Semiannual report & accounts

 

General information

Report of the management board

Balance sheet

Profit and loss account

Cash-flow summary

Notes

Other data

Spread of net assets

List of securities

 

 

Coolsingel 120

Postbus 973

NL-3000 AZ Rotterdam

Tel. +31 - 10 - 224 12 24

Fax +31 - 10 - 411 52 88

Internet: www.robeco.com

 

Paulus C. van den Hoek, chairman

Gilles Izeboud

Philip Lambert

Dirk P.M. Verbeek

 

Robeco Fund Management B.V. (as of 27 April 2006)

Mark R. Glazener (until 27 April 2006)

Volker Wytzes (until 27 April 2006)

 

Robeco Fund Management B.V. (as of 1 January 2006)

Management Board:

Mark F. van der Kroft

Edith J. Siermann

Edwin de Weerd (as of 12 January 2006)

 

Mark R. Glazener

 

A simplified prospectus with information on Robeco N.V. and its associated costs and risks is available. This simplified prospectus and the full prospectus are available at the company's offices and via www.robeco.com.

 

This report is also published in Dutch, French, German, Italian and Spanish. Only the Dutch edition is binding.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

In the first half of 2006 strong and balanced growth was recorded globally. Generally, profitability in the corporate sector remained strong and there was ample liquidity.

Inflationary pressures emerged partly as a result of the increase in the price of commodities like oil. Many central banks, including the US Federal Reserve Bank (Fed) and the ECB tightened their monetary policies. The Bank of Japan stopped its policy of flooding the market with liquidity and bond yields increased sharply.

Until May equity markets benefited from the favorable economic outlook. This was followed by a correction triggered by fears that the Fed would overdo its tightening, putting downward pressure on economic growth and on earnings growth in the corporate sector.

This concern also led to a general change in risk perception and risk appetite. In recent years investors have generally searched for high returns by investing in assets presenting a relatively higher risk. The more uncertain economic outlook led them to show increasing preferences for markets and assets that were perceived to be safer. The correction was smallest in the US and largest in the emerging markets.

 

The valuations of equity markets generally appear to be reasonable. The economic outlook remains favorable, with expectations for a moderate slowdown in the US, continuing recovery in the euro zone and Japan, and strong growth in most of the emerging markets. Interest rates will probably go up further, while inflation may increase, but is likely to remain under control.

Equity markets should do reasonably well in this environment, although there is some  uncertainty about the possibility of the correction continuing and going too far. In addition, the US economy may slow down more sharply than envisaged, affecting growth in the rest of the world and making the environment for equities less favorable.

 

In the first half of 2006, the share price of Robeco fell from EUR 27.31 to EUR 26.50. Assuming reinvestment of the dividend of EUR 0.48 per share distributed in May 2006, this is an investment result of -1.3%. Based on net asset value, which fell from EUR 27.38 to EUR 26.40, the investment result was -1.9%. The fund's benchmark, the MSCI World Index, also fell 1.9% over the same period.

The fund performed in line with the benchmark. Thanks to the active investment policy the fund's return, before deduction of the management fee, was 0.5% higher than that of the benchmark. The sound stock selection in a variety of sectors was the driving force behind this performance. Of the 0.5% mentioned above, 0.7% was attributable to stock selection; the sector-allocation policy and the currency policy made a negative contribution of -0.1% each. The overweight position in the health-care sector and the underweight position in utilities were the cause of this. As was the case throughout 2005, the best performing stock-market sectors were once again energy, materials and utilities. Currency decisions also made a slightly negative contribution, because from June onwards we expected the Japanese yen to appreciate against the US dollar, which did not happen.

Stock selection within the consumer-staples, energy and telecommunication sectors was good, while there was below-average performance in the health-care sector. The fund Robeco aims to realize a stable performance relative to the benchmark so the fund's performance is generated by a broad range of stocks rather than just a limited selection. We would nevertheless like to single out some stocks which realized an above-average performance. Archer-Daniels-Midland returned no less than 68% due to rising ethanol prices resulting from the increased use of ethanol in oil refinery. BellSouth rose 36.1% due to AT&T's takeover bid for the company.

 

In the first half of 2006 the emphasis lay on industrials, which is a late-cyclical sector, and on the defensive health-care and consumer-staples sectors. The fund had an underweight position in financials and utilities.

Within materials the fund maintained its position in commodities (BHP Billiton, Rio Tinto and Inco) and bought gold producer Newmont Mining. We expect gold prices to rise further due to purchases by central banks in Asia and the Middle East. The limited additional gold-mining capacity to come on stream, will mainly come from Newmont Mining itself.

Industrials is a very mixed sector. Within this sector the interest in TNT was increased and a position was taken in Österreichische Post when the company went public. Both companies are active in the field of postal services and package delivery.

In the consumer-discretionary sector we increased our position in Coach. Coach designs, produces and sells affordable luxury bags. The company has seen strong growth in North America and Japan. In this same sector we also increased our interest in Partygaming at an opportune moment. Partygaming is an online gaming site, with poker games, a casino etc. After the successful bid on VNU the fund sold its position and reinvested the proceeds in Wolters Kluwer.

Within the consumer-staples sector the fund took a position in Shiseido, a company with great potential to cut costs. Shiseido is also taking advantage of the growth opportunities in China. The position in Constellation Brands was sold after a sharp rally. This company has developed into an acquirer of increasingly expensive wine-producing companies and the question is whether it will be able to realize sufficient returns on these assets.

Within the health-care sector the portfolio interests were moved from services (Omnicare, Caremark) to suppliers (Stryker, St Jude Medical, Zimmer). The shares of suppliers dropped due to price pressure on orthopedic products. We expect that this price decline will be only of a temporary nature and are positive about the long-term growth prospects for these companies.

In the financials sector we sold the fund's interest in Countrywide Financial. This mortgage bank is highly dependent on the sale of new mortgages but because of the slowdown of the US housing market we expect these sales to be disappointing. In the UK we sold the bank HBOS. The bank is cheap, but we see very little growth in the UK where consumers have accumulated a considerable debt burden in recent years. A part of the money was reinvested in DnB NOR, a Norwegian bank which we think is cheap and which operates in a country (Norway) where banking and insurance products are currently booming.

Within the information-technology sector we bought Yahoo! after its share price had dropped considerably. The company will continue to benefit from growth in Internet advertising in the years to come. The position in Yahoo! was financed by reducing the interest in Microsoft.  Microsoft stock is not expensive, but the company is still struggling with delays in the launch of new versions of its software.

Within the telecommunication sector the fund switched its position in France Telecom for one in Deutsche Telekom as the latter has more restructuring possibilities.

 

 

 

Rotterdam, 9 August 2006

 

The management board

Robeco Fund Management B.V.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EUR x thousand

 

EUR x thousand

 

 

indirect method, EUR x thousand

 

 

 

Robeco N.V. (hereafter also referred to as 'the fund') is a Dutch investment company with a variable capital within the meaning of article 28 of the 1969 Dutch Corporate Income Tax Act [Wet op de Vennootschapsbelasting 1969]. This means that no corporate-income tax is due, providing that the fund makes its profit available for distribution to shareholders in the form of dividend within eight months of the close of the financial year and satisfies any other relevant regulations. As a result of the appointment as Manager of Robeco Fund Management B.V., which holds a license from the AFM [the Netherlands Authority for the Financial Markets] under the Dutch Investment Institutions Supervision Act ['Wtb', Wet Toezicht Beleggingsinstellingen], the license in accordance with article 5 of the 1990 Dutch Investment Institutions Supervision Act has been legally cancelled. Since 26 April 2002, Robeco N.V. is subject to the EC directive containing rules for Undertakings for Collective Investment in Transferable Securities (UCITS). Under the terms of article 6 of Part II of the Dutch Investment Institutions Supervision Act, Robeco N.V. was granted a license as of the same date by the AFM, permitting trade of its shares in other EC member states.

 

Robeco N.V. appointed Robeco Fund Management B.V. as Manager of the fund as of 1 January 2006. The tasks for which the Manager will be responsible include the execution of the investment policy, management of the fund assets as well as handling the fund's financial administration, marketing and distribution. Robeco Fund Management B.V. is part of the Robeco Group and was granted a license by the Netherlands Authority for the Financial Markets to act as manager on 29 December 2005. The agreement between the fund's management board and the Manager includes the stipulation that the Manager will comply with the provisions of the prospectus, the Articles of Association and the directives of the fund's management board, insofar as these are in line with the shareholders' interests, and that the Manager will observe the applicable legislation and regulations. The Manager will also regularly report to the management board on its duties. At the General Meeting of Shareholders held on 27 April 2006 Robeco Fund Management B.V. was appointed as director of the company.

 

The semiannual report has been drawn up in conformity with the models provided by Dutch legislature for annual financial statements, taking into account the regulations that apply to semiannual reports. In certain areas descriptions have been used which better express the nature of the items and relate better to the characteristics of an investment company.

 

Robeco N.V. is an open-end investment company, meaning that, barring exceptional circumstances, Robeco N.V. issues and repurchases its shares on a daily basis at prices approximating net asset value. A fixed spread between the bid and offer price applies to cover costs related to issuance and repurchase of own shares. The issue price will not be more than 0.5% higher than the net asset value and the repurchase price will not be more than 0.5% lower than the net asset value. The abovementioned margin between the net asset value and the issue and repurchase prices, and the associated costs, are for the account and risk of Robeco Investment Consulting B.V. (RIC), as a result of which Robeco N.V. issues and repurchases its shares at net asset value. RIC will distribute any positive spread results to the funds, in proportion to each fund's positive contribution to the spread result. A buffer is maintained to cover any future losses.

 

Parties with which shares may be held in non-certificated form include Robeco Direct N.V. in the Robeco Group Accounts System or the affiliated branches of Rabobank in the Rabo Securities Account. Participants pay costs on the sum deposited for each purchase, and in the event of a sale a percentage of the sum withdrawn. These participation costs are currently a maximum of 0.4% via Robeco Direct and a maximum of 0.5% via Rabobank, depending on the channel selected. These sums will accrue to Robeco Direct and Rabobank respectively.

 

As a result of the appointment of the Manager, outsourcing of the administration has been terminated as of 1 January 2006.

 

 

 

The accounting principles for the valuation of assets and liabilities and determination of the result are unchanged, and as such are in accordance with the annual financial statements. Amounts are expressed in thousands of euros.

 

Robeco N.V. is affiliated to the entities belonging to Robeco Groep N.V. The affiliation with Robeco Groep N.V. is the result of the possibility of having decisive control or a substantial influence on the fund's business policy. Robeco Groep N.V. belongs to the Rabobank Group. The management structure of Robeco Groep N.V., in which significant authority is allocated to its independent supervisory board, is such that Rabobank does not have a meaningful say in or influence on the fund's business policy. Robeco Groep N.V. pursues an independent investment policy on behalf of its affiliated investment companies, taking into account the interests of the investors involved. Besides services of other market parties, Robeco N.V. also uses the services of one or more of these affiliated entities including transactions relating to securities, treasury, derivatives, custody, securities lending, and sale and purchase of its own shares, fund-administration services, as well as management activities. Transactions are executed at market rates.

 

 

Transactions in financial instruments may lead to the fund being subject to the risks described below or to the fund transferring these risks to another party.

Currency risk is the risk that the value of a financial instrument will fluctuate as a result of changes in exchange rates. Interest-rate risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market rates. Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, caused by factors that exclusively apply to the individual instrument or its issuer or caused by factors that affect all instruments traded in the market.

The fund minimizes the risks by investing mainly in large and well-known companies and by making a balanced selection with regard to distribution across regions, sectors, individual stocks and currencies.

 

Credit risk is the risk that the counterparty of a financial instrument will no longer meet its obligations, as a result of which the fund will suffer a financial loss. The fund minimizes this risk by trading exclusively with reputable counterparties. Wherever it is customary in the market, the fund will demand and obtain collateral.

Liquidity risk is the risk that the fund is not able to obtain the financial means required to meet the obligations arising from financial instruments. The fund minimizes this risk by mainly investing in financial instruments that are tradable on a daily basis.

 

The Report of the management board, the Balance sheet, the Notes to the balance sheet and the Spread of net assets, which includes the geographic distribution of the investments, the net currency position and distribution over sectors, give an insight into the actual risks at balance-sheet date.

 

Managing risk is a part of the investment process as a whole and with the help of advanced systems, the risks outlined above are limited, measured and monitored on the basis of fixed risk measures.

 

Investing implies that positions are taken. As it is possible to use various instruments, including derivative instruments, to construct an identical position, the selection of derivatives is subordinate to the positioning of a portfolio. In our published information, attention is given primarily to the overall position, and secondarily to the nature and volume of the financial instruments employed.

 

The market value of derivatives is reported in the Balance sheet. The presentation of the market value is based on the liabilities and receivables per counterparty. The receivables are reported under Financial investments and the liabilities are reported under Accounts payable. The value of the derivatives' underlying instruments is not included in the Balance sheet. If applicable, they are explained under the heading Commitments not shown in the balance sheet.

 

 

Shares in an amount of EUR 1,202.4 million (EUR 1,103.8 million at the end of last year) were lent at balance-sheet date. To cover the risk of non-restitution, adequate collateral with a value of EUR 1,256.4 million (EUR 1,149.5 million at the end of last year) was demanded and obtained; this collateral is not included in the Balance sheet. A breakdown of the equity portfolio and an overview of the spread of net assets can be found at the end of this report. The geographic distribution and the currency position of the equity portfolio are included in the overview of the Spread of net assets which can be found at the end of this report.

The list of movements in the fund's securities portfolio during the reporting period is available free of charge at the fund's offices.

 

Includes balances in current accounts at banks.

 

Includes a short-term loan of EUR 209 million granted by an affiliated company to Robeco N.V.
4 Shareholders' equity

 

The company's authorized share capital amounts to EUR 800 million, divided into 800,000,000 ordinary shares with a nominal value of EUR 1 each. As of 30 June 2006 the number of shares outstanding was 259,767,528. Net asset value per share amounted to EUR 26.40. In May 2006 the company distributed dividend to the amount of EUR 0.48 per share.

 

 

 

Futures contracts purchased at balance-sheet date represent an increase in assets invested of JPY 28,123 million; futures contracts sold represent a decrease in assets invested of EUR 262 million and USD 45 million. The forward-exchange transactions current at closing date represent purchases of AUD 75 million, CAD 102 million, GBP 176 million and JPY 24,245 million, against sales of CHF 250 million, USD 261 million, NOK 165 million and EUR 159 million. Futures contracts and forward exchange transactions are included in the Spread of net assets at the end of this report. Unrealized results of these transactions at closing date are included in the Profit and loss account.

 

 

 

The total expense ratio expresses the costs charged to the fund during the reporting period as a percentage of the average assets entrusted during the reporting period. The total expense ratio as shown does not include transaction costs. The total expense ratio was 0.56% during the reporting period. The management costs relate to all of the fund's current costs, which include the fees paid for registering shareholders and all costs resulting from the management of the fund, with the exception of costs relating to investments and taxes. The service fee covers the administration, the costs of the external auditor, other external advisers, regulators, costs relating to reports required by law, such as the annual and semiannual reports, and the costs relating to the meetings of shareholders. Other costs relate to bank charges and the custody fee charged by third parties for the custody of the fund's securities portfolio. The custody fee is EUR 357 thousand. For the period 1 July 2005 through 30 June 2006, the total expense ratio is 1.12%, and for the period 1 July 2004 through 30 June 2005 it was 1.05%.

 

Management costs relate exclusively to the management fee of 1.00% per year charged by the Manager. The service fee charged by the Manager amounts to 0.12% per year and covers formal and operational costs. For assets exceeding EUR 1 billion the service fee is 0.10%; for assets exceeding EUR 5 billion the service fee is 0.08%. The management fee and service fee are calculated on a daily basis, based on the average assets entrusted. Wherever in this report mention is made of the average assets entrusted this is also calculated on a daily basis, unless stated otherwise.

 

This includes custody costs and bank charges.

 

Robeco N.V. is not subject to performance fee.

 

Brokerage costs and exchange fees relating to investment transactions are discounted in the cost price or the sales value of the investment transactions. These costs and fees are charged to the result ensuing from changes in value. The quantifiable transaction costs are shown below. The transaction volume of the quantifiable transaction costs is 92.8% of the total transaction volume.

 

 

 

Various independent research institutions/third parties provide services to the company to support its decision-making process. Part of the commissions paid to brokers is used to pay for these services, so-called commission-sharing arrangements. In the reporting period commission-sharing agreements represented an amount of EUR 1,262 thousand (over the period 1 January through 30 June 2005 this was EUR 1,679 thousand). There were no hard commissions during the reporting period. 

 

This shows the turnover of the investments against the average assets entrusted and is a measure of the incurred transaction costs resulting from the portfolio policy pursued and the ensuing investment transactions. In the calculation method used, the amount of the turnover is determined by the sum of the purchases and sales of investments less the sum of issuance and repurchase of own shares. If the outcome is negative, the turnover ratio is 0. The turnover ratio is determined by expressing the amount of turnover as a percentage of the average assets entrusted. The turnover ratio over the reporting period was 22% against 43% over the period 1 January through 30 June 2005. Since 1 January 2005, the fund is no longer managed by one single person, but by a team of four fund managers. Each team member focuses on specific sectors. As a result of this, in the period 1 January through 30 June 2005, the stock selection within sectors has been adjusted in accordance with the views of the team members. Consequently, the turnover ratio was higher over the previous reporting period. These special circumstances no longer played a role in the period 1 January through 30 June 2006, therefore the turnover ratio dropped.

 

Part of the transaction volume over the reporting period relates to transactions with affiliated parties. The table below shows the various types of transactions where this was the case.

 

 

Robeco Securities Lending B.V. is the intermediary for all Robeco N.V.'s securities-lending transactions. As compensation for its services Robeco Securities Lending B.V. receives a fee of 40% of the gross return on these securities-lending transactions. An external agency periodically assesses whether the agreements between the fund and Robeco Securities Lending are still in line with the market. The return for the fund over the reporting period was EUR 776 thousand (EUR 538 thousand over the period 1 January through 30 June 2005) and for Robeco Securities Lending EUR 518 thousand (EUR 359 thousand over the period 1 January through 30 June 2005).

 

In the first half of 2006, Robeco N.V. voted at the majority of the general meetings of shareholders of the companies in which it invests. If the shares of an investment position have been lent out, the voting rights attached to those shares may not be exercised during general meetings of shareholders. If an important event were to occur, the shares that have been lent out may be recalled in order for the voting rights attached to these shares to be able to be exercised. The voting policy and more information about votes cast can be found on Robeco's Internet site, www.robeco.com.

 

Rotterdam, 9 August 2006

 

The management board

 

The ordinary shares of Robeco N.V. are listed on Eurolist by Euronext Amsterdam N.V. In addition, Robeco N.V. has a stock-exchange quotation in Paris, Brussels, Luxembourg, London, Berlin, Dusseldorf, Frankfurt, Hamburg, Munich, Vienna and Zurich.

 

 

 

Statement pursuant to article 48, paragraph 1, section d, of the Dutch Investment Institutions Supervision Decree ['Btb', Besluit toezicht beleggingsinstellingen].

On 1 January 2006 and 30 June 2006 the directors of the investment company and/or the management company held the following total personal interests in investments of the investment company.

 

 

 

 

No external audit has been conducted.