RBB
FAMILY OF MUTUAL FUNDS
A TRADITION OF BUILDING WEALTH
LOGO (GRAPHIC OMITTED)
Government Securities Portfolio
Semi-Annual Report
February 28, 1998
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
SEMI-ANNUAL INVESTMENT ADVISER'S REPORT
GOVERNMENT SECURITIES PORTFOLIO
For the period September 1, 1997 through February 28, 1998, the economic
landscape continued to promote declining interest rates. Indications of
inflation, such as the Producer Price Index and the Consumer Price Index, have
consistently evidenced declining costs of production at the manufacturer level
and reduced prices for consumers at the retail level. With the unemployment rate
at a 24 year low, job growth, income growth, and a rising stock market have
influenced and maintained strong consumer spending. Monetary policy is unchanged
with Fed Funds rate at 5.50% since March of 1997 but the Asian financial crisis
has yet to impact the U.S. markets which could provoke the Federal Open Market
Committee to alter the current level of short term interest rates. During the
period September 1, 1997 and ending February 28, 1998, the yield curve, as
measured by the 3 months to 30 year treasury curve, has flattened 79 basis
points to 61 from 140. The Government Securities Portfolio was fully invested
during this period and the average maturity on February 28, 1998 was 7.1 years.
PNC Institutional Management Corporation
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF NET ASSETS
FEBRURARY 28, 1998
(UNAUDITED)
PAR
(000) VALUE
------ ----------
AGENCY OBLIGATIONS--34.1%
Federal Home Loan Bank
6.500% 11/29/05....................... $ 250 $ 260,130
Federal National Mortgage Association
7.050% 12/10/98 ...................... 250 252,275
6.750% 08/24/00 ...................... 250 251,267
8.250% 12/18/00 ...................... 1,000 1,064,610
Government National Mortgage Association
9.000% 08/24/00 ...................... 230 247,068
----------
TOTAL AGENCY OBLIGATIONS
(Cost $1,994,032) ................ 2,075,350
----------
U.S. TREASURY OBLIGATIONS--65.2%
U.S. TREASURY BONDS--26.1%
8.500% 02/15/20 ...................... 1,000 1,301,330
7.250% 05/15/16 ...................... 250 284,895
----------
1,586,225
----------
U.S. TREASURY NOTES--39.1%
7.125% 10/15/98 ...................... 399 402,982
6.875% 07/31/99 ...................... 150 152,636
7.500% 05/15/02 ...................... 250 267,345
5.500% 11/15/98 ...................... 250 249,960
7.500% 10/31/99 ...................... 250 257,497
7.125% 02/29/00 ...................... 250 257,230
6.375% 09/30/01 ...................... 250 256,025
7.500% 11/15/01 ...................... 250 265,570
7.000% 07/15/06 ...................... 250 270,853
----------
2,380,098
----------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $3,556,827) ................ 3,966,323
----------
VALUE
----------
TOTAL INVESTMENTS--99.3%
(Cost $5,550,859) .................... $6,041,673
OTHER ASSETS IN EXCESS
OF LIABILITIES--0.7% ................. 39,967
----------
NET ASSETS (Applicable to 689,427
RBB Shares)--100.0% .................. $6,081,640
==========
NET ASSET VALUE AND REDEMPTION
PRICE PER SHARE
($6,081,640 (DIVIDE) 689,427) ........ $8.82
=====
OFFERING PRICE PER SHARE
($8.82 (DIVIDE) .9525) ............... $9.26
=====
* Also cost for Federal income tax purposes. The gross appreciation
(depreciation) on a tax basis is as follows:
Gross Appreciation .............. $503,245
Gross Depreciation .............. (12,431)
--------
Net Appreciation ................ $490,814
========
See Accompanying Notes to Financial Statements.
2
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED FEBRUARY 28, 1998 (UNAUDITED)
Investment Income
Interest ..................................................... $216,599
--------
Expenses
Investment advisory fees ..................................... 12,616
Distribution fees ............................................ 12,616
Printing expenses ............................................ 10,300
Transfer agent fees .......................................... 7,000
Custodian fees ............................................... 6,210
Registration fees ............................................ 6,000
Administration fees .......................................... 3,154
Other expenses ............................................... 1,710
--------
59,606
Less fees waived ............................................. (15,770)
Less expense reimbursements by advisor ....................... (21,758)
--------
Total expenses ............................................ 22,078
--------
Net investment income ........................................... 194,521
--------
Realized and unrealized gain (loss) on investments
Net realized loss on investments ............................. (2,916)
Increase in net unrealized appreciation on investments ....... 155,539
--------
Net gain on investments ...................................... 152,623
--------
Net increase in net assets resulting from operations ............ $347,144
========
See Accompanying Notes to Financial Statements.
3
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
GOVERNMENT SECURITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
----------------- ---------------
(UNAUDITED)
<S> <C> <C>
Increase in net assets:
Operations:
Net investment income ........................................... $ 194,521 $ 466,003
Net gain on investments ......................................... 152,623 135,686
---------- -----------
Net increase in net assets resulting from operations ............ 347,144 601,689
---------- -----------
Distributions to shareholders:
Dividends to shareholders from net investment income:
RBB shares ...................................................... (194,521) (466,085)
Distributions to shareholders from capital:
RBB shares ...................................................... (177,386) (262,254)
---------- -----------
Total distributions to shareholders ......................... (371,907) (728,339)
---------- -----------
Net capital share transactions .................................... (630,963) (1,920,686)
---------- -----------
Total decrease in net assets ...................................... (655,726) (2,047,336)
Net Assets:
Beginning of period ............................................. 6,737,366 8,784,702
---------- -----------
End of period ................................................... $6,081,640 $ 6,737,366
========== ===========
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
--------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE
SIX MONTHS YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995* AUGUST 31, 1994
----------------- --------------- --------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ...... $ 8.87 $ 9.04 $ 9.54 $ 9.69 $ 10.73
------- -------- -------- ------- --------
Income from investment operations:
Net investment income .................. 0.5287 0.8744 0.5220 0.5819 0.5931
Net gains on securities
(both realized and unrealized) ....... (0.0500) (0.1346) (0.2540) 0.0361 (0.8651)
------- -------- -------- ------- --------
Total from investment operations .. 0.4787 1.0090 0.2680 0.6180 (0.2720)
------- -------- -------- ------- --------
Less distributions
Dividends (from net investment income) . (0.5287) (0.8744) (0.5220) 0.5819 (0.5901)
Distributions (from excess net
investment income) ................... -- -- -- -- (0.0235)
Return of capital ...................... -- (0.3046) (0.2460) (0.1861) (0.1544)
------- -------- -------- ------- --------
Total distributions .............. (0.5287) (1.1790) (0.7680) (0.7680) (0.7680)
------- -------- -------- ------- --------
Net asset value, end period ............... $ 8.82 $ 8.87 $ 9.04 $ 9.54 $ 9.69
======= ======== ======== ======= ========
Total return .............................. (1.11%)(b)(c) 9.39%(b) 2.75%(b) 6.72%(b) (2.60%)(b)
Ratios/Supplemental Data
Net assets, end of year (000) .......... $ 6,082 $ 6,737 $ 8,785 $10,514 $54,938
Ratios of expenses to
average net assets ................... 0.70%(a)(c) 0.70%(a) 0.70%(a) 0.72%(a) .64%(a)
Ratios of net investment income to
average net assets .................. 6.87%(c) 6.18% 6.05% 6.59% 5.86%
Portfolio turnover rate ................ -- 26% 77% 86% 65%
</TABLE>
(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
1.89% for the six months ending February 28, 1998, 2.15%, 2.05%, 1.22% and
1.10% for the years ended August 31, 1997, 1996, 1995 and 1994,
respectively.
(b) Sales load not reflected in total return.
(c) Annualized.
* Certain numbers were revised to conform to current year presentation.
See Accompanying Notes to Financial Statements.
5
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS
FEBRUARY 28, 1998
(UNAUDITED)
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
twenty-three 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 14.03 billion are currently classified into eighty-three classes. Each
class represents an interest in one of twenty-three investment portfolios of the
Fund. The classes have been grouped into fifteen separate "families", eight 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 and the Boston Partners
Family. The RBB Family represents interests in one portfolio, which are covered
in this report.
A) SECURITY VALUATION -- Government Securities Portfolio:
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 -- Government
Securities Portfolio: 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 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. 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.
6
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998
(UNAUDITED)
NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to Investment Advisory Agreements, PNC Institutional Management
Corporation ("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:
PORTFOLIO ANNUAL RATE
------------------------------- -----------------------------------------
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.
PIMC may, at its discretion, voluntarily waive all or any portion of its
advisory fee. For the six months ended February 28, 1998, advisory fees and
waivers were as follows:
GROSS NET
ADVISORY ADVISORY
FEE WAIVER FEE
-------- -------- --------
Government Securities Portfolio $12,616 $(12,616) $ --
======= ======== ====
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 six months ended February 28, 1998, the reimbursed expenses were $21,758.
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 six months ended February 28, 1998, transfer agency
fees and waivers were as follows:
GROSS NET
TRANSFER AGENCY TRANSFER AGENCY
FEE WAIVER FEE
--------------- ------ ---------------
Government Securities Portfolio $7,000 $ -- $7,000
====== ==== ======
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 six months ended February 28, 1998, administration fees and waivers were
as follows:
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- ------- --------------
Government Securities Portfolio $3,154 $(3,154) $ --
====== ======= ====
*As of March 31, 1998, PNC Institutional Management Corporation has officially
changed their name to BlackRock Institutional Management Corporation.
7
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998
(UNAUDITED)
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, Cash Preservation, Janney
Montgomery Scott and RBB Classes, and up to .20% on an annualized basis for the
Sansom Street Class.
For the six months ended February 28, 1998, distribution fees for each
class of shares within the three investment portfolios were as follows:
DISTRIBUTION
FEE
------------
Government Securities Portfolio
RBB Class $12,616
=======
NOTE 3. PURCHASE AND SALES OF SECURITIES
For the six months ended February 28, 1998, 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 $-- $-- $-- $1,119,991
</TABLE>
NOTE 4. CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES PORTFOLIO
-----------------------------------------------------------
FOR THE FOR THE
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1998 AUGUST 31, 1997
------------------------- -------------------------
(UNAUDITED)
SHARES VALUE SHARES VALUE
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Shares sold:
RBB Class 183 $ 1,648 6,764 $ 60,974
Shares issued in reinvestment of dividends:
RBB Class 25,879 230,299 49,208 441,918
Shares repurchased:
RBB Class (96,593) (862,910) (267,555) (2,423,578)
----------- --------- ----------- -----------
Net decrease (70,531) $(630,963) (211,583) $(1,920,686)
----------- --------- ----------- -----------
RBB Shares authorized 100,000,000 100,000,000
=========== ===========
</TABLE>
8
<PAGE>
THE RBB FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FEBRUARY 28, 1998
(UNAUDITED)
NOTE 5. NET ASSETS
At February 28, 1998, net assets consisted of the following:
GOVERNMENT
SECURITIES
PORTFOLIO
-----------
Capital Paid-In
RBB Class $10,067,058
Accumulated Net Realized Gain (Loss) on Investments
RBB Class (4,476,232)
Unrealized Appreciation (Depreciation) on Investments
RBB Class 490,814
-----------
$ 6,081,640
===========
9
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