<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
The Contrarian Fund-TM-
Annual Report
December 31, 1997
[GRAPHIC]
CONTRARIAN
4
<PAGE>
THE CONTRARIAN FUND-TM- 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>
THE CONTRARIAN FUND-TM-
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.
EXPENSE REDUCTION
Effective January 1, 1998, the 12b-1 expense for The Contrarian Fund (Class A)
was reduced from 0.75% to 0.50% of the Fund's average daily net assets.
FUND PHILOSOPHY
The Contrarian Fund-TM- seeks to achieve maximum long-term growth of capital by
investing worldwide in growing companies that are attractively priced. The Fund
invests on a global basis in an effort to make timely investments in new
discovery ideas or in companies and industries that are neglected, hated or
forgotten. When appropriate, the Fund will short sell stocks.
CONTENTS
Fund Highlights 1
Report to Shareholders 2
Fund Performance - Class A Shares 8
Portfolio Summary 9
Fund Performance - Class C Shares 10
Schedule of Investments 11
Schedule of Securities Sold Short 14
Statement of Assets and Liabilities 16
Statement of Operations 17
Statement of Changes in Net Assets 18
Financial Highlights - Class A Shares 19
Financial Highlights - Class C Shares 20
Notes to Financial Statements 21
Report of Independent Accountants 28
Administration 28
1
<PAGE>
FUND MANAGER
[PHOTO]
PAUL H. STEPHENS
Portfolio Manager
The Contrarian Fund-TM-
DEAR SHAREHOLDER:
The Contrarian Fund (Class A) returned -22.19% for the fourth quarter and
- -29.51% for the twelve month period ended December 31, 1997. The Fund's Class
C shares had a return of -23.28% for the fourth quarter and -29.32% since
their inception on April 14, 1997.
The Fund's disappointing 1997 performance occurred primarily in the fourth
quarter as the Asian meltdown and fears of global deflation provided the
catalysts for a severe bear market in the natural resource sector. The poor
numbers are also attributable to our contrarian view that the mainstream U.S.
stock market is both overvalued and vulnerable. The Contrarian Fund
maintained a short position of 25-35% in the portfolio for most of 1997 and
was overweighted long in historically defensive and out of favor industries
such as gold mining, base metals mining, and the oil and gas exploration and
production sector.
"WE ARE TOTALLY COMMITTED TO BOTH REGAINING YOUR CONFIDENCE AND RETURNING TO
OUR HISTORICAL INVESTMENT RESULTS."
2
<PAGE>
SHORT POSITION
Our S&P 500 put options and our short sale portfolio created 16% of our 1997
decline. Gold mining positions contributed the largest percentage loss at 40%,
copper and gold mining companies contributed 21%, nickel mining companies
contributed 16%, and oil and gas exploration and production companies
contributed 6%. The magnitude of the panic selling in the resource sector
overwhelmed the positive 1997 performance of many of our core positions. The
Fund had gains for the year in our favorite growth stock (ROYAL GROUP
TECHNOLOGIES, LTD.), in financial services (primarily DUNDEE BANCORP, INC.,
CLASS A), in the real estate area (primarily CATELLUS DEVELOPMENT CORPORATION),
and in many energy services companies.
We have reduced our short exposure to currently 19.14% of The Contrarian
Fund, and we are no longer hedging our longs with S&P 500 put options as we
feel the premiums charged are excessively high and that the puts only add
significant value when a 20 - 30% market decline occurs. The last six months
have been extremely difficult for a contrarian investor, but we remain
disciplined in both our investment methodology and our hedged approach.
"...WE REMAIN DISCIPLINED IN BOTH OUR INVESTMENT
METHODOLOGY AND OUR HEDGED APPROACH."
We recommend you look at a mutual fund investment in the same way you look at
a stock. If you believe the fund manager and his team are still creative,
smart, honest and motivated, then add to that fund when they have down
periods in the same way you'd buy more of a company's stock that you like if
it dropped 30% in value. We are totally committed to both regaining your
confidence and returning to our historical investment results.
Even though The Contrarian Fund has had large withdrawals over the last six
to seven months, we don't believe our selling to cover redemptions was a
factor in the Fund's decline. We liquidated many of our secondary and
tertiary positions and only shaved our core holdings.
3
<PAGE>
LONG POSITIONS
We believe our current portfolio is attractively priced, and we have high
conviction in our top 15 long positions that currently (as of January 28,
1998) represent 58.81% of the Contrarian Fund:
<TABLE>
<S> <C> <C> <C>
1. Inco, Ltd. - VBN shares (NVB, $12 3/8) 10.77%
2. Royal Group Technologies, Ltd. (RYG, $24 1/4) 10.37%
3. Dundee Bancorp, Inc., Class A (DBC.A-CN, C$28 1/2) 6.09%
4. Metromedia International Group, Inc. (MMG, $10 7/8) 5.09%
5. DiamondWorks, Ltd. (DMW-CN, C$1.70) 3.71%
6. Normandy Mining, Ltd. (NDY-AU, AU$1.66) 3.08%
7. Consolidated African Mines, Ltd. (CAM-SJ, 1.42 Rand) 2.68%
8. Indochina Goldfields, Ltd. (ING-CN, C$2.30) 2.54%
9. Etruscan Resources, Ltd. (EET-CN, C$4.10) 2.45%
10. CD Radio, Inc. (CDRD, $16 5/16) 2.44%
11. Golden Star Resources, Ltd. (GSR, $4 3/4) 2.42%
12. Eurogas Corporation (EUG-CN, C$2.12) 2.18%
13. Newmont Mining Corporation (NEM, $29 3/8) 1.80%
14. MAXXAM, Inc. (MXM, $47 5/8) 1.78%
15. Atlantic Gulf Communities Corporation (AGLF, $4 .00) 1.41%
TOTAL 58.81%
</TABLE>
INVESTMENT MANAGEMENT
[PHOTO]
G. RANDY HECHT
President
Robertson Stephens
Funds
[email protected]
INVESTMENT TEAM
RESEARCH
Rick Barry
Chris Bonomo
Jim Carruthers
Melissa Floren
Michael Hoffman
Andy Pilara
Borden Putnam III
RESEARCH (CONTINUED)
Jay Sherwood
M. Hannah Sullivan
SENIOR TRADER
Catherine O'Neill
TRADING
Christopher Beagle
Don Heidary
ADMINISTRATION
Leslie Bauer
Dianny Cabrera
4
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
" WE ARE PATIENT INVESTORS AND THAT'S EXACTLY THE WAY WE FEEL ABOUT OUR CORE
HOLDINGS...."
We are managing the portfolio at approximately 80% long and 20% short. Our
growth gold stocks are totally washed out, gold is universally hated, and the
pessimism is palpable -- all great signs for a contrarian. We currently have
an 18% growth gold mining portfolio position, second only to our short sale
weighting of 19.14%. We believe other core non-gold holdings such as the
Inco, Ltd.-VBN shares, Dundee Bancorp, Inc. and Metromedia International
Group, Inc. are extremely oversold and have excellent recovery potential.
Peter Lynch has often said that a fund manager only needs one or two great
new ideas a year and then should hold them for 5 - 10 years. We are patient
investors and that's exactly the way we feel about our core holdings.
PORTFOLIO
Reasonably new positions where we feel The Contrarian Fund is both early in
the discovery phase, and that have open-ended upside potential are:
- - DIAMONDWORKS, LTD: (DMW-CN, $1.70/sh) DiamondWorks is a diamond production
and exploration company focused in Angola, one of the world's richest
countries in natural resources, especially diamonds. DiamondWorks mines
and sells high-quality diamonds from alluvial (gravel) operations at the
recently commissioned Luo site in Angola, where production has been
averaging approximately 300 carats per day. The first parcel of stones
totaling 10,300 carats was sold in Antwerp for US$3.11 million, for a value
averaging US$300 per carat. Additionally, exploration is under way on
several of DiamondWorks' other properties.
5
<PAGE>
- - CONSOLIDATED AFRICAN MINES, LTD.: (CAM-SJ, 1.42 Rand/sh) CAM is a South
African based holding company with a focus on gold, that is selling at a
50% discount to its currently depressed Net Asset Value (NAV) of 2.91 Rand.
CAM's NAV is largely comprised of its holdings in a number of listed South
Africa companies, the largest of these holdings being a combined direct and
indirect 15.3% stake in JCI. JCI has agreed to liquidate for 4.2 billion
Rand, or 1.44 Rand per share in cash to CAM shareholders. In addition to
having the stock price in cash, CAM has multiple other assets such as a
combined direct and indirect 21.2% stake in RANDGOLD RESOURCES, LTD. (GDRs)
in which The Contrarian Fund also owns a 1% Fund position. Randgold
Resources' focus is West Africa and expects to produce over 200,000 ounces
of gold annually from its Syama mine in Mali, at a cost of US$210 per oz.
CAM also owns a combined direct and indirect 13% stake in Durban Roodeport
Deep which annually produces 750,000 ounces for less than US$300 per ounce.
CAM is ably led by Brett Kebble, a visionary South African entrepreneur who
is at the forefront of the asset unbundlings and corporate restructurings
that are sweeping through the African mining industry.
- - ETRUSCAN RESOURCES, LTD.: (EET-CN, C$4.10/sh) Etruscan is a well financed
West African gold exploration company whose prime asset is the Tiawa
property in Niger that is under joint venture with Placer Dome. For Placer
to earn 51% in the property, Placer must fund all exploration (to US$10.5
million), complete and fund a feasibility study and all pre-development
costs, and make a cash payment to Etruscan of US$60 million. Based upon
drilling results to-date, the concession presently is known to host
resources exceeding 3 million ounces, with nearly 1 million high-grade,
open-pitable ounces contained in the Samira main zone.
- - EUROGAS CORPORATION: (EUG-CN, C$2.12/sh) Eurogas Corporation has
operations in Russia, Spain, Canada, and Tunisia. Eurogas is currently
drilling a 4,750 meter test well in Tunisia which has potential reserves
estimated to be between 400 million and 1 billion barrels of oil. As of
the writing of this letter, the Tunisian well was drilled to 4,600 meters
with final analysis of the cores and logs available shortly.
"OUR GROWTH GOLD STOCKS ARE TOTALLY WASHED OUT, GOLD IS UNIVERSALLY HATED, ..."
"...AND THE PESSIMISM IS PALPABLE -- ALL GREAT SIGNS FOR A CONTRARIAN."
6
<PAGE>
- - CD RADIO, INC.: (CDRD, $16.31/sh) CD Radio, Inc. holds one of two national
FCC licenses that allow the company to broadcast a commercial-free,
subscription-based satellite radio service into cars. Subscribers will pay
approximately $10 per month and will be able to receive 50 channels of
digital quality music and talk-radio with an uninterrupted signal across
the nation. CD Radio will spend two years building and launching its
satellites before service will begin in the second half of 1999. On
November 20, the company raised $180 million of equity and debt which is
being used to fund the buildout of its satellites and other expenses
through the first quarter of 1999. CDRD has now completed $445 million of
the $645 million in necessary financing. We believe CDRD is
revolutionizing the radio industry and is a unique long-term growth
company.
- - ATLANTIC GULF COMMUNITIES CORPORATION: (AGLF, $4.00/sh) Atlantic Gulf has
substantially strengthened its position in the Florida real estate market.
During 1997, the company raised a total of $55 million in preferred and
common equity, including $25 million from Leon Black's Apollo Real Estate
Advisors, L.P. Assuming exercise of all warrants, Apollo will end up
owning 33% of Atlantic Gulf and will control three of seven board seats.
Apollo has over $1 billion in real estate investments and will be
instrumental in providing additional sponsorship and project flow to
Atlantic Gulf.
In conclusion, we don't enjoy the volatility that The Contrarian Fund has
experienced recently, but it goes with the territory when you are a
contrarian and you invest in out-of-favor and unfashionable sectors. We
strongly believe patient investors can be rewarded by following a contrarian
approach.
Sincerely,
/s/ Paul H. Stephens
PAUL H. STEPHENS
Portfolio Manager
January 28, 1998
TO HEAR MY ONGOING THOUGHTS ON THE FUND, CALL OUR
PORTFOLIO MANAGER HOTLINE AT 1-800-766-3863.
7
<PAGE>
FUND PERFORMANCE - CLASS A SHARES
Results of a Hypothetical $10,000 Investment in The Contrarian Fund-TM-, the
S&P 500 Index(1), and the MSCI All Country World Index(2)
IF INVESTED ON JUNE 30, 1993(3)
[GRAPH]
[PLOT POINTS TO FOLLOW]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURNS
CONTRARIAN S&P 500 MSCI ALL COUNTRY
FOR THE PERIOD ENDED 12/31/97 FUND INDEX(1) WORLD INDEX(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Since inception (6/30/93)(3) 18.62% 139.85% 60.36%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
CONTRARIAN S&P 500 MSCI ALL COUNTRY
FOR THE PERIODS ENDED 12/31/97 FUND INDEX(1) WORLD INDEX(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One year (29.51)% 33.34% 12.62%
- ---------------------------------------------------------------------------------------------------------------------------------
Three years 3.92% 31.14% 13.04%
- ---------------------------------------------------------------------------------------------------------------------------------
Since inception (6/30/93)(3) 3.86% 21.42% 11.05%
- ---------------------------------------------------------------------------------------------------------------------------------
</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 Morgan Stanley Capital International ("MSCI") All Country World Index
is an unmanaged, market capitalization-weighted index composed of companies
representative of the market structure of 47 developed and emerging market
countries. 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 that 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.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. 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. High-yielding,
lower-quality debt securities may be considered to be of lower standing and
more speculative.
8
<PAGE>
PORTFOLIO SUMMARY
AS OF DECEMBER 31, 1997
[CHART]
Warrants 0.3%
Industial Minerals 0.8%
Convertible/Preferred 0.9%
Transportation Services 1.1%
Real Estate 1.6%
Aluminum 2.2%
Diamond Mining 3.1%
Copper Mining 4.3%
Financial Services 6.4%
Media & Telecommunication Services 6.5%
Energy 8.8%
Textiles 0.1%
Other & Other Assets, Net 2.3%
Short Positions (Net) 20.3%
Construction/Infrastructure 12.3%
Gold Mining 15.9%
Nickel Mining 13.1%
TOP TEN HOLDINGS
1.
ROYAL GROUP TECHNOLOGIES, LTD. (12.28%)
An innovative technology company that is revolutionizing the building industry.
The company consistently creates new products out of extruded vinyl to replace
traditional wood and metal products.
2.
INCO, LTD. - VBN SHARES (11.07%)
Owns 25% of the free cash flow
from the planned Voisey's Bay
nickel-copper-cobalt mine, and a
25% interest in all future discoveries.
3.
DUNDEE BANCORP, INC., CLASS A (6.27%)
A well-managed natural resource holding company based in Toronto that owns
Goodman & Co.
4.
METROMEDIA INTERNATIONAL GROUP, INC. (4.25%)
John Kluge's communications company focused on wireless opportunities in the
former Soviet Union and China.
5.
INDOCHINA GOLDFIELDS, LTD. (3.13%)
Explores for and develops large,
low-cost copper and gold deposits, primarily in Myanmar, Indonesia, Kazakstan,
South Korea, and Fiji.
6.
CONSOLIDATED AFRICAN MINES, LTD. (2.55%)
Is the holding company for a group of companies that operate in the mining,
financial services, gold mining exploration, and other sectors in South Africa.
7.
NORMANDY MINING, LTD. (2.54%)
Explores for gold, other metals, and industrial and commercial minerals in
Australia, New Zealand, Southeast Asia, and Africa.
8.
DIAMONDWORKS, LTD. (2.50%)
Explores and mines for diamonds in Angola, Sierra Leone, and Canada. The company
also has gold polymetallic exploration ventures in China, and gold exploration
in Venezuela.
9.
CD RADIO, INC. (2.21%)
Holds one of two FCC national satellite radio broadcast licenses. The company is
building a satellite-to-car 50-channel radio system for the broadcast of music
and other programming to motorists throughout the United States.
10.
INCO, LTD. (2.00%)
Number-one nickel producer in North America. Also produces copper, platinum,
silver, cobalt, sulfuric acid, and liquid sulfur dioxide.
9
<PAGE>
FUND PERFORMANCE - CLASS C SHARES
RESULTS OF A HYPOTHETICAL $10,000 INVESTMENT in The Contrarian Fund-TM-, the
S&P 500 Index(1), and the MSCI All Country World Index(2)
IF INVESTED ON APRIL 14, 1997(3)
CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
CONTRARIAN CONTRARIAN S&P 500 MSCI ALL COUNTRY
FOR THE PERIOD ENDED 12/31/97 FUND FUND(4) INDEX(1) WORLD INDEX(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Since inception (4/14/97)(3) (28.60)% (29.32)% 32.11% 15.01%
- ---------------------------------------------------------------------------------------------------------------------------------
</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 Morgan Stanley Capital International ("MSCI") All Country World Index
is an unmanaged, market capitalization-weighted index composed of companies
representative of the market structure of 47 developed and emerging market
countries. 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 that 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.
Investing in a more limited number of issuers and sectors can be subject to
greater market fluctuation. 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. High-yielding,
lower-quality debt securities may be considered to be of lower standing and
more speculative.
10
<PAGE>
SCHEDULE OF INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 FOREIGN CURRENCY(8) SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
- ------------------------------------------------------------------------------------------------------------------------------
ALUMINUM - 2.2%
Kaiser Aluminum Corporation 138,300 $ 1,218,769
MAXXAM, Inc. 178,900 7,804,512
- ------------------------------------------------------------------------------------------------------------------------------
9,023,281
- ------------------------------------------------------------------------------------------------------------------------------
CONSTRUCTION/INFRASTRUCTURE - 12.3%
Royal Group Technologies, Ltd. CAD 2,119,400 49,388,247
- ------------------------------------------------------------------------------------------------------------------------------
49,388,247
- ------------------------------------------------------------------------------------------------------------------------------
COPPER/GOLD MINING - 4.3%
Cambior, Inc.(1) CAD 774,000 4,569,961
Indochina Goldfields, Ltd. CAD 4,486,940 9,123,429
Indochina Goldfields, Ltd., 144A(5) CAD 1,700,000 3,456,661
- ------------------------------------------------------------------------------------------------------------------------------
17,150,051
- ------------------------------------------------------------------------------------------------------------------------------
DIAMOND MINING - 3.1%
Diamond Fields International Note(2) CAD 6,687,600 2,336,443
DiamondWorks, Ltd. CAD 11,163,400 9,360,361
DiamondWorks, Ltd., 144A(5) CAD 848,485 711,443
- ------------------------------------------------------------------------------------------------------------------------------
12,408,247
- ------------------------------------------------------------------------------------------------------------------------------
ENERGY - 8.8%
Abacan Resource Corporation CAD 1,232,900 1,936,576
Anderson Exploration, Ltd. CAD 300,000 2,934,703
Anzoil N.L. AUD 71,549,422 1,095,524
Beau Canada Exploration, Ltd. CAD 740,500 1,500,507
Black Sea Energy, Ltd. CAD 2,771,600 3,660,220
Black Sea Energy, Ltd., 144A, Restricted(2)(3)(5) CAD 1,178,280 1,258,561
Eurogas Corporation, 144A(5) CAD 5,768,400 6,650,498
Nescor Energy, Restricted(2),(3) 375,000 105,000
Petroleum Securities Australia, Ltd. AUD 226,000 599,309
Petroleum Securities Australia, Ltd., ADR(4) 197,300 2,712,875
Pioneer Natural Resources Company 150,000 4,340,627
Santa Fe Energy Resources, Inc. 200,000 2,250,000
Tarragon Oil & Gas, Ltd. CAD 376,000 2,942,529
Vastar Resources, Inc.(1) 100,000 3,575,000
- ------------------------------------------------------------------------------------------------------------------------------
35,561,929
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 6.4%
Dundee Bancorp, Inc., Class A CAD 1,200,000 25,238,444
U.S. Global Investors, Inc., Class A 279,860 524,737
- ------------------------------------------------------------------------------------------------------------------------------
25,763,181
- ------------------------------------------------------------------------------------------------------------------------------
GOLD MINING - 15.9%
BKG Resources PLC GBP 3,948,232 649,800
Chase Resources Corporation CAD 403,950 42,338
Consolidated African Mines, Ltd. SAR 35,702,644 10,270,975
El Callao Mining Corporation CAD 450,000 113,196
Emperor Mines, Ltd. AUD 4,317,979 1,266,021
11
The accompanying notes are an integral part of these financial statements.
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
<CAPTION>
DECEMBER 31, 1997 FOREIGN CURRENCY(8) SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
GOLD MINING - CONTINUED
Etruscan Resources, Ltd. CAD 3,351,300 $ 9,343,316
Euro-Nevada Mining Corporation(1) CAD 150,000 2,028,089
First Dynasty Mines, Ltd. CAD 2,324,550 812,127
First Dynasty Mines, Ltd., 144A(5) CAD 1,760,000 614,890
Franco-Nevada Mining Corporation, Ltd.(1) CAD 75,000 1,472,592
Golden Star Resources, Ltd. CAD 2,000,000 6,987,388
Guyanor Ressources, S.A., Class B CAD 602,600 589,484
Harmony Gold Mining Company, Ltd., ADR(4) 844,000 1,899,000
MK Gold Company 739,600 1,109,400
New East Daggafontein Mines, Ltd. SAR 145,400 185,839
Newmont Mining Corporation(1) 235,600 6,920,750
Normandy Mining, Ltd.(1) AUD 10,534,882 10,227,364
Queenstake Resources, Ltd. CAD 1,001,000 615,505
Randgold and Exploration Company, Ltd. SAR 664,700 860,497
Randgold Resources, Ltd., GDR(4) 728,656 3,643,280
Vengold, Inc. CAD 4,756,400 4,320,525
- ------------------------------------------------------------------------------------------------------------------------------
63,972,376
- ------------------------------------------------------------------------------------------------------------------------------
INDUSTRIAL MINERALS - 0.8%
China Industrial Minerals Company, 144A, Restricted(2)(3)(5) 2,183,334 3,275,001
- ------------------------------------------------------------------------------------------------------------------------------
3,275,001
- ------------------------------------------------------------------------------------------------------------------------------
MEDIA & TELECOMMUNICATION SERVICES - 6.5%
CD Radio, Inc. 525,000 8,892,187
Metromedia International Group, Inc. 1,800,000 17,100,000
- ------------------------------------------------------------------------------------------------------------------------------
25,992,187
- ------------------------------------------------------------------------------------------------------------------------------
NICKEL MINING - 13.1%
Inco, Ltd.(1) CAD 475,000 8,065,192
Inco, Ltd., VBN Shares(1) CAD 3,346,550 44,545,839
- ------------------------------------------------------------------------------------------------------------------------------
52,611,031
- ------------------------------------------------------------------------------------------------------------------------------
REAL ESTATE - 1.6%
Atlantic Gulf Communities Corporation 638,130 2,871,585
Avatar Holdings, Inc. 130,000 3,696,875
- ------------------------------------------------------------------------------------------------------------------------------
6,568,460
- ------------------------------------------------------------------------------------------------------------------------------
TEXTILES - 0.1%
PT Apac Centertex Corporation, Foreign(1),(7) IDR 17,668,000 642,479
- ------------------------------------------------------------------------------------------------------------------------------
642,479
- ------------------------------------------------------------------------------------------------------------------------------
TRANSPORTATION SERVICES - 1.1%
China Yuchai International, Ltd. 1,582,925 4,353,044
- ------------------------------------------------------------------------------------------------------------------------------
4,353,044
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
DECEMBER 31, 1997 FOREIGN CURRENCY(8) SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS - 76.2% (Cost $428,326,118) $ 306,709,514
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS
- ------------------------------------------------------------------------------------------------------------------------------
Atlantic Gulf Communities Corporation, Series B 206,778 2,274,558
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS - 0.6% (Cost $2,049,780) 2,274,558
- ------------------------------------------------------------------------------------------------------------------------------
PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------
CONVERTIBLE BONDS
- ------------------------------------------------------------------------------------------------------------------------------
Randgold and Exploration Company, Ltd., 7.00%, Due 10/3/01(1) 2,750,000 1,388,750
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS - 0.3% (Cost $2,750,000) 1,388,750
- ------------------------------------------------------------------------------------------------------------------------------
WARRANTS VALUE
- ------------------------------------------------------------------------------------------------------------------------------
WARRANTS
- ------------------------------------------------------------------------------------------------------------------------------
Atlantic Gulf Communities Corporation, Warrants, Strike $5.75, Expire 6/23/04(6) 413,556 607,792
DiamondWorks, Ltd., Warrants, Strike CAD1.65, Expire 7/15/98(2)(6) CAD 848,485 121,566
Etruscan Resources, Ltd., Warrants, Strike CAD7.50, Expire 4/21/98(2)(6) CAD 1,031,900 4,988
PT Apac Centertex Corporation, Warrants, Strike IDR1,000, Expire 7/14/01(6) IDR 2,700,000 11,291
Vengold, Inc., Warrants, Strike $1.30, Expire 6/30/00(6) CAD 1,286,000 269,574
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL WARRANTS - 0.3% (Cost $436,091) 1,015,211
OPTIONS VALUE
- ------------------------------------------------------------------------------------------------------------------------------
OPTIONS
- ------------------------------------------------------------------------------------------------------------------------------
Harmony Gold Mining Company, Ltd., Strike SAR6,000, Expire 7/31/01(6) SAR 9,900 4,069
Normandy Mining, Ltd., Strike AUD2.50, Expire 4/30/01(6) AUD 1,673,426 190,806
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL OPTIONS - 0.0% (Cost $43,533) 194,875
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS - 77.4% (Cost $433,605,522) 311,582,908
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
DEPOSITS WITH BROKERS AND CUSTODIAN BANK FOR SECURITIES SOLD SHORT
- ------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bill, 5.00%, due 1/22/98, $107,000,000 par value 106,688,541
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL DEPOSITS WITH BROKERS AND CUSTODIAN BANK FOR SECURITIES SOLD SHORT - 26.5% 106,688,541
- ------------------------------------------------------------------------------------------------------------------------------
RECEIVABLE FROM BROKERS FOR SECURITIES SOLD SHORT - 29.6% 119,148,380
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
SECURITIES SOLD SHORT - (20.3)% (Proceeds: $95,871,359) (81,855,834)
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997 VALUE
- ------------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES, NET -- (13.2)% $ (53,268,176)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS -- 100.0% $ 402,295,819
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Income-producing security.
(2) Fair-value security. See 1.a in Notes to Financial Statements.
(3) Restricted Security. See 4.d. in Notes to Financial Statements.
(4) ADR - American Depository Receipt; GDR - Global Depository Receipt.
(5) These securities may be resold in transactions exempt from registration
under Rule 144A of the Securities Act of 1933, normally to qualified
institutional buyers.
(6) See 4.e. in Notes to Financial Statements.
(7) Shares registered for foreign investors.
(8) Foreign-denominated security: AUD - Australian Dollar; CAD - Canadian
Dollar; GBP - British Pound; IDR - Indonesian Rupiah; SAR - South African
Rand.
SCHEDULE OF SECURITIES SOLD SHORT
<TABLE>
<CAPTION>
DECEMBER 31, 1997 SHARES VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
AGRICULTURAL SERVICES - 3.7%
Delta & Pine Land Company 492,244 $ 15,013,456
- ------------------------------------------------------------------------------------------------------------------------------
15,013,456
- ------------------------------------------------------------------------------------------------------------------------------
COMMERCIAL SERVICES - 0.2%
Employee Solutions, Inc. 166,400 717,600
- ------------------------------------------------------------------------------------------------------------------------------
717,600
- ------------------------------------------------------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.1%
Cidco, Inc. 23,700 462,150
- ------------------------------------------------------------------------------------------------------------------------------
462,150
- ------------------------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE - 1.8%
Activision, Inc. 201,200 3,596,450
Avant! Corporation 16,500 276,375
Imnet Systems, Inc. 216,420 3,516,825
- ------------------------------------------------------------------------------------------------------------------------------
7,389,650
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER & SPECIALTY RETAIL - 1.8%
West Marine, Inc. 314,500 7,036,937
- ------------------------------------------------------------------------------------------------------------------------------
7,036,937
- ------------------------------------------------------------------------------------------------------------------------------
CONSUMER TECHNOLOGY - 2.6%
Sensormatic Electronics Corporation 639,600 10,513,425
- ------------------------------------------------------------------------------------------------------------------------------
10,513,425
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
SCHEDULE OF SECURITIES SOLD SHORT (CONTINUED)
DECEMBER 31, 1997 SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS - 0.3%
Identix, Inc 110,700 $ 1,065,488
- ------------------------------------------------------------------------------------------------------------------------------
1,065,488
- ------------------------------------------------------------------------------------------------------------------------------
ELECTRONICS - 0.3%
Zenith Electronics Corporation 257,700 1,401,244
- ------------------------------------------------------------------------------------------------------------------------------
1,401,244
- ------------------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES - 1.6%
Delta Financial Corporation 495,600 6,628,650
- ------------------------------------------------------------------------------------------------------------------------------
6,628,650
- ------------------------------------------------------------------------------------------------------------------------------
MACHINERY-GENERAL INDUSTRIAL - 1.5%
Zoltek Companies, Inc. 219,000 6,104,625
- ------------------------------------------------------------------------------------------------------------------------------
6,104,625
- ------------------------------------------------------------------------------------------------------------------------------
MEDICAL SERVICES - 0.2%
Medaphis Corporation 118,700 771,550
- ------------------------------------------------------------------------------------------------------------------------------
771,550
- ------------------------------------------------------------------------------------------------------------------------------
MEDICAL SUPPLIES - 1.4%
Enzo Biochem, Inc. 379,800 5,554,575
- ------------------------------------------------------------------------------------------------------------------------------
5,554,575
- ------------------------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS - 0.5%
Micron Technology, Inc. 76,200 1,981,200
- ------------------------------------------------------------------------------------------------------------------------------
1,981,200
- ------------------------------------------------------------------------------------------------------------------------------
SPECIALTY WHOLESALE - 3.7%
Rexall Sundown, Inc. 489,500 14,776,781
- ------------------------------------------------------------------------------------------------------------------------------
14,776,781
- ------------------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.6%
EchoStar Communications Corporation, Class A 65,300 1,093,775
InteliData Technologies Corporation 159,100 293,341
Tel-Save Holdings, Inc. 52,900 1,051,387
- ------------------------------------------------------------------------------------------------------------------------------
2,438,503
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SECURITIES SOLD SHORT - 20.3% (Proceeds: $107,916,552) $ 81,855,834
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31, 1997
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
Investments, at value (Cost: $433,605,522) $ 311,582,908
Deposits with brokers and custodian bank for securities sold short 106,688,541
Receivable from brokers for securities sold short 119,148,380
Receivable for investments sold 23,098,898
Receivable for fund shares subscribed 591,852
Dividends/interest receivable 211,335
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 561,321,914
- ------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------
Securities sold short (Proceeds: $95,871,359) 81,855,834
Payable to custodian bank 15,000,500
Payable to broker 55,630,944
Payable for investments purchased 420,906
Payable for fund shares redeemed 5,105,100
Payable to adviser 571,446
Accrued expenses 441,365
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 159,026,095
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 402,295,819
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------------------------------
Paid-in capital 486,076,439
Accumulated undistributed net investment income 53,424
Accumulated net realized gain from investments 64,572,267
Accumulated net realized loss from securities sold short (52,454,078)
Net unrealized depreciation on investments (121,593,067)
Net unrealized appreciation on securities sold short 25,640,834
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $ 402,295,819
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PRICING OF SHARES:
Net Asset Value, offering and redemption price per share - Class A Shares $ 11.61
(net assets of $398,242,451 applicable to 34,301,986 shares of beneficial interest
outstanding with no par value)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share - Class C Shares $ 11.54
(net assets of $4,053,368 applicable to 351,272 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.
16
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1997
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------------------------------
Interest $ 19,421,941
Dividends (net of foreign tax withheld of $244,941) 3,284,790
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME 22,706,731
- ------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 13,674,978
Distribution fees - Class A Shares 6,816,512
Transfer agent fees 624,238
Dividend expense for securities sold short 440,447
Custodian fees 363,618
Shareholder reports 278,232
Professional fees 174,428
Registration and filing fees 119,573
Interest expenses 86,271
Insurance 24,776
Trustees' fees and expenses 22,265
Distribution fees - Class C Shares 20,977
Shareholder servicing fees - Class C Shares 6,992
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 22,653,307
- ------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 53,424
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
REALIZED GAIN/(LOSS) AND UNREALIZED APPRECIATION/(DEPRECIATION) ON INVESTMENTS AND SECURITIES SOLD SHORT
- ------------------------------------------------------------------------------------------------------------------------------
Net realized gain from investments 52,049,490
Net realized loss from securities sold short (48,986,912)
Net change in unrealized depreciation on investments (267,380,035)
Net change in unrealized appreciation on short sales 13,334,501
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NET REALIZED GAIN/(LOSS) AND UNREALIZED (DEPRECIATION)/APPRECIATION
ON INVESTMENTS AND SECURITIES SOLD SHORT (250,982,956)
- ------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(250,929,532)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE FOR THE
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) $ 53,424 $ (186,383)
Net realized gain from investments 52,049,490 61,594,231
Net realized (loss)/gain from securities sold short (48,986,912) 9,532,717
Net change in unrealized (depreciation)/appreciation on investments (267,380,035) 46,658,624
Net change in unrealized appreciation on securities sold short 13,334,501 6,082,273
- ------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE)/INCREASE IN NET ASSETS RESULTING FROM OPERATIONS (250,929,532) 123,681,462
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income - Class A Shares - -
Net investment income - Class C Shares(1) - -
Realized gain on investments - Class A Shares (3,087,288) (12,608,730)
Realized gain on investments - Class C Shares(1) (27,643) -
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (3,114,931) (12,608,730)
- ------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net (decrease)/increase in net assets resulting from capital share transactions (407,097,396) 444,888,205
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL (DECREASE)/INCREASE IN NET ASSETS (661,141,859) 555,960,937
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,063,437,678 507,476,741
End of period $ 402,295,819 $1,063,437,678
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class C shares were first issued on April 14, 1997.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS - CLASS A SHARES
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE
FOR A SHARE OUTSTANDING YEAR ENDED YEAR ENDED NINE MONTHS YEAR ENDED PERIOD ENDED
THROUGHOUT EACH PERIOD: 12/31/97 12/31/96 ENDED 12/31/95(3) 3/31/95 3/31/94(1),(3)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.57 $ 13.78 $ 10.70 $ 12.34 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income/(loss) 0.00 0.00 (0.01) (0.04) (0.02)
Net realized gain/(loss) and unrealized
appreciation/(depreciation) on
investments and securities sold short (4.88) 2.99 3.09 (1.35) 2.36
- -----------------------------------------------------------------------------------------------------------------------------
Net (Decrease)/Increase in Net Assets
Resulting From Operations (4.88) 2.99 3.08 (1.39) 2.34
- -----------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income - - - - -
Distributions from realized gain on investments (0.08) (0.20) - (0.25) -
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.61 $ 16.57 $ 13.78 $ 10.70 $ 12.34
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (29.51)% 21.68% 28.79% (11.23)%(2) 23.40%
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000s) $398,242 $1,063,438 $ 507,477 $ 397,646 $ 484,951
Ratio of Expenses to Average Net Assets 2.48%(5) 2.46% 2.54% 2.46%(2) 2.22%
Ratio of Net Investment Income/(Loss) to
Average Net Assets 0.01% (0.02)% (0.20)% (0.27)%(2) (0.77)%
Portfolio Turnover Rate 36% 44% 29% 79% 14%
Average Commission Rate Paid(4) $ 0.0191 $ 0.0273 - - -
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class A shares were first issued on June 30, 1993.
(2) If the Fund had paid all of its expenses and there had been no
reimbursement by the adviser for the year ended March 31, 1995, total
return would have been (11.40)%, the ratio of expenses to average net
assets would have been 2.58%, and the ratio of net investment loss to
average net assets would have been (0.39)%.
(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 principal basis, if any.
(5) Effective January 1, 1998, the 12b-1 expense for the contrarian fund (class
a) was reduced from 0.75% to 0.50% of the fund's average daily net assets.
See 3.c. In notes to financial statements.
Per-share data with respect to class a shares has been determined by using
the average number of class a shares outstanding throughout the period.
Distributions reflect actual per-share amounts distributed for the periods.
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
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 $ 16.26
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss(2) (0.03)
Net realized gain/(loss) and unrealized (depreciation)/appreciation on investments and securities sold short (4.61)
- ------------------------------------------------------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (4.64)
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from net investment income -
Distributions from realized gain on investments (0.08)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 11.54
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (28.60)%
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period (000's) $ 4,053
Ratio of Expenses to Average Net Assets 2.73%
Ratio of Net Investment Loss to Average Net Assets (0.32)%
Portfolio Turnover Rate 36%
Average Commission Rate Paid(3) $ 0.0191
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Class C shares were first issued on April 14, 1997.
(2) Amounts shown may not correspond to amounts shown on the Statement of
Operations due to the timing of realized and unrealized gain/(loss).
(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.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Contrarian Fund-TM-(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 non-diversified, open-end management investment
company. The Fund became effective to offer shares to the public on June 30,
1993. Prior to the public offering, shares were offered in a private placement
offering on June 3, 1993, at $10 per share to investors under Section 4 (2) of
he Securities Act of 1933. 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 of the Fund, 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 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 April 14, 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
investments that will mature in 60 days or less are started at amortized cost,
which approximates market value. Foreign securities are generally denominated in
foreign currencies. The currencies are translated into U.S. dollars by using the
exchange rates quoted at the close of The London Stock Exchange prior to when
the Fund's net asset value is next determined. At December 31, 1997, 97.7% of
the Fund's long positions and 100% of its short positions were 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
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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,
approximately 2.3% of the Fund's long positions were valued using these
guidelines and procedures.
As its normal course of business, the Fund has invested a significant portion of
its assets in companies concentrated within a number of industries involving
gold, nickel and copper mining, and construction/infrastructure. Accordingly,
the performance of the Fund may be subject to a 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 securities are
purchased, sold, or sold short (trade date). Realized gains or losses on
securities transactions are determined on the basis of specific
identification.
e. FOREIGN CURRENCY TRANSLATION:
The accounting records of the Fund are maintained in U.S. dollars.
Investment securities and all other assets and liabilities of the Fund
denominated in a foreign currency are translated into U.S. dollars at the
exchange rate each day. Purchases and sales of securities, income receipts,
and expense payments are translated into U.S. dollars at the exchange rate in
effect on the dates of the respective transactions.
The Fund does not isolate the portion of the fluctuations on investments
resulting from changes in foreign currency exchange rates from the
fluctuations in market prices of investments held. Such fluctuations are
included with the net realized gain or loss and unrealized appreciation or
depreciation from investments and securities sold short.
22
<PAGE>
ROBERTSON STEPHENS MUTUAL FUNDS
f. 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.
g. 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.
h. 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.
i. CLASS ALLOCATIONS:
Income, common expenses, 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 net assets
of each class and the specific expense rate applicable to each class.
j. 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.
k. 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.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 year ended December 31, 1996, and for Class C for the period from
April 14, 1997 (Commencement of Operations), to December 31, 1997, were as
follows:
CLASS A
<TABLE>
<CAPTION>
1/1/97 - 12/31/97 SHARES AMOUNT
<S> <C> <C>
- ----------------------------------------------------------------------
Shares sold 24,871,107 $ 405,584,450
Shares reinvested 234,064 2,918,772
- ----------------------------------------------------------------------
25,105,171 408,503,222
- ----------------------------------------------------------------------
Shares redeemed (54,963,351) (821,238,289)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Net decrease (29,858,180) $(412,735,067)
- ----------------------------------------------------------------------
1/1/96 - 12/31/96 SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 59,842,647 $ 974,268,575
Shares reinvested 718,331 12,010,500
- ----------------------------------------------------------------------
60,560,978 986,279,075
- ----------------------------------------------------------------------
Shares redeemed (33,218,658) (541,390,870)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Net increase 27,342,320 $ 444,888,205
- ----------------------------------------------------------------------
<CAPTION>
CLASS C
4/14/97* - 12/31/97 SHARES AMOUNT
- ----------------------------------------------------------------------
Shares sold 418,292 $ 6,481,723
Shares reinvested 2,185 27,119
- ----------------------------------------------------------------------
420,477 6,508,842
- ----------------------------------------------------------------------
Shares redeemed (69,205) (871,171)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Net increase 351,272 $ 5,637,671
- ----------------------------------------------------------------------
</TABLE>
* Class C shares were first issued on April 14, 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 calculated at an annual rate of 1.50% of the average
daily net assets of the Fund. For the year ended December 31, 1997, the Fund
incurred investment advisory fees of $13,674,978. For the year ended
December 31, 1997, there was no expected reimbursement of the advisory fees
and other expenses.
RSIM L.P. 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 L.P. 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.
24
<PAGE>
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 0.75% 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. Beginning January 1, 1998, the
distribution fee calculated for the Class A shares will be reduced to 0.50%
of the daily average net assets attributable to Class A shares. For the
period from January 1, 1997, through September 30, 1997, for Class A, and for
the period from April 14, 1997 (Commencement of Operations), through
September 30, 1997, for Class C, the Fund paid distribution fees of
$5,696,774 and $11,918, 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 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 April 14, 1997 (Commencement of
Operations), through December 31, 1997, for Class C shares, the Fund incurred
shareholder servicing fees of $6,992.
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 brokerage commissions of $16,986 to BARS, which represented 0.6% of total
commissions paid during this period.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 INVESTMENTS:
a. TAX BASIS OF INVESTMENTS:
At December 31, 1997, the cost of investments and proceeds of securities sold
short for federal income tax purposes was $568,316,764. Accumulated net
unrealized depreciation on investments and securities sold short, excluding the
foreign currency fluctuation associated with other assets and liabilities, was
$101,292,930, consisting of gross unrealized appreciation and depreciation of
$120,962,904 and $221,255,834, 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 $248,620,139 and $562,114,624, respectively.
c. SHORT SALES:
Short sales are transactions in which the Fund sells a security it does not own,
in anticipation of a decline in the market value of that security. To complete
such a transaction, the Fund must borrow the security to deliver to the buyer
upon the short sale; the Fund then is obligated to replace the security borrowed
by purchasing it in the open market at some later date. The Fund will incur a
loss if the market price of the security increases between the date of the short
sale and the date on which the Fund replaces the borrowed security. The Fund
will typically realize a gain if the security declines in value between those
dates. All short sales must be fully collateralized. The Fund maintains the
collateral in a segregated account consisting of cash, equities and/or U.S.
government securities sufficient to collateralize its obligation on the short
positions. At December 31, 1997, equities held by the Fund with a total market
value of $91,178,474 were segregated at the Fund's custodian as collateral for
its short sales. The Fund may also sell short "against the box" (i.e., the Fund
enters into a short sale as described above while holding an offsetting long
position in the security which is sold short). If the Fund enters into a short
sale against the box, it will hold an equivalent amount of the securities to
cover its position while the short sale is outstanding. For the year ended
December 31, 1997, the cost of investments purchased to cover short sales and
proceeds from investments sold short were $489,608,402 and $346,314,539,
respectively.
Included in the "Other liabilities, Net" category in the Schedule of
Investments are the following securities sold short where the Fund has
purchased the underlying securities to effectively close out the short
positions. Included in Receivables from Brokers for Securities Sold Short is
$23,277,021 for these short positions. At December 31, 1997, the cost of the
associated long positions and the unrealized appreciation of investments and
securities sold short are $11,231,828 and $12,045,193, respectively. At
December 31, 1997, the Fund chose not to complete the transactions which
would have required delivery of the purchased securities to the lender. The
Fund does not consider these boxed positions as investments.
<TABLE>
<CAPTION>
SECURITIES SHARES VALUE
<S> <C> <C>
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Avant Corporation 507,900 $ 8,507,325
Employee Solutions, Inc. 393,400 1,696,537
HCIA, Inc. 105,800 1,256,375
Imp., Inc. 30,000 20,625
Objective Systems Integrators, Inc. 20,400 170,850
- ----------------------------------------------------------------------
$11,651,712
- ----------------------------------------------------------------------
</TABLE>
26
<PAGE>
d. RESTRICTED SECURITIES:
A restricted security cannot be resold to the general public without prior
registration under the Securities Act of 1933. If the security is subsequently
reregistered and resold, the issuers would bear the expense of all registrations
at no cost to the Fund. At December 31, 1997, the Fund held restricted
securities with an aggregate value of $4,638,562, which represented 1.2% of the
Fund's net assets. Restricted securities are valued according to the guidelines
and procedures adopted by the Fund's Board of Trustees as outlined in Note 1.a.,
paragraph 2.
<TABLE>
<CAPTION>
SHARES COST VALUE ACQUISITION
SECURITY (000) (000) (000) DATE
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Black Sea Energy, Ltd. 1,178 1,182 1,259 2/5/97
China Industrial
Minerals Company 2,183 2,838 3,275 4/25/97 -
4/30/97
Nescor Energy 375 125 105 4/18/94 -
5/15/94
- ------------------------------------------------------------------------------
$4,145 $4,639
- ------------------------------------------------------------------------------
</TABLE>
e. OPTIONS AND WARRANTS:
Options and warrants normally entitle the holder to purchase a proportionate
amount of a particular class of the issuer's securities at a predetermined price
during a specific period. Options and warrants for which market quotations were
not readily available were priced using the modified Black-Scholes Valuation
Formula. The Black-Scholes Valuation Formula values an option or warrant by
determining the differential between the exercise price of the option or warrant
and the current price of the underlying stock based on a number of factors.
These factors include, but are not limited to, current price of the underlying
stock, exercise price of the option or warrant, time to expiration, assumed
riskless rate of interest, compounded rate of return on the stock, and standard
deviation of the return on the stock. This valuation method is subject to
frequent review and is in accordance with the guidelines and procedures adopted
by the Fund's Board of Trustees.
f. FOREIGN SECURITIES:
Foreign securities investments involve special risks and considerations not
typically associated with those of U.S. origin. These risks include, but are
not limited to, revaluation of currencies, adverse political, social, and
economic developments, and less reliable information about issuers. Moreover,
securities of many foreign companies and markets may be less liquid and their
prices more volatile than those of U.S. companies and markets.
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.
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
The Contrarian Fund-TM-
In our opinion, the accompanying statement of assets and liabilities,
including the schedules of investments, and of securities sold short 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 Contrarian Fund-TM- (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
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 Contrarian
Fund-TM-. It is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus.
Published February 13, 1998
28
<PAGE>
Design: Broom & Broom, Inc., San Francisco
Photography: Jerry Orabona, Bill Zemanek
THE 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.
<PAGE>
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]
[LOGO]
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 Contra under the heading Robertson
Stephens. Its computer quotation symbol is RSCOX.
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.
