<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
The MicroCap Growth Fund
Annual Report
December 31, 1997
[GRAPHIC]
MICROCAP GROWTH
4
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
January 30, 1998
Fellow Shareholder:
First I want to thank you for being a shareholder in the Robertson Stephens
Funds. All of us here appreciate your support.
As you probably already know, 1997 was an outstanding year for most categories
of equity investing with the notable exception of stocks of Asian companies.
The year also brought very high market volatility especially in shares of
smaller companies, but investors who stayed the course were well rewarded. Yet
as I review the timing and level of redemptions out of our fund complex and
other fund complexes, I am acutely aware that many investors do not stay the
course, and instead sell during market declines worrying that the market will go
even lower. An important study done in 1997 by an independent consulting group
(DALBAR, Inc.) studying mutual fund investors from 1984-1996 concluded that the
average investor in equity mutual funds had given up between 1/3 to 2/3 of
available returns by selling at the wrong times and reinvesting after the market
had significantly recovered. This slippage in performance is very significant
and obviously needs to be avoided. Developing a financial plan and sticking to
it are the centerpieces for achieving expected returns.
We have put some free tools in place for your convenience to help an investor
stay the course or just stay up to date with fund activity. First, the
portfolio managers of each fund regularly update a recorded message. These
"hotline" messages are accessible for current investors through our toll free
number (1-800-766-3863) and our Web site (www.rsim.com) and are updated
especially during times of significant market volatility. Additionally, we also
conduct monthly conference calls with our portfolio managers and provide
detailed quarterly summaries on each of our equity mutual funds, all of which
can also be accessed on our Web site.
Over the past few years we have introduced several funds that have the objective
of global investing. In 1998 we plan to introduce a new fund - a broadly
diversified large-cap international fund that is designed to be a core holding.
This fund will seek to outperform the benchmark indexes through the application
of an investment discipline based on Economic Value Added (EVA). This
methodology focuses on studying the level of incremental returns on capital that
companies can earn with their free cash flow. Though we have successfully used
EVA analysis for years in some of our funds, this is a little used methodology
in the mutual fund industry. We believe this methodology sets us apart and that
our technological advances help to give our portfolio managers an edge in
picking winning stocks. We are quite enthusiastic about this future fund
offering.
At Robertson Stephens Funds we continually work on making our investment process
better to pursue the goal of outstanding risk adjusted rates of return. One of
the areas we focused on in 1997 and will continue to focus on in the future is
the use of technologies that help us become better investors. In that regard we
added several new exciting technology tools in 1997. As very significant
shareholders of our own funds we look forward to seeking excellent returns with
you in 1998 and beyond. We believe in the old adage of "Eating your own
cooking."
If you have any questions or suggestions please drop me a note or send me an
E-mail message.
Again, thank you for your support.
/s/ Randy Hecht
G. RANDY HECHT
President
Robertson Stephens Funds
[email protected]
Information contained herein relating to the new international fund is subject
to completion or amendment. A registration statement relating to the fund's
securities has been filed with the Securities and Exchange Commission. The
fund's securities may not be sold nor may offers to buy be accepted prior to the
time the registration statement becomes effective. This letter shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the fund's securities in any state in which such offer,
solicitation, or sale would be unlawful prior to registration or qualification
under the securities laws of any such state. A prospectus regarding the new
fund is available from BancAmerica Robertson Stephens; an investor should read
that prospectus carefully before investing.
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
THE MICROCAP GROWTH FUND
FUND HIGHLIGHTS
ACQUISITION
BankAmerica Corporation's acquisition of Robertson, Stephens & Company became
effective October 1, 1997. The investment management activity for both
organizations has been placed under the leadership of Randy Hecht, President of
Robertson Stephens Investment Management (RSIM) since 1989. We believe this is a
strong commitment to honor the unique culture which remains at the heart of
RSIM's success, and we look forward to the ability to expand our global
capabilities and resources as a result of this partnership.
CO-PORTFOLIO MANAGER
Effective January 2, 1998, Rainerio Reyes, an analyst for the Robertson Stephens
MicroCap Growth Fund since its inception, was named co-portfolio manager of the
Fund and now manages with Dave Evans.
FUND PHILOSOPHY
The Robertson Stephens MicroCap Growth Fund invests in a diversified portfolio
of equity securities of companies with market capitalizations of $250 million
or less. We seek micro-cap companies that we believe have the potential for
long-term capital appreciation based on superior or niche products or services,
operating characteristics, management, or other factors.
CONTENTS
Fund Highlights 1
Report to Shareholders 2
Fund Performance - Class A Shares 6
Portfolio Summary 7
Fund Performance - Class C Shares 8
Schedule of Investments 9
Statement of Assets and Liabilities 13
Statement of Operations 14
Statement of Changes in Net Assets 15
Financial Highlights - Class A Shares 16
Financial Highlights - Class C Shares 17
Notes to Financial Statements 18
Report of Independent Consultants 24
Administration 24
1
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
[PHOTO]
FUND MANAGER
DAVID J. EVANS
PORTFOLIO MANAGER
The Robertson Stephens MicroCap Growth Fund
DEAR SHAREHOLDER:
For the fourth quarter of 1997, The Robertson Stephens MicroCap Growth Fund
(Class A) returned -10.26%, compared to -8.20% for the Russell 2000 Growth
Index. For the one-year period ended December 31, 1997, the Fund gained 30.45%,
compared to 12.95% for the Russell 2000 Growth Index. The Fund's Class C shares
had a return of -11.62% for the fourth quarter and 15.83% since their inception
on June 18, 1997.
Fourth quarter results were strongly influenced by the financial turmoil in
Southeast Asia. While the Asian crisis had a ripple effect on the business of a
handful of the Fund's companies, the sell-off in many micro-cap stocks had
little to do with fundamentals. At year-end, there were signs that investors
were regaining the ability to distinguish between real and imagined risks among
micro-cap companies.
PERFORMANCE COMMENTARY
While December produced a modest decline, the quarter closed on an up note,
securing a strong result for the Fund's first full year of operation. Our
emphasis on diversification continued to have a positive impact on performance.
Winners during the fourth quarter were drawn equally from technology,
"WE REMAIN CONVINCED ABOUT THE FUNDAMENTAL
2
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
health care and products/services. Conversely, technology produced a
disproportionate share of losers. It is worth noting that company-specific
issues were outweighed by sector or market considerations as the root cause of
our technology underperformance. Concerns over Asian financial issues and
"guilt by association" with larger cap shortfalls weighed heavily on some of our
holdings.
The Fund concluded the year with just under 23% in cash and cash equivalents.
This cash position makes no statement regarding the long-term attractiveness of
the micro-cap sector or our ability to uncover compelling investment
opportunities within it. Rather, it reflects substantial cash flows toward
year-end and our desire to be opportunistic in putting these funds to work.
Cash remains a residual in our investment process and the daily "snapshot" of
our cash position may fluctuate.
MARKET COMMENTARY AND OUTLOOK
A look back at 1997 helps us make the case for long-term investment in the
micro-cap sector. Total return for the full year was excellent with strong
performance from late April through early October, overwhelming more difficult
periods in the first and fourth quarters. The inefficiencies of the micro-cap
market, one of its principal investment attractions, make it impossible to
time.
We remain convinced of the fundamental long-term attractiveness of the micro-cap
sector. The turmoil in Asia and concerns over the technology sector caused some
investors to lose focus during the fourth quarter. The "flight to liquidity"
tended to boost the prices of many of the larger capitalization companies which
we believe may have difficulty sustaining above-average revenue growth in 1998.
Large multinational companies are more likely to be affected by currency issues
and weakness in Asian economies than the typical micro-cap stock. Our
expectation for slow to moderate economic growth will also pressure companies
whose earnings have been boosted by share repurchases, down-sizing and other
margin improvement techniques. We believe our portfolio companies are well
positioned to prosper in this environment. In addition, the trend toward lower
interest rates leaves the door open for possible multiple expansion. Focus on
these issues helped to propel the U.S. market during the summer of 1997, and we
expect that may happen again in 1998
LONG-TERM ATTRACTIVENESS OF THE MICRO-CAP SECTOR."
3
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
"WHILE DECEMBER PRODUCED A MODEST DECLINE, THE QUARTER CLOSED ON AN UP NOTE,
SECURING A STRONG RESULT FOR THE FUND'S FIRST FULL YEAR OF OPERATION."
THE PORTFOLIO
The Fund's investments are concentrated in the most rapidly growing sectors of
the U. S. economy, yet each company is selected based on its individual merits.
Thus the search for companies with unique competitive advantages sometimes
yields growth situations in otherwise slow growing industries. Our belief that
disciplined research produces underfollowed, under-owned and undervalued
companies is typified by the following holdings.
- -- U.S. HOME & GARDEN INC. is a leading manufacturer and marketer of lawn and
garden products distributed through well-known retailers, including Home
Depot, Lowe's, Kmart and Wal-Mart. Multiple brand names such as Weedblock
(weed preventative landscape fabrics), Jobe's (fertilizer products) and
Emerald Edge (decorative landscape edging) are enabling USHG to gain shelf
space and market share. Acquisitions of additional lines in this
fragmented, but consolidating, industry could boost the growth rate from
20% to 30%.
[PHOTO]
INVESTMENT MANAGEMENT
G. RANDY HECHT
President
Robertson Stephens
Funds
[email protected]
INVESTMENT TEAM
RESEARCH
Rainerio Reyes
TRADING
Maureen Basney
4
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
- -- NET.B@NK, INC. is a "bank without branches", providing consumers with
secure, convenient and cost-effective banking services via the Internet.
Without the overhead expense of branch offices and attendant personnel,
NTBK can offer higher interest on deposits and lower costs on loans and
other financial services. Electronic bill payment from any PC with a
secure browser is but one of the attractions of seven-day-a-week,
24-hour-a-day banking.
- -- ENAMELON, INC. is expected to produce rapid growth within a mature consumer
product category- toothpaste. Enamelon (also the brand name) is the first
toothpaste that prevents cavities before they start by preventing plaque
acids from destroying tooth enamel and/or rebuilding enamel that has
already been destroyed. Results in six test markets during the second half
of 1997 have surpassed expectations, and national rollout is scheduled for
first quarter 1998.
We believe that this sampling from the MicroCap Growth Fund portfolio reflects
the innovation and creativity that is driving current economic growth. Our
diversified portfolio provides the individual investor with access to this least
efficient sector of the market.
As we conclude our first full year of operation, we would like to thank those
who have been investing along with us and add a special welcome to new investors
who joined us in the fourth quarter. The opportunities in micro-cap investing
are substantial, and we encourage your ongoing search for undiscovered growth.
Sincerely,
/s/ DAVID J. EVANS
DAVID J. EVANS
Portfolio Manager
January 5, 1998
TO HEAR MY ONGOING THOUGHTS ON THE FUND, CALL OUR
PORTFOLIO MANAGER HOTLINE AT 1-800-766-3863.
5
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
FUND PERFORMANCE - CLASS A SHARES
Results of a hypothetical $10,000 investment in The Robertson Stephens MicroCap
Growth Fund, the S&P 500 Index(1), and the Russell 2000 Growth Index(2)
IF INVESTED ON AUGUST 15, 1996(3)
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
MICROCAP S&P 500 RUSSELL 2000
FOR THE PERIOD ENDED 12/31/97 GROWTH FUND INDEX(1) GROWTH INDEX(2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since inception (8/15/96)(3) 43.50% 50.38% 22.23%
- --------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
MICROCAP S&P 500 RUSSELL 2000
FOR THE PERIOD ENDED 12/31/97 GROWTH FUND INDEX(1) GROWTH INDEX(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One year 30.45% 33.34% 12.95%
- -----------------------------------------------------------------------------------------------------------------------------------
Since inception (8/15/96)(3) 29.96% 34.46% 15.68%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's Composite Index of 500 Stocks ("S&P 500 Index") is a
widely recognized, unmanaged index of market activity based on the
aggregate performance of a selected portfolio of publicly traded stocks. It
is widely recognized as representative of the stock market in general.
Investment results assume the reinvestment of dividends paid on the stocks
comprising the index. You cannot invest in an index itself.
(2) The Russell 2000 Growth Index is a market capitalization-weighted index
composed of 2,000 U.S. companies with market capitalizations ranging from
$40 million to $450 million and greater-than-average growth rates.
Investment results assume the reinvestment of dividends paid on the stocks
constituting the index. You cannot invest in an index itself.
(3) Date that the Fund's Class A shares were first issued to the public.
Investors should realize that all performance data presented is based upon
past performance during limited periods of time, and past performance is no
guarantee of future performance. Investors should also realize that both
investment return and principal value will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost. The
correlation of performance between an unmanaged index and this Fund is not
usually exact.
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can
involve more volatility, less liquidity, and less publicly available
information. Short selling is the sale of a borrowed security, and the
price of the security can increase between the date the security is sold
and the date when the fund must replace it. Options and futures may not be
perfectly correlated to the underlying index or security.
6
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
PORTFOLIO SUMMARY
AS OF DECEMBER 31, 1997
[GRAPH]
Top Ten Holdings
1.
YOUTH SERVICES INTERNATIONAL, INC. (2.14%)
Operates 17 residential juvenile justice programs in nine states. The Company
currently serves approximately 2,000 youths.
2.
APPLE ORTHODONTIX, INC., CLASS A (2.01%)
Provides practice management services to orthodontic practices in the United
States and Canada. The company offers a full range of services designed to
facilitate the delivery of orthodontic treatment to consumers.
3.
MOLECULAR DEVICES CORPORATION (2.00%)
Designs, develops, manufactures, and markets bioanalytical measurement
systems, including software and consumables.
4.
MEDQUIST, INC. (1.96%)
Provides electronic transcription and document management services to the
health care industry.
5.
XCELLENET, INC. (1.93%)
Develops remote access utility software products. The company's
'Remoteware' products provide advanced system management capabilities,
including administration and control of corporate intranets.
6.
CORNELL CORRECTIONS, INC. (1.86%)
Provides privatized correctional, detention and prerelease services in the
United States. The Company provides integrated development, design,
construction and operation of facilities.
7.
QUADRAMED CORPORATION. (1.81%)
Develops, markets, and sells a suite of financial management, decision support
and electronic data interchange software products and services.
8.
RENT-WAY, INC. (1.74%)
Operates 108 rent-to-own stores in the United States, offering such products as
televisions, stereos, and furniture.
9.
CN BIOSCIENCES, INC. (1.65%)
Develops, produces, markets, and
distributes products used in disease-related life sciences research.
10.
SUPERIOR CONSULTANT HOLDINGS CORPORATION (1.55%)
A health care consulting firm. The company provides a wide range of information
technology consulting and strategic and operations management consulting
services.
7
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
FUND PERFORMANCE - CLASS C SHARES
Results of a hypothetical $10,000 investment
in The Robertson Stephens MicroCap Growth Fund, the S&P 500 Index(1), and the
Russell 2000 Growth Index(2)
IF INVESTED ON JUNE 18, 1997(3)
[GRAPH]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
MICROCAP MICROCAP S&P 500 RUSSELL 2000
FOR THE PERIOD ENDED 12/31/97 GROWTH FUND GROWTH FUND(4) INDEX(1) GROWTH INDEX(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since inception (6/18/97)(3) 16.83% 15.83% 10.19% 8.60%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's Composite Index of 500 Stocks ("S&P 500 Index") is
a widely recognized, unmanaged index of market activity based on
the aggregate performance of a selected portfolio of publicly traded
stocks. It is widely recognized as representative of the stock market
in general. Investment results assume the reinvestment of dividends
paid on the stocks comprising the index. You cannot invest in an index
itself.
(2) The Russell 2000 Growth Index is a market capitalization-weighted index
composed of 2,000 U.S. companies with market capitalizations ranging from
$40 million to $450 million and greater-than-average growth rates.
Investment results assume the reinvestment of dividends paid on the stocks
constituting the index. You cannot invest in an index itself.
(3) Date that the Fund's Class C shares were first issued to the public.
(4) Reflects the 1% contingent deferred sales charge imposed on redemptions
within the first year of purchasing shares.
Investors should realize that all performance data presented is based upon past
performance during limited periods of time, and past performance is no guarantee
of future performance. Investors should also realize that both investment return
and principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost. The correlation of performance between an
unmanaged index and this Fund is not usually exact.
International investing can involve greater currency fluctuations and less
political and economic stability. Investing in smaller companies can involve
more volatility, less liquidity, and less publicly available information. Short
selling is the sale of a borrowed security, and the price of the security can
increase between the date the security is sold and the date when the fund must
replace it. Options and futures may not be perfectly correlated to the
underlying index or security.
8
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS(1)
- -----------------------------------------------------------------------------------------------------------------------------
BIOTECHNOLOGY - 1.3%
Enzon, Inc. 50,000 $ 275,000
LifeCell Corporation 245,000 1,133,125
- -----------------------------------------------------------------------------------------------------------------------------
1,408,125
- -----------------------------------------------------------------------------------------------------------------------------
BROADCAST/RADIO/TV - 2.7%
Medialink Worldwide, Inc. 110,000 1,485,000
Pegasus Communications Corporation 65,000 1,348,750
- -----------------------------------------------------------------------------------------------------------------------------
2,833,750
- -----------------------------------------------------------------------------------------------------------------------------
CLOTHING-RETAIL - 0.5%
I.C. Isaacs & Company, Inc. 50,000 506,250
- -----------------------------------------------------------------------------------------------------------------------------
506,250
- -----------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 10.6%
Abacus Direct Corporation 40,000 1,640,000
Computer Learning Centers, Inc. 20,000 1,225,000
Cornell Corrections, Inc. 95,000 1,971,250
National Research Corporation 27,600 182,850
Rent-Way, Inc. 100,000 1,850,000
Securacom, Inc. 115,000 1,121,250
Vivid Technologies, Inc. 65,000 1,031,875
Youth Services International, Inc. 145,000 2,274,687
- -----------------------------------------------------------------------------------------------------------------------------
11,296,912
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER HARDWARE/COMPONENTS - 1.8%
ECCS, Inc. 130,000 845,000
Transact Technologies, Inc. 100,000 1,112,500
- -----------------------------------------------------------------------------------------------------------------------------
1,957,500
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 9.1%
Credit Management Solutions, Inc. 100,000 1,300,000
CyberMedia, Inc. 75,000 1,129,688
Kofax Image Products, Inc. 100,000 556,250
Networks Solutions, Inc., Class A 50,000 656,250
Peerless Systems Corporation 40,000 515,000
Pervasive Software, Inc. 137,000 993,250
QuadraMed Corporation 70,000 1,925,000
Rogue Wave Software, Inc. 95,000 1,050,937
Simulation Sciences, Inc. 30,000 480,000
Summit Design, Inc. 105,000 1,089,375
- -----------------------------------------------------------------------------------------------------------------------------
9,695,750
- -----------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 4.7%
Edify Corporation 75,000 1,406,250
Excite, Inc. 35,000 1,050,000
Vista Information Solutions, Inc. 130,000 487,500
XcelleNet, Inc. 156,400 2,052,750
- -----------------------------------------------------------------------------------------------------------------------------
4,996,500
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CONSULTING SERVICES - 1.6%
Superior Consultant Holdings Corporation 55,000 $1,650,000
- -----------------------------------------------------------------------------------------------------------------------------
1,650,000
- -----------------------------------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 8.9%
Chattem, Inc. 95,000 1,401,250
Cost Plus, Inc. 37,000 1,073,000
Enamelon, Inc. 100,000 1,287,500
Hot Topic, Inc. 55,000 1,251,250
Krause's Furniture, Inc. 150,000 450,000
Media Arts Group, Inc. 70,000 1,050,000
Rocky Shoes & Boots, Inc. 45,000 686,250
Signature Eyewear, Inc. 92,000 736,000
Track n' Trail, Inc. 35,000 310,625
U.S. Home & Garden, Inc. 300,000 1,237,500
- -----------------------------------------------------------------------------------------------------------------------------
9,483,375
- -----------------------------------------------------------------------------------------------------------------------------
DATA PROCESSING SERVICES - 2.7%
Inspire Insurance Solutions, Inc. 65,000 1,356,875
Transaction Network Services, Inc. 90,000 1,552,500
- -----------------------------------------------------------------------------------------------------------------------------
2,909,375
- -----------------------------------------------------------------------------------------------------------------------------
ENTERTAINMENT - 0.4%Brilliant Digital Entertainment, Inc. 90,000 421,875
- -----------------------------------------------------------------------------------------------------------------------------
421,875
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 2.2%
Net.B@nk, Inc. 95,000 1,116,250
Willis Lease Finance Corporation 70,000 1,225,000
- -----------------------------------------------------------------------------------------------------------------------------
2,341,250
- -----------------------------------------------------------------------------------------------------------------------------
FOOD RETAIL/WHOLESALE - 0.5%
Opta Food Ingredients, Inc. 90,000 540,000
- -----------------------------------------------------------------------------------------------------------------------------
540,000
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE FACILITIES MANAGEMENT - 2.0%
Apple Orthodontix, Inc., Class A 180,000 2,137,500
- -----------------------------------------------------------------------------------------------------------------------------
2,137,500
- -----------------------------------------------------------------------------------------------------------------------------
HEALTH CARE SERVICES - 5.6%
Horizon Health Corporation 55,000 1,278,750
MedQuist, Inc. 60,000 2,085,000
PMR Corporation 70,000 1,400,000
Res-Care, Inc. 40,000 1,160,000
- -----------------------------------------------------------------------------------------------------------------------------
5,923,750
- -----------------------------------------------------------------------------------------------------------------------------
LODGING - 1.3%
Execustay Corporation 145,000 1,413,750
- -----------------------------------------------------------------------------------------------------------------------------
1,413,750
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MANUFACTURING - 3.4%
CN Biosciences, Inc. 70,000 $1,750,000
FARO Technologies, Inc. 120,000 1,395,000
ZEVEX International, Inc. 50,000 468,750
- -----------------------------------------------------------------------------------------------------------------------------
3,613,750
- -----------------------------------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS & DEVICES - 2.7%
Bioanalytical Systems, Inc. 70,000 533,750
Closure Medical Corporation 46,000 1,190,250
Photoelectron Corporation 120,000 1,155,000
- -----------------------------------------------------------------------------------------------------------------------------
2,879,000
- -----------------------------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES - 2.0%
Molecular Devices Corporation 100,000 2,125,000
- -----------------------------------------------------------------------------------------------------------------------------
2,125,000
- -----------------------------------------------------------------------------------------------------------------------------
NETWORK SYSTEMS - 1.0%
Performance Technologies, Inc. 75,000 1,087,500
- -----------------------------------------------------------------------------------------------------------------------------
1,087,500
- -----------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - 2.1%
Medicis Pharmaceutical Corporation, Class A 20,000 1,022,500
Microcide Pharmaceuticals, Inc. 140,000 1,242,500
- -----------------------------------------------------------------------------------------------------------------------------
2,265,000
- -----------------------------------------------------------------------------------------------------------------------------
RESTAURANTS - 3.0%
Garden Fresh Restaurant Corporation 70,000 1,006,250
PJ America, Inc. 90,000 1,350,000
Star Buffet, Inc. 67,500 776,250
- -----------------------------------------------------------------------------------------------------------------------------
3,132,500
- -----------------------------------------------------------------------------------------------------------------------------
RETAIL - 0.6%
New West Eyeworks, Inc. 78,000 653,250
- -----------------------------------------------------------------------------------------------------------------------------
653,250
- -----------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS - 3.1%
Aseco Corporation 80,000 682,500
Cerprobe Corporation 85,000 1,476,875
QLogic Corporation 38,000 1,121,000
- -----------------------------------------------------------------------------------------------------------------------------
3,280,375
- -----------------------------------------------------------------------------------------------------------------------------
SPECIALTY RETAIL - 0.9%
Party City Corporation 30,000 967,500
- -----------------------------------------------------------------------------------------------------------------------------
967,500
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 2.1%
RF Monolithics, Inc. 80,000 910,000
STAR Telecommunications, Inc. 40,000 1,285,000
- -----------------------------------------------------------------------------------------------------------------------------
2,195,000
- -----------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT - 1.4%
IWL Communications, Inc. 112,000 1,456,000
- -----------------------------------------------------------------------------------------------------------------------------
1,456,000
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
SCHEDULE OF INVESTMENTS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SHARES VALUE
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TRANSPORTATION - 1.5%
Atlantic Coast Airlines, Inc. 50,000 $1,587,500
- -----------------------------------------------------------------------------------------------------------------------------
1,587,500
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 79.7% (COST $82,038,219) 84,758,037
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
- -----------------------------------------------------------------------------------------------------------------------------
Cash 831
U.S. Treasury Bill, due 1/8/98, $5,000,000 par value 4,995,868
Repurchase Agreement
State Street Bank & Trust Company, 5.30%, dated 12/31/97, due 1/2/98,
maturity value $19,000,593 (collateralized by $17,830,000 par value
U.S. Treasury Note, 7.875%, due 11/15/07) 18,995,000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL CASH AND CASH EQUIVALENTS - 22.6% 23,991,699
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES, NET - (2.3)% (2,487,754)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS - 100.0% $106,261,982
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Non-income producing securities.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
Investments, at value (Cost: 82,038,219) $ 84,758,037
Cash and cash equivalents 23,991,699
Receivable for fund shares subscribed 2,789,848
Organization cost 4,585
Interest receivable 2,796
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 111,546,965
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased 4,504,818
Payable for fund shares redeemed 592,273
Payable to adviser 95,071
Accrued expenses 92,821
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,284,983
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS 106,261,982
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------------------------------
Paid-in capital 106,790,928
Accumulated net realized loss from investments (3,248,764)
Net unrealized appreciation on investments 2,719,818
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $106,261,982
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering, and redemption price per share - Class A Shares $14.35
(Net assets of $104,857,957 applicable to 7,306,772 shares of beneficial interest
outstanding with no par value)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering, and redemption price per share - Class C Shares $14.23
(Net assets of $1,404,025 applicable to 98,686 shares of beneficial interest
outstanding with no par value)(1)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Redemption price per share is equal to the net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements. 13
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Interest $248,909
Dividends 7,050
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 255,959
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
EXPENSES
- -----------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 530,205
Administrative services fees 106,041
Distribution fees - Class A Shares 105,123
Custodian fees 99,541
Transfer agent fees 94,958
Professional fees 61,632
Registration and filing fees 39,370
Organization expense 22,415
Trustees' fees and expenses 22,265
Shareholder reports 18,500
Distribution fees - Class C Shares 2,755
Shareholder servicing fees - Class C Shares 919
Insurance 204
- -----------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,103,928
Less: Expense waiver by adviser (274,052)
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES, NET 829,876
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT LOSS (573,917)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN/(LOSS) AND UNREALIZED APPRECIATION/(DEPRECIATION) ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------------------------
Net realized loss from investments (3,121,807)
Net change in unrealized appreciation on investments 2,102,641
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED LOSS AND UNREALIZED APPRECIATION ON INVESTMENTS (1,019,166)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,593,083)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996(1)
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------------
Net investment loss $(573,917) $(43,565)
Net realized loss from investments (3,121,807) (126,957)
Net change in unrealized appreciation on investments 2,102,641 617,177
- --------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE)/INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (1,593,083) 446,655
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares -- --
Net investment income - Class C Shares(2) -- --
Realized gain on investments - Class A Shares -- --
Realized gain on investments - Class C Shares(2) -- --
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS -- --
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from capital share transactions 98,390,751 9,017,659
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 97,797,668 9,464,314
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Beginning of period 9,464,314 --
End of period $106,261,982 $9,464,314
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Fund commenced operations on August 15, 1996.
(2) Class C shares were first issued on June 18, 1997.
The accompanying notes are an integral part of these financial statements. 15
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
FINANCIAL HIGHLIGHTS - CLASS A SHARES
<TABLE>
<CAPTION>
FOR THE FOR THE
FOR A SHARE OUTSTANDING YEAR ENDED PERIOD ENDED
THROUGHOUT EACH PERIOD: 12/31/97 12/31/96(1,3)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.00 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.19) (0.08)
Net realized loss and net change in unrealized
appreciation on investments 3.54 1.08
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 3.35 1.00
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income -- --
Distributions from realized gain on investments -- --
- --------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.35 $11.00
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(2) 30.45% 10.00%
- --------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000s) $104,858 $9,464
Ratio of Expenses to Average Net Assets 1.95%(2) 3.08%(2)
Ratio of Net Investment Loss to Average Net Assets (1.35)%(2) (2.13)%(2)
Portfolio Turnover Rate 170% 22%
Average Commission Rate Paid(4) $0.0601 $0.0600
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A shares were first issued on August 15, 1996.
(2) If the Fund had paid all of its expenses and there had been no
reimbursement from the Adviser for the year ended December 31, 1997, and
for the period from August 1, 1996 (Commencement of Operations) to
December 31, 1996, total return would have been 30.09% and 9.20%,
respectively, the ratio of expenses to average net assets would have
been 2.60% and 6.40%, respectively, and the ratio of net investment loss to
average net assets would have been (2.00)% and (5.45)%, respectively.
(3) Ratios, except for total return and portfolio turnover rate, have been
annualized.
(4) A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged. This amount may vary from
fund to fund and period to period depending on the mix of trades executed
in various markets where trading practices and commission rate structures
may differ. This rate generally does not reflect markups, markdowns or
spreads on shares traded on a principle basis, if any.
Per-share data with respect to Class A shares for each period has been
determined by using the average number of Class A shares outstanding
throughout each period. Distributions reflect actual per-share amounts
distributed for the period.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
FINANCIAL HIGHLIGHTS - CLASS C SHARES
<TABLE>
<CAPTION>
FOR THE
FOR A SHARE OUTSTANDING PERIOD ENDED
THROUGHOUT THE PERIOD: 12/31/97(1)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.18
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.15)
Net realized loss and net change in unrealized appreciation on investments 2.20
- -----------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2.05
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income --
Distributions from realized gain on investments --
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.23
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(2) 16.83%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000s) $ 1,404
Ratio of Expenses to Average Net Assets 2.70%(2)
Ratio of Net Investment Loss to Average Net Assets (2.20)%2
Portfolio Turnover Rate 170%
Average Commission Rate Paid(3) $ 0.0601
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class C shares were first issued on June 18, 1997.
(2) If the Fund had paid all of its expenses and there had been no
reimbursement from the Adviser for the period from May 8, 1997
(Commencement of Operations) through December 31, 1997, total return would
have been 16.58%, the ratio of expenses to average net assets would have
been 3.35%, and the ratio of net investment loss to average net assets
would have been (2.85)%.
(3) A fund is required to disclose its average commission rate per share for
security trades on which a commission is charged. This amount may vary from
fund to fund and period to period depending on the mix of trades executed
in various markets where trading practices and commission rate structures
may differ. This rate generally does not reflect markups, markdowns or
spreads on shares traded on a principal basis, if any.
Ratios, except for total return and portfolio turnover rate, have been
annualized. Total returns do not include the 1% contingent deferred sales
charge.
Per-share data with respect to Class C shares has been determined by using
the average number of Class C shares outstanding
throughout the period. Distributions reflect actual per-share amounts
distributed for the period.
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
Notes to Financial Statements
The Robertson Stephens MicroCap Growth Fund (the "Fund") is a series of the
Robertson Stephens Investment Trust (the "Trust"), a Massachusetts business
trust organized on May 11, 1987. The Fund is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-end
management investment company. The Fund became effective to offer shares to the
public on August 15, 1996. The Trust offers twelve series of shares -- The
Robertson Stephens Emerging Growth Fund, The Robertson Stephens Value + Growth
Fund, The Contrarian Fund-TM, The Robertson Stephens Developing Countries Fund,
The Robertson Stephens Growth & Income Fund, The Robertson Stephens Partners
Fund, The Information Age Fund-TM, The Robertson Stephens Global Natural
Resources Fund, The Robertson Stephens Global Low-Priced Stock Fund, The
Robertson Stephens Diversified Growth Fund, The Robertson Stephens MicroCap Fund
and The Robertson Stephens Global Value Fund. The assets for each series are
segregated and accounted for separately.
The Trustees have authorized the issuance of two classes of shares of beneficial
interest, designated as Class A and C, respectively. The shares of each class
represent an interest in the same portfolio of investments of the Fund. Expenses
of the Fund are borne pro-rata by the holders of each class of shares, except
that each class may bear expenses unique to that class (including, but not
limited to, distribution expenses applicable to such class). Shares of each
class would receive their pro-rata share of the net assets of the Fund, if the
Fund was liquidated. In addition, The Board of Trustees declares separate
distributions on each class of shares. Each class votes as a class only with
respect to its own distribution plan or other matters for which a class vote is
required by law or determined by the Board of Trustees. Class C shares were
first issued by the Fund on June 18, 1997. Class C shares are subject to a 1%
contingent deferred sales charge if those shares are redeemed within one year of
purchase.
NOTE 1 SIGNIFICANT ACCOUNTING POLICIES:
The following policies are in conformity with generally accepted accounting
principles.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those
estimates.
A. INVESTMENT VALUATIONS:
Marketable securities are valued at the last sale price on the principal
exchange or market on which they are traded; or, if there were no sales that
day, at the mean between the closing bid and asked prices. Short-term
18
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
investments that will mature in 60 days or less are stated at amortized cost,
which approximates market value. At December 31, 1997, 100% of the Fund's
portfolio was valued in this manner.
Securities for which market quotations are not readily available are valued at
their fair value as determined in accordance with the guidelines and procedures
adopted by the Fund's Board of Trustees. The guidelines and procedures use
fundamental valuation methods which include, but are not limited to, the
analysis of: the effect of any restrictions on the sale of the security, product
development and trends of the security's issuer, changes in the industry and
other competing companies, significant changes in the issuer's financial
position, and any other event which would have a significant impact on the value
of a security. At December 31, 1997, no security of the Fund was valued using
these guidelines and procedures.
As its normal course of business, the Fund has invested a significant portion of
its assets in companies within a number of industries in the health care and
technology sectors. Accordingly, the performance of the Fund may be subject to
greater risk of market fluctuation than that of a fund invested in a wider
spectrum of market or industrial sectors.
b. REPURCHASE AGREEMENTS:
Repurchase agreements are fully collateralized by U.S. government securities.
All collateral is held by the Fund's custodian and is monitored daily to ensure
that the collateral's market value equals at least 100% of the repurchase price
under the agreement. However, in the event of default or bankruptcy, realization
and/or retention of the collateral may be subject to legal proceedings. The
Fund's policy is to limit repurchase agreement transactions to those parties
deemed by the Fund's Investment Adviser to have satisfactory creditworthiness.
c. FEDERAL INCOME TAXES:
The Fund intends to comply with requirements of the Internal Revenue Code,
qualifying as a regulated investment company. Therefore, the Fund does not
expect to be subject to income tax, and no provision for such tax will be made.
d. SECURITIES TRANSACTIONS:
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Realized gains or losses on securities
transactions are determined on the basis of specific identification.
19
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
e. INVESTMENT INCOME:
Dividend income is recorded on the ex-dividend date, except certain cash
dividends from foreign securities which are recorded as soon as the Fund is
informed of the ex-dividend date. Interest income, which includes accretion of
original issue discount, is accrued and recorded daily.
f. EXPENSES:
Most expenses of the Trust can be directly attributed to a specific fund.
Expenses which cannot de directly attributed to a specific fund are apportioned
between the funds in the Trust.
g. DISTRIBUTIONS TO SHAREHOLDERS:
Dividends to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital. Undistributed net
investment income and accumulated undistributed net realized gain/(loss) on
investments and foreign currency transactions may include temporary book and tax
differences which will reverse in a subsequent period. During any particular
year net realized gains from investment transactions, in excess of available
capital loss carryforwards, would be taxable to the Fund if not distributed and,
therefore, will be distributed to shareholders annually. Any taxable income or
gain remaining at fiscal year end is distributed in the following year.
h. CLASS ALLOCATIONS:
Income, common expenses, and realized and unrealized gains/(losses) are
determined at the Fund level and allocated daily to each class of shares based
on the appropriate net assets of the respective classes. Transfer agent
expenses, distribution/shareholder service fees, and any other class specific
expenses, if any, are calculated daily at the class level based on the
appropriate daily net assets of each class and the specific expense rate
applicable to each class.
i. CAPITAL ACCOUNTS:
Due to the timing of dividend distributions and the differences in accounting
for income and realized gains/(losses) for financial statement and federal
income tax purposes, the fiscal year in which amounts are distributed may differ
from the year in which the income and realized gains/(losses) were recorded by
the Fund.
j. TEMPORARY BORROWINGS:
The Fund and several affiliated funds share in a $15 million, uncommitted
revolving credit and/or overdraft protection facility from the Fund's custodian
bank for temporary borrowing purposes, including the meeting of redemption
requests that otherwise might require the untimely disposition of securities.
Interest is calculated based on the market rates at the time of borrowing. The
Fund may borrow up to a maximum of 33 percent of its total assets under the
agreement.
20
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
NOTE 2 CAPITAL SHARES:
a. TRANSACTIONS:
The Fund has authorized an unlimited number of shares of beneficial interest
with no par value divided into two classes designated Class A and Class C.
Transactions in capital shares for Class A for the year ended December 31, 1997,
and for the period from August 15, 1996 (Commencement of Operations), to
December 31, 1996, and for Class C for the period from June 18, 1997
(Commencement of Operations), to December 31, 1997, were as follows:
<TABLE>
<CAPTION>
Class A
1/1/97 - 12/31/97 SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
SHARES SOLD 16,945,199 $ 249,080,025
Shares reinvested - -
- -------------------------------------------------------------------------------
16,945,199 $ 249,080,025
- -------------------------------------------------------------------------------
Shares redeemed (10,498,789) (152,209,425)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net increase 6,446,410 $ 96,870,600
- -------------------------------------------------------------------------------
8/15/96 - 12/31/96 SHARES AMOUNT
- -------------------------------------------------------------------------------
SHARES SOLD 1,308,605 $ 13,800,689
Shares reinvested - -
- -------------------------------------------------------------------------------
1,308,605 $ 13,800,689
- -------------------------------------------------------------------------------
Shares redeemed (448,243) (4,783,030)
- -------------------------------------------------------------------------------
Net increase 860,362 $ 9,017,659
- -------------------------------------------------------------------------------
CLASS C
6/18/97* - 12/31/97 SHARES AMOUNT
- -------------------------------------------------------------------------------
SHARES SOLD 102,687 $ 1,577,750
Shares reinvested - -
- -------------------------------------------------------------------------------
102,687 $ 1,577,750
- -------------------------------------------------------------------------------
Shares redeemed (4,001) (57,599)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net increase 98,686 $1,520,151
- -------------------------------------------------------------------------------
</TABLE>
*Class C Shares were first issued on June 18, 1997.
NOTE 3 TRANSACTIONS WITH AFFILIATES:
a. ADVISORY FEES AND EXPENSE LIMITATION:
Under the terms of an advisory agreement, which is reviewed and approved
annually (beginning in 2000) by the Board of Trustees, the Fund pays Robertson,
Stephens & Company Investment Management, L.P. ("RSIM, L.P.") an investment
advisory fee and an administrative services fee calculated at an annual rate of
1.25% and 0.25%, respectively, of the average daily net assets of the Fund. For
the year ended December 31, 1997, the Fund incurred investment advisory fees and
administrative fees of $530,205 and $106,041, respectively. RSIM, L.P. has
voluntarily agreed to waive any annual operating expenses, excluding the expense
differential between Class A and Class C, of the Fund's Class A shares and Class
C shares exceeding an annual expense ratio of 1.95%. For the year ended December
31, 1997, for Class A, and for the period from June 18, 1997 (Commencement of
Operations) through December 31,
21
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1997, for Class C, RSIM, L.P. voluntarily agreed to waive and reimburse fees of
$271,678 and $2,374, respectively.
RSIM may recoup waived or reimbursed operating expenses over the succeeding two
years, subject to expense limitations then applicable to the Fund. No previous
expense waivers or reimbursements of operating expenses were recouped by RSIM
from the Fund during the year ended December 31, 1997.
b. COMPENSATION OF TRUSTEES AND OFFICERS:
Trustees and officers of the Trust who are interested persons of the Trust
receive no compensation from the Trust. Trustees of the Trust who are not
interested persons of the Trust, as defined in the 1940 Act, collectively
received compensation and reimbursement of expenses of $22,265 for the year
ended December 31, 1997.
c. DISTRIBUTION FEES:
For the period from January 1, 1997, through September 30, 1997, the Fund
entered into agreements with Robertson, Stephens & Company LLC ("RS&Co.") for
distribution services with respect to its Class A and Class C shares and adopted
Plans of Distribution pursuant to Rule 12b-1 under the 1940 Act, where
continuance is reviewed annually by the Fund's Board of Trustees. Under these
Plans, RS&Co. was compensated for services in such capacity including its
expenses in connection with the promotion and distribution of the Fund's Class A
and Class C shares. The distribution fees for Class A and Class C shares are
calculated at an annual rate of 0.25% and 0.75%, respectively, based on the
average daily net assets attributed to each class of shares, although the Class
C Plan contemplates payments at a rate of up to 1% of the Fund's average net
assets attributable to Class C shares. For the period from January 1, 1997,
through September 30, 1997, for Class A, and for the period from June 18, 1997
(Commencement of Operations) through September 30, 1997, for Class C, the Fund
paid distribution fees of $39,142 and $278, respectively, to RS&Co. On October
1, 1997, BankAmerica Corporation ("BAC") became the owner of the entire
beneficial interest in RSIM, L.P. (See note 5.a. in Notes to the Financial
Statements). As part of that acquisition, BAC also became the owner of the
entire beneficial interest in RSIM's affiliate, BancAmerica Robertson Stephens
(formerly Robertson Stephens & Company LLC). Pursuant to certain laws and
regulations that apply to bank holding companies and their affiliates, a bank
holding company-affiliated broker- dealer may not serve as the distributor or
principal underwriter of mutual funds. Commencing October 1, 1997, Edgewood
Services, Inc., a non-affiliate, has been designated the Fund's new distributor.
d. SHAREHOLDER SERVICING FEE:
The Trust has adopted a Shareholder Servicing Plan for the Class C shares of
each fund. Under the Plan, each fund pays fees to BancAmerica Robertson Stephens
("BARS") at an annual rate of up to 0.25% of the Fund's
22
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
average daily net assets of the Class C shares. The Plan contemplates that
financial institutions will enter into shareholder service agreements with BARS
to provide administrative support services to their customers who are fund
shareholders. In return for providing these support services, a financial
institution may receive payments from BARS at a rate not exceeding 0.25% of the
average daily net assets of the Class C shares of each fund for which the
financial institution is the financial institution of record. For the period
from June 18, 1997 (Commencement of Operations), through December 31, 1997, for
Class C, the Fund incurred shareholder servicing fees of $919.
e. BROKERAGE COMMISSIONS:
RSIM, L.P. may direct orders for investment transactions to BARS as
broker-dealer, subject to Fund policies as stated in the prospectus, regulatory
constraints, and the ability of BARS to provide competitive prices and
commission rates. All investment transactions in which BARS acts as a broker may
only be executed on an agency basis. Subject to certain constraints, the Fund
may make purchases of securities from offerings or underwritings in which BARS
has been retained by the issuer. For the year ended December 31, 1997, the Fund
paid no brokerage commissions to BARS.
NOTE 4 INVESTMENTS:
a. TAX BASIS OF INVESTMENTS:
At December 31, 1997, the cost of investments for federal income tax purposes
was $83,519,047. Accumulated net unrealized appreciation on investments was
$1,238,990, consisting of gross unrealized appreciation and depreciation of
$11,107,320 and $9,868,330, respectively.
b. INVESTMENT PURCHASES AND SALES:
For the year ended December 31, 1997, the cost of investments purchased and the
proceeds from investments sold (excluding options, securities sold short and
short-term investments) were $141,303,492 and $64,085,395, respectively.
NOTE 5 ACQUISITION:
On October 1, 1997, BankAmerica Corporation
completed its acquisition of Robertson, Stephens & Company Group, L.L.C. and
Robertson, Stephens & Company, Inc. Pursuant to that acquisition, BankAmerica
Corporation became the owner of the entire beneficial interest in RSIM, L.P.
23
<PAGE>
THE MICROCAP GROWTH FUND ANNUAL REPORT
Report of Independent Accountants
To the Board of Trustees and Shareholders of The Robertson Stephens MicroCap
Growth Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, 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 The Robertson Stephens MicroCap
Growth Fund (the "Fund") at December 31, 1997, and the results of its operations
and the changes in its net assets and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting principles.
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 generally accepted auditing standards, 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
December 31, 1997, by correspondence with the custodian and brokers, and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
San Francisco, California
February 7, 1998
<PAGE>
ADMINISTRATION
OFFICERS AND TRUSTEES
Andrew P. Pilara, Jr., Trustee
President
Leonard B. Auerbach, Trustee
President and Chairman of Auerbach Associates, Inc.
John W. Glynn, Jr., Trustee
Principal and Chairman of
Glynn Capital Management
James K. Peterson, Trustee
Former Director of the IBM Retirement Funds
Terry R. Otton
Chief Financial Officer
Dana K. Welch
Secretary
INVESTMENT ADVISER
Robertson, Stephens & Company Investment Management, L.P.
555 California Street, Suite 2600
San Francisco, CA 94104
DISTRIBUTOR
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230-0897
TRANSFER AGENT AND DISBURSING AGENT
State Street Bank & Trust Company
c/o National Financial Data Services
Kansas City, MO
1-800-272-6944
CUSTODIAN
State Street Bank & Trust Company
Boston, MA
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Francisco, CA
LEGAL COUNSEL
Ropes & Gray
Boston, MA
This report is submitted for the information of shareholders of The Robertson
Stephens MicroCap Growth Fund. It is not authorized for distribution to
prospective investors unless preceded or accompanied by an effective prospectus.
Published February 13, 1998
24
<PAGE>
Design: Broom & Broom, Inc., San Francisco
Photography: Jerry Orabona, Bill Zemanek
ROBERTSON STEPHENS MUTUAL FUNDS
VALUE
THE PARTNERS FUND
A SMALL-CAP FUND USING A
CASH FLOW VALUE METHODOLOGY
Managed by Andrew Pilara.
GROWTH & INCOME
THE GROWTH & INCOME FUND
SEEKING GROWTH WHILE
ATTEMPTING TO MODERATE RISK
Managed by John Wallace.
GROWTH
THE DIVERSIFIED GROWTH FUND
FOCUSING ON SMALL- AND
MID-CAP COMPANIES
Managed by John Wallace
and John Seabern.
THE EMERGING GROWTH FUND
SEEKING TO INVEST IN AMERICA'S
MOST DYNAMIC, GROWTH-
ORIENTED COMPANIES
Managed by Jim Callinan.
THE INFORMATION AGE FUND-TM-
TARGETING INVESTMENTS IN THE INFORMATION TECHNOLOGY SECTOR
Managed by Ron Elijah
and Rod Berry.
THE MICROCAP GROWTH FUND
FOCUSING ON COMPANIES WITH MARKET CAPS OF LESS THAN $250 MILLION
Managed by Dave Evans
and Rainerio Reyes.
THE VALUE + GROWTH FUND
A GROWTH FUND FOR THE
LONG-TERM INVESTOR
Managed by Ron Elijah.
GLOBAL
THE CONTRARIAN FUND-TM-
A GLOBAL HEDGE FUND
Managed by Paul Stephens.
THE GLOBAL LOW-PRICED STOCK FUND
SEEKING OVERLOOKED AND UNDERVALUED COMPANIES
Managed by Hannah Sullivan.
THE GLOBAL NATURAL RESOURCES FUND
PRIMARILY FOCUSING ON HARD
ASSET COMPANIES
Managed by Andrew Pilara.
THE GLOBAL VALUE FUND
SEEKING UNDERVALUED
INVESTMENTS WORLDWIDE
Managed by Andrew Pilara.
INTERNATIONAL
THE DEVELOPING COUNTRIES FUND
LOOKING FOR GROWING COMPANIES
IN EMERGING MARKETS
Managed by Michael Hoffman.
Please read the prospectus to learn about the Funds' objectives, investment
policies, and the special risks associated with The Robertson Stephens Mutual
Funds, including international investing, investing in smaller companies,
investing in a more limited number of issuers and sectors or a particular
sector, short selling, using options and futures, and investing in
high-yielding, lower-quality debt securities.
MUTUAL FUND SHARES ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENTAL ENTITY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY BANK OF AMERICA OR
ANY OF ITS AFFILIATES; AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
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ROBERTSON STEPHENS FUNDS
Bringing the Fund Manager to You
555 California Street, Suite 2600
San Francisco, California 94104
FUND NEWS & INFORMATION
ROBERTSON STEPHENS
INVESTOR SERVICES
- -- Knowledgeable mutual fund representatives.
- -- Automated access to daily net asset values.
- -- Portfolio Manager Hotline, 24 hours a day.
1-800-766-3863
ROBERTSON STEPHENS
MUTUAL FUND E-MAIL
[email protected]
[GRAPHIC]
ROBERTSON STEPHENS
ON THE WEB
HTTP://WWW.RSIM.COM
ROBERTSON STEPHENS
ACCOUNTLINK
- -- Automated account information, 24 hours a day.
1-800-624-8025
FUND LISTINGS
The Fund is listed in THE WALL STREET JOURNAL, USA TODAY, INVESTOR'S BUSINESS
DAILY, and most local newspapers as MicCGr under the heading Robertson Stephens.
Its computer quotation symbol is RSMGX.
The views expressed in this report were those of the Fund's portfolio manager
as of the date specified, and may not reflect the views of the portfolio
manager on the date they are first published or at any other time thereafter.
RSIM and its affiliates may buy or sell investments at any time for the
Fund, their other clients or for their own accounts, and may not necessarily
do so in a manner consistent with the views expressed in this report. The
prices at which they buy or sell investments may be affected favorably by the
contents of this report or the timing of its publication. THE VIEWS
EXPRESSED IN THIS REPORT ARE INTENDED TO ASSIST SHAREHOLDERS OF THE FUND IN
UNDERSTANDING THEIR INVESTMENT IN THE FUND AND DO NOT CONSTITUTE INVESTMENT
ADVICE; INVESTORS SHOULD CONSULT THEIR OWN INVESTMENT PROFESSIONALS AS TO
THEIR INDIVIDUAL INVESTMENT PROGRAMS.
