAGE ANNUAL TOTAL RETURN
One Year 4.20%
From Inception 5.66%
-----------------------------------
[Line Graph Omitted-Plot Points as Follows:]
Lehman
Brothers
Government Intermediate
Securities Government
Portfolio Index
----------- ------------
8/1/91 9,525 10,000
8/31/92 10,850 11,299
8/31/93 11,974 12,280
8/31/94 11,663 12,247
8/31/95 12,447 13,344
8/31/96 12,789 13,939
8/31/97 13,982 15,061
Note: Past performance is not predictive of future performance.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of The RBB Fund, Inc.:
We have audited the accompanying statements of net assets of the Government
Securities Portfolio of the RBB Fund, Inc., as of August 31, 1997 and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards.Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
August 31, 1997, by correspondence with the Custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Government Securities Portfolio of the RBB Fund, Inc., as of August 31, 1997 and
the results of their operations for the year then ended, the changes in their
net assets for each of the two years in the period then ended, and their
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 17, 1997
2
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1997
PAR
(000) VALUE
------- ---------
AGENCY OBLIGATIONS--28.4%
Federal Home Loan Mortgage Corp.
5.430% 09/05/97 ................. $ 100 $ 99,940
Federal National Mortgage Association
7.050% 12/10/98 ................. 250 253,718
6.750% 08/24/00 ................. 250 250,085
8.250% 12/18/00 ................. 1,000 1,058,570
6.500% 11/29/05 ................. 250 248,552
----------
TOTAL AGENCY OBLIGATIONS
(Cost $1,865,621) ........... 1,910,865
----------
MORTGAGE BACKED OBLIGATIONS--4.4%
Government National Mortgage Association
9.000% 08/24/00 ................. 280 297,328
----------
TOTAL MORTGAGE BACKED OBLIGATIONS
(Cost $277,553) 297,328
----------
U.S. TREASURY OBLIGATIONS--66.6%
U.S. TREASURY BONDS--21.9%
8.500% 02/15/20 ................. 1,000 1,208,750
7.250% 05/15/16 ................. 250 265,330
----------
1,474,080
----------
U.S. TREASURY NOTES--44.7%
7.125% 10/15/98 ................. 500 507,250
6.875% 07/31/99 ................. 250 254,107
7.500% 05/15/02 ................. 250 262,945
7.250% 02/15/98 ................. 250 251,788
6.125% 08/31/98 ................. 200 200,772
5.500% 11/15/98 ................. 250 249,087
7.500% 10/31/99 ................. 250 257,525
7.125% 02/29/00 ................. 250 256,127
6.375% 09/30/01 ................. 250 251,538
7.500% 11/15/01 ................. 250 261,735
7.000% 07/15/06 ................. 250 259,835
----------
3,012,709
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,216,534) ........... 4,486,789
----------
VALUE
---------
TOTAL INVESTMENTS--99.4%
(Cost $6,359,708*) .............. $6,694,982
----------
OTHER ASSETS IN EXCESS
OF LIABILITIES--0.6% ............ 42,384
----------
NET ASSETS (Applicable to 759,598
RBB Shares)--100.0% ............. 6,737,366
==========
NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE
($6,737,366 (DIVIDE) 759,958) ... $8.87
=====
OFFERING PRICE PER SHARE
($8.87 (DIVIDE) .9525) .......... $9.31
=====
* Also cost for Federal income tax purposes. The gross appreciation
(depreciation) on a tax basis is as follows:
Gross Appreciation ....... $353,535
Gross Depreciation ....... (18,261)
--------
Net Appreciation ......... $335,274
========
See Accompanying Notes to Financial Statements.
3
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997
Investment Income
Interest ....................................................... $518,995
--------
Expenses
Printing fees .................................................. 30,790
Transfer agent fees ............................................ 30,363
Investment advisory fees ....................................... 30,188
Distribution fees .............................................. 30,125
Custodian fees ................................................. 13,845
Registration fees .............................................. 12,000
Administration fees ............................................ 7,547
Miscellaneous fees ............................................. 6,573
Legal fees ..................................................... 326
Audit fees ..................................................... 184
Directors' fees ................................................ 157
Insurance fees ................................................. 150
Organization fees .............................................. 124
--------
162,372
Less fees waived ............................................... (37,735)
Less expense reimbursements by advisor ......................... (71,645)
--------
Total expenses ............................................ 52,992
--------
Net investment income .......................................... 466,003
--------
Realized and unrealized gain (loss) on investments
Net realized (loss) on investments .......................... (9,496)
Increase in net unrealized appreciation on investments ...... 145,182
--------
Net gain on investments ..................................... 135,686
--------
Net increase in net assets resulting from operations ........... $601,689
========
See Accompanying Notes to Financial Statements.
4
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income .................................... $ 466,003 $ 591,601
Net gain (loss) on investments ........................... 135,686 (287,736)
---------- ----------
Net increase in net assets resulting from operations ..... 601,689 303,865
---------- ----------
Distributions to shareholders:
Dividends to shareholders from net investment income:
RBB shares ............................................. (466,085) (534,237)
Distributions to shareholders from capital:
RBB shares ............................................. (262,254) (254,433)
---------- ----------
Total distributions to shareholders .................. (728,339) (788,670)
---------- ----------
Net capital share transactions ............................. (1,920,686) (1,244,286)
---------- ----------
Total decrease in net assets ............................... (2,047,336) (1,729,091)
Net Assets:
Beginning of year ........................................ 8,784,702 10,513,793
---------- ----------
End of year .............................................. $6,737,366 $8,784,702
========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)]
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
-------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995* AUGUST 31, 1994 AUGUST 31, 1993
---------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........... $ 9.04 $ 9.54 $ 9.69 $ 10.73 $ 10.46
------- ------- -------- -------- --------
Income from investment operations:
Net investment income ..................... 0.8744 0.5220 0.5819 0.5931 0.7080
Net gains (losses) on securities
(both realized and unrealized) .......... 0.1346 (0.2540) 0.0361 (0.8651) 0.3300
------- ------- -------- -------- --------
Total from investment operations ...... 1.0090 0.2680 0.6180 (0.2720) 1.0380
------- ------- -------- -------- --------
Less distributions
Dividends (from net investment income) .... (0.8744) (0.5220) (0.5819) (0.5901) (0.7080)
Distributions (from excess net
investment income) ...................... -- -- -- (0.0235) --
Return of capital ......................... (0.3046) (0.2460) (0.1861) (0.1544) (0.0600)
------- ------- -------- -------- --------
Total distributions ................... (1.1790) (0.7680) (0.7680) (0.7680) (0.7680)
------- ------- -------- -------- --------
Net asset value, end of year ................. $ 8.87 $ 9.04 $ 9.54 $ 9.69 $ 10.73
======= ======= ======== ======== ========
Total return ................................. 9.39%(b) 2.75%(b) 6.72%(b) (2.60%)(b) 10.36(b)
Ratios/Supplemental Data
Net assets, end of year (000) ............. $ 6,737 $ 8,785 $ 10,514 $ 54,938 $ 36,296
Ratios of expenses to average net assets .. 0.70%(a) 0.70%(a) 0.72%(a) .64%(a) .66%(a)
Ratios of net investment income to
average net assets ...................... 6.18% 6.05% 6.59% 5.86% 6.70%
Portfolio turnover rate ................... 26% 77% 86% 65% 47%
<FN>
(a) Without the waiver of advisory, administration and custody fees and without
the reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Government Securities Portfolio would have been
2.15%, 2.05%, 1.22%, 1.10% and 1.22% for the years ended August 31, 1997,
1996, 1995, 1994 and 1993, respectively.
(b) Sales load not reflected in total return.
* Certain numbers were revised to conform to current year presentation.
</FN>
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1997
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, and currently has nineteen
investment Portfolios, one of which is included in these financial statements.
The Fund has authorized capital of thirty billion shares of common stock of
which 13.67 billion are currently classified into seventy-nine classes. Each
class represents an interest in one of twenty investment portfolios of the Fund.
The classes have been grouped into sixteen separate "families," nine of which
have begun investment operations: the RBB Family, the BEA Family, the Sansom
Street Family, the Bedford Family, the Cash Preservation Family, the Janney
Montgomery Scott Money Family, the n/i Family, the Boston Partners Family, and
the Bradford Family. The RBB Family represents interests in one portfolio, which
is covered in this report.
A) SECURITY VALUATION -- Portfolio securities for which market
quotations are readily available are valued at market value, which is
currently determined using the last reported sales price. If no sales are
reported, as in the case of some securities traded over-the-counter,
portfolio securities are valued at the mean between the last reported bid
and asked prices. Corporate bonds, tax-exempt bonds and notes, and
government securities are valued on the basis of quotations provided by an
independent pricing service which uses information with respect to
transactions on bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between securities in
determining value. Short-term obligations with maturities of 60 days or
less are valued at amortized cost which approximates market value.
B) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- 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
agent 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.
C) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from
net investment income from each portfolio are declared and paid at least
monthly. Any net realized capital gains will be distributed at least
annually. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of mortgage-backed securities.
D) FEDERAL INCOME TAXES -- No provision is made for Federal taxes
as it is the Fund's intention to have the 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. 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 generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
7
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1997
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to Investment Advisory Agreements, PNC Institutional Management
Corp. ("PIMC"), a wholly owned subsidiary of PNC Asset Management Group, Inc.,
which is in turn a wholly owned subsidiary of PNC Bank, National Association
("PNC Bank"), serves as investment advisor for the portfolio described herein.
For its advisory services, PIMC is entitled to receive the following fees,
computed daily and payable monthly based on a portfolio's average daily net
assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
---------------------------------- --------------------------------------------
<S> <C> <C>
Government Securities Portfolio .40% of first $250 million of net assets;
.35% of next $250 million of net assets;
and .30% of net assets in excess of $500 million.
</TABLE>
PIMC may, at its discretion, voluntarily waive all or any portion of its
advisory fee. For the year ended August 31, 1997, advisory fees and waivers were
as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
-------- --------- --------
Government Securities Portfolio $ 30,188 $(30,188) $ --
The investment advisor has agreed to reimburse the portfolio for an amount,
if any, by which the total operating and management expenses exceed the cap. For
the year ended August 31, 1997, the reimbursed expenses were $71,645.
PNC Bank serves as custodian for the Fund. PFPC Inc.("PFPC"), an indirect
wholly-owned subsidiary of PNC Bank, serves as transfer and disbursing agent.
PFPC may, at its discretion, voluntarily waive all or any portion of its
transfer agency fee. For the year ended August 31, 1997, transfer agency fees
and waivers were as follows:
GROSS NET
TRANSFER AGENCY TRANSFER AGENCY
FEE WAIVER FEE
--------------- ------ ---------------
Government Securities Portfolio $ 30,363 $ -- $ 30,363
======== ===== ========
In addition, PFPC serves as administrator for the Government Securities
Portfolio. The administration fee is computed daily and payable monthly at the
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 year ended August 31, 1997 administration fees and waivers were as
follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- ---------- --------------
Government Securities Portfolio $ 7,547 $ (7,547) $ --
========= ========= =====
8
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1997
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
The Fund, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
Contracts with Counsellors Securities Inc. ("Counsellors"), which provide for
each class to make monthly payments, based on average net assets, to Counsellors
of up to .65% on an annualized basis for the Bedford, Bradford, Cash
Preservation, Janney Montgomery Scott and RBB Classes, and up to .20% on an
annualized basis for the Sansom Street Class.
For the year ended August 31, 1997, distribution fees were as follows:
DISTRIBUTION
FEE
------------
Government Securities Portfolio
RBB Class $ 30,125
=========
Expenses include Legal fees paid to counsel to the company, a partner of
which is secretary of the company.
Expenses include Administrative and 12B-1 fees paid to Counsellors, Inc.
whose secretary is also a director of the company.
NOTE 3. PURCHASE AND SALES OF SECURITIES
For the year ended August 31, 1997, purchases and sales of investment
securities and United States Government Obligations (other than short-term
investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES U.S. GOVERNMENT OBLIGATIONS
-------------------------- ----------------------------
PURCHASES SALES PURCHASES SALES
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Government Securities Portfolio $ -- $ -- $1,773,164 $2,088,883
</TABLE>
NOTE 4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
--------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 1997 AUGUST 31, 1996
--------------------------- ---------------------------
SHARES VALUE SHARES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold:
RBB Class 6,764 $ 60,974 18,278 $ 167,759
Shares issued in reinvestment
of dividends:
RBB Class 49,208 441,918 50,559 478,224
Shares repurchased:
RBB Class (267,555) (2,423,578) (198,915) (1,890,269)
----------- ----------- ----------- -----------
Net decrease (211,583) $(1,920,686) (130,078) $(1,244,286)
=========== =========== =========== ===========
RBB Shares authorized 100,000,000 100,000,000
=========== ===========
</TABLE>
9
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1997
NOTE 5. NET ASSETS
At August 31, 1997, net assets consisted of the following:
GOVERNMENT
SECURITIES
PORTFOLIO
-----------
Capital Paid-In
RBB Class $10,874,974
Accumulated Net Realized Gain (Loss)
on Investments
RBB Class (4,472,882)
Unrealized Appreciation (Depreciation)
on Investments
RBB Class 335,274
-----------
$ 6,737,366
===========
NOTE 6. CAPITAL LOSS CARRYOVERS
At August 31, 1997, capital loss carryovers were available to offset future
realized gains as follows: $4,472,882 in the Government Securities Portfolio of
which $602,716 expires in 1999, $764,714 expires in 2000, $750,038 expires in
2002, $2,345,238 expires in 2003, and $10,177 expires in 2004.
10
<PAGE>
