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As filed with the Securities and Exchange Commission on October 8, 1999
Registration No. 33-16439
811-5159
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO.36 /x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
AMENDMENT NO.38 /x/
RS INVESTMENT TRUST
(FORMERLY, ROBERTSON STEPHENS INVESTMENT TRUST)
(Exact Name of Registrant as Specified in Charter)
388 Market Street, Suite 200
San Francisco, California 94111
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (800) 766-3863
G. RANDALL HECHT
c/o RS Investment Management
388 Market Street, Suite 200
San Francisco, California 94111
(Name and Address of Agent for Service)
Copies to:
TIMOTHY W. DIGGINS, ESQUIRE
ROPES & GRAY
One International Place
Boston, MA 02110-2624
Approximate date of proposed public offering : As soon as practicable after this
Amendment becomes effective.
It is proposed that this filing will become effective:
(check appropriate box)
/ / Immediately upon filing pursuant to paragraph (b);
/ / On(date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1);
/ / On (date) pursuant to paragraph (a)(1);
/X/ 75 days after filing pursuant to paragraph (a)(2); or
/ / On(date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
THIS POST-EFFECTIVE AMENDMENT RELATES ONLY TO THE ADDITION OF RS INTERNET AGE
FUND TO THE RS INVESTMENT TRUST.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 8, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
POST-EFFECTIVE AMENDMENT TO THE TRUST'S REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS
NOT YET BECOME EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
RS INVESTMENT TRUST
388 Market Street, Suite 200
San Francisco, CA 94111 PROSPECTUS
800-766-FUND November ___, 1999
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RS INTERNET AGE FUND
The RS Internet Age Fund seeks long-term capital appreciation by investing
primarily in high-technology companies. RS Investment Management, L.P., the
Fund's investment adviser, believes that the continued development of
high-technology products and services, including the Internet and e-commerce,
will be central to economic growth in this "Internet Age."
The RS Internet Age Fund is a series of shares of RS Investment Trust.
You can call RS Investment Management at (800) 766-FUND to find out more
about the Fund. This Prospectus explains what you should know about the Fund
before you invest. Please read it carefully.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
PAGE
Summary Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Objective, Principal Investment Strategies, and Principal Risks. . . . . . . 4
Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Other Investment Strategies and Risks. . . . . . . . . . . . . . . . . . . . 8
Risks of Investing in the Fund . . . . . . . . . . . . . . . . . . . . . . . 8
Management of the Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
How the Fund's Shares Are Priced . . . . . . . . . . . . . . . . . . . . . . 12
How to Purchase Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Initial Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Subsequent Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Other Information About Purchasing Shares. . . . . . . . . . . . . . . . . . 15
How to Sell Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Redemptions by Mail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Redemptions by Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Wire Transfer of Redemptions . . . . . . . . . . . . . . . . . . . . . . . . 17
General Redemption Policies. . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Dividends and Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 18
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Distribution Arrangements and Rule 12b-1 Fees. . . . . . . . . . . . . . . . 19
Year 2000 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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SUMMARY INFORMATION
OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES, AND PRINCIPAL RISKS.
- - - INVESTMENT OBJECTIVE. Long-term capital appreciation.
- - - PRINCIPAL INVESTMENT STRATEGIES. The Fund invests primarily in
high-technology companies. "High-technology companies" are companies
that RS Investment Management determines to be substantially engaged in
the manufacture, development, support, or sale of high-technology
products or services, or whose use of high-technology contributes
substantially, or is likely to contribute to substantially, to its
financial performance. RS Investment Management, L.P., the Fund's
investment adviser, believes that the continued development of
high-technology products and services, including the Internet and
e-commerce, will be central to economic growth in this "Internet Age."
The following examples illustrate the wide range of products and services
provided by high-technology companies:
- - Computer hardware and software of any kind, including, for example,
semiconductors, minicomputers, and peripheral equipment.
- - Telecommunications products and services.
- - Internet services and products -- including companies that provide
access, infrastructure, content, products, or services to Internet
companies and users.
- - E-commerce -- the sale of goods and services to individuals and
businesses over the Internet or other means of electronic commerce.
- - Medical products and services.
- - Multimedia products and services, including, for example, goods and
services used in the broadcast and media industries.
- - Data processing products and services.
- - Dissemination of market, economic, and financial information.
The Fund may invest in companies of any size. It is likely, however,
that the Fund will at times invest a substantial portion of its assets in
small- and mid-cap companies, if RS Investment Management believes that
they offer the best opportunities for long-term capital appreciation.
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RS Investment Management typically considers a number of factors in
evaluating a potential investment, including, for example, whether the
company has a distinct proprietary element; whether it is gaining market
share; whether it is earning superior margins or experiencing superior
profitability; and whether it has a strong management team. RS
Investment Management may consider selling a security for the Fund if the
issuer's growth rate deteriorates or its performance otherwise
disappoints, if the price of the security attains RS Investment
Management's price target or otherwise appears relatively high to RS
Investment Management, or if there is an unfavorable change in the
issuer's management or corporate plans or if institutional ownership of
the security increases substantially.
- - - PRINCIPAL INVESTMENTS. The Fund invests principally in common stocks,
but may also invest any portion of its assets in preferred stocks and
warrants. The Fund normally invests at least 65% of its assets in
high-technology companies, including companies providing products or
services to Internet users and companies engaged in e-commerce.
- - - PRINCIPAL RISKS.
- - It is possible to lose money on an investment in the Fund.
- - EQUITY SECURITIES. One risk of investing in the Fund is the risk
that the value of the equity securities in the portfolio will fall,
or will not appreciate as anticipated by RS Investment Management,
due to factors that adversely affect particular companies in the
portfolio and/or the U.S. equities market in general.
- - INVESTMENTS IN HIGH-TECHNOLOGY COMPANIES. Because the Fund's
investments are concentrated in the securities of high-technology
companies, the value of its shares will be especially affected by
factors peculiar to those companies and may fluctuate more widely
than the value of shares of a portfolio which invests in a broader
range of companies. These factors might include, for example,
intense competition, changes in consumer preferences, challenges in
achieving product compatibility, and government regulation.
Securities of high-technology companies may experience significant
price movements caused by disproportionate investor optimism or
pessimism with little or no basis in fundamental economic
conditions.
The Fund's investments in high-technology companies may be highly
volatile. Changes in their prices may reflect changes in investor
evaluation of a particular product or group of products, of the
prospects of a company to develop and market a particular
technology successfully, or of high-technology investments
generally.
- - SMALLER COMPANIES. The Fund may invest in smaller companies, which
tend to
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be more vulnerable to adverse developments than larger companies.
Small companies may have limited product lines, markets, or
financial resources, or may depend on a limited management group.
Their securities may trade infrequently and in limited volumes.
As a result, the prices of these securities may fluctuate more than
the prices of securities of larger, more widely traded companies
and the Fund may experience difficulty in establishing or closing
out positions in these securities at prevailing market prices.
Also, there may be less publicly available information about small
companies or less market interest in their securities as compared
to larger companies, and it may take longer for the prices of the
securities to reflect the full value of their issuers' earnings
potential or assets.
- - PORTFOLIO TURNOVER. Frequent purchases and sales of the Fund's
portfolio securities involve expenses to the Fund, including
brokerage commissions or dealer mark-ups and other transaction
costs. They may also result in realization of taxable capital
gains, which may be taxed to shareholders at ordinary income
tax rates.
FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
SHAREHOLDER FEES (paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee* None
Exchange Fee None
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* A $9.00 fee is charged for redemption by bank wire.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
<TABLE>
<S> <C>
Management Fees 1.25%
Distribution (12b-1) Fees 0.25%
Other Expenses(1) 0.38%
-----
Total Annual Fund
Operating Expenses 1.88%
</TABLE>
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Because of Rule 12b-1 fees paid by the Fund, long-term shareholders may pay more
than the economic equivalent of the maximum front-end sales load permitted under
applicable broker-dealer sales rules.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment earns a 5% return each year and that
the Fund's operating expenses remain the same as the Total Annual Fund Operating
Expenses shown above. Your actual costs may be higher or lower. Based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
RS Internet Age Fund $197 $653 N/A N/A
</TABLE>
OTHER INVESTMENT STRATEGIES AND RISKS
In addition to the principal investment strategies described in the Summary
Information section above, the Fund may at times use the strategies and
techniques described below, which involve certain special risks. This Prospectus
does not attempt to disclose all of the various investment techniques and types
of securities that RS Investment Management might use in managing the Fund. As
in any mutual fund, investors must rely on the professional investment judgment
and skill of RS Investment Management.
The Fund may not achieve its objective in all circumstances and you could
lose money by investing. The following provides more detail about the Fund's
principal risks and the circumstances that could adversely affect the value of
the Fund's shares or its total return.
The Fund's investment strategies and portfolio investments may differ from
those of most other mutual funds. RS Investment Management seeks aggressively to
identify favorable securities, economic and market sectors, and investment
opportunities that other investors and investment advisers may not have
identified. RS Investment Management may devote more of the Fund's assets to
pursuing an investment opportunity than many other mutual funds might; it may
buy or sell an investment at times different from when most other mutual funds
might do so; and it may select investments for the Fund that would be
inappropriate for less aggressive mutual funds. The Fund may hold a portion of
its assets in cash or money market investments.
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All percentage limitations on investments will apply at the time of
investment and will not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of the investment.
The Trustees of the Trust may change the investment objective and policies
of the Fund without a vote of the shareholders unless otherwise specifically
stated.
RISKS OF INVESTING IN THE FUND
HIGH-TECHNOLOGY. The markets in which many high-technology companies
compete are characterized by rapid change, evolving industry standards, frequent
new service and product announcements, introductions, and enhancements, and
changing customer demands. The failure of a high-technology company to adapt to
such changes could have a material adverse effect on the company's business,
results of operations, and financial condition. In addition, the widespread
adoption of new networking or telecommunications technologies or other
technological changes could require substantial expenditures by an
high-technology company to modify or adapt its services or infrastructure, which
could have a material adverse effect on an high-technology company's business,
results of operations, and financial condition.
INVESTMENTS IN SMALLER COMPANIES. The Fund may invest a substantial
portion of its assets in securities issued by small companies. Such companies
may offer greater opportunities for capital appreciation than larger companies,
but investments in such companies may involve certain special risks. Such
companies may have limited product lines, markets, or financial resources and
may be dependent on a limited management group. While the markets in securities
of such companies have grown rapidly in recent years, such securities may trade
less frequently and in smaller volume than more widely held securities. The
values of these securities may fluctuate more sharply than those of other
securities, and the Fund may experience some difficulty in establishing or
closing out positions in these securities at prevailing market prices. There may
be less publicly available information about the issuers of these securities or
less market interest in such securities than in the case of larger companies,
and it may take a longer period of time for the prices of such securities to
reflect the full value of their issuers' underlying earnings potential or
assets.
FOREIGN SECURITIES. The Fund may invest in securities principally traded
in foreign markets. Because foreign securities are normally denominated and
traded in foreign currencies, the value of the Fund's assets may be affected
favorably or unfavorably by currency exchange rates, exchange control
regulations, foreign withholding taxes, and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less information publicly
available about a foreign company than about a U.S. company, and foreign
companies are not generally subject to accounting, auditing, and financial
reporting standards and practices comparable to those in the United States. The
securities of some foreign companies are less liquid and at times more volatile
than securities of comparable U.S.
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companies. Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment or delivery of
securities or in the recovery of the Fund's assets held abroad) and expenses not
present in the settlement of domestic investments.
In addition, there may be a possibility of nationalization or expropriation
of assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability, and diplomatic developments that could
affect the value of the Fund's investments in certain foreign countries. Legal
remedies available to investors in certain foreign countries may be more limited
than those available with respect to investments in the United States or in
other foreign countries. In the case of securities issued by a foreign
governmental entity, the issuer may in certain circumstances be unable or
unwilling to meet its obligations on the securities in accordance with their
terms, and the Fund may have limited recourse available to it in the event of
default. The laws of some foreign countries may limit the Fund's ability to
invest in securities of certain issuers located in those foreign countries.
Special tax considerations apply to foreign securities. The Fund may buy or sell
foreign currencies and options and futures contracts on foreign currencies for
hedging purposes in connection with its foreign investments. Except as otherwise
provided in this Prospectus, there is no limit on the amount of the Fund's
assets that may be invested in foreign securities.
OPTIONS AND FUTURES. The Fund may buy and sell call and put options to
hedge against changes in net asset value or to attempt to realize a greater
current return. In addition, through the purchase and sale of futures contracts
and related options, the Fund may at times seek to hedge against fluctuations in
net asset value and to attempt to increase its investment return.
The Fund's ability to engage in options and futures strategies will depend
on the availability of liquid markets in such instruments. It is impossible to
predict the amount of trading interest that may exist in various types of
options or futures contracts. Therefore, there is no assurance that the Fund
will be able to utilize these instruments effectively for the purposes stated
above. Options and futures transactions involve certain risks which are
described below and in the Statement of Additional Information.
Transactions in options and futures contracts involve brokerage costs and
may require the Fund to segregate assets to cover its outstanding positions. For
more information, see the Statement of Additional Information.
INDEX FUTURES AND OPTIONS. The Fund may buy and sell index futures
contracts ("index futures") and options on index futures and on indices (or may
purchase investments whose values are based on the value from time to time of
one or more securities indices) for hedging purposes. An index future is a
contract to buy or sell units of a particular bond or stock index at an agreed
price on a specified future date. Depending on the change in value of the index
between the time when the Fund enters into and terminates an index futures or
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option transaction, the Fund realizes a gain or loss. The Fund may also buy and
sell index futures and options to increase its investment return.
RISKS RELATED TO OPTIONS AND FUTURES STRATEGIES. Options and futures
transactions involve costs and may result in losses. Certain risks arise because
of the possibility of imperfect correlations between movements in the prices of
futures and options and movements in the prices of the underlying security or
index or of the securities held by the Fund that are the subject of a hedge. The
successful use by the Fund of the strategies described above further depends on
the ability of RS Investment Management to forecast market movements correctly.
Other risks arise from the Fund's potential inability to close out futures or
options positions. Although the Fund will enter into an options or futures
transactions only if RS Investment Management believes that a liquid secondary
market exists for such option or futures contract, there can be no assurance
that the Fund will be able to effect closing transactions at any particular time
or at an acceptable price.
The Fund expects that its options and futures transactions generally will
be conducted on recognized exchanges. The Fund may in certain instances purchase
and sell options in the over-the-counter markets. The Fund's ability to
terminate options in the over-the-counter markets may be more limited than for
exchange-traded options, and such transactions also involve the risk that
securities dealers participating in such transactions would be unable to meet
their obligations to the Fund. The Fund will, however, engage in
over-the-counter transactions only when appropriate exchange-traded transactions
are unavailable and when, in the opinion of RS Investment Management, the
pricing mechanism and liquidity of the over-the-counter markets are satisfactory
and the participants are responsible parties likely to meet their obligations.
SECURITIES LOANS AND REPURCHASE AGREEMENTS. The Fund may lend portfolio
securities to broker-dealers and may enter into repurchase agreements. These
transactions must be fully collateralized at all times, but involve some risk to
the Fund if the other party should default on its obligations and the Fund is
delayed or prevented from recovering the collateral.
DEFENSIVE STRATEGIES. At times, RS Investment Management may judge that
market conditions make pursuing the Fund's basic investment strategy
inconsistent with the best interests of its shareholders. At such times, RS
Investment Management may temporarily use alternative strategies, primarily
designed to reduce fluctuations in the values of the Fund's assets. In
implementing these "defensive" strategies, the Fund may invest in U.S.
Government securities, other high-quality debt instruments, and other securities
RS Investment Management believes to be consistent with the Fund's best
interests. If such a temporary "defensive" strategy is implemented, the Fund may
not achieve its investment objective.
PORTFOLIO TURNOVER. The length of time the Fund has held a particular
security is not generally a consideration in investment decisions. The
investment policies of the Fund may
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lead to frequent changes in the Fund's investments, particularly in periods of
volatile market movements. A change in the securities held by the Fund is known
as "portfolio turnover." Portfolio turnover generally involves some expense to
the Fund, including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in other
securities. Such sales may result in realization of taxable capital gains
including short-term capital gains which are generally taxed to shareholders at
ordinary income tax rates. RS Investment Management anticipates that the
portfolio turnover rate for the Fund's first full year of operation will not
exceed 200%.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER. RS Investment Management, L.P., 388 Market Street,
Suite 200, San Francisco, CA 94111, is the investment adviser for the Fund. RS
Investment Management, L.P. is a California partnership that was formed in 1993.
Subject to such policies as the Trustees may determine, RS Investment
Management furnishes a continuing investment program for the Fund and makes
investment decisions on its behalf. The Trust pays all expenses not assumed by
RS Investment Management including, among other things, Trustees' fees,
auditing, accounting, legal, custodial, investor servicing, and shareholder
reporting expenses, and payments under the Fund's Distribution Plan.
RS Investment Management places all orders for purchases and sales of the
Fund's investments. In selecting broker-dealers, RS Investment Management may
consider research and brokerage services furnished to it and its affiliates.
Subject to seeking the most favorable price and execution available, RS
Investment Management may consider sales of shares of the Fund as a factor in
the selection of broker-dealers.
RS Investment Management may at times bear certain expenses of the Fund.
The Investment Advisory Agreement between the Fund and RS Investment Management
permits RS Investment Management to seek reimbursement for those expenses within
the succeeding two-year period, subject to any expense limitations then
applicable to the Fund in question.
ADMINISTRATIVE SERVICES. The Fund has entered into an agreement with RS
Investment Management pursuant to which RS Investment Management provides
administrative services to the Fund. No fees are payable by the Fund under the
agreement.
PORTFOLIO MANAGERS. The Fund is managed by a team of investment
professionals at RS Investment Management. Mr. James L. Callinan and Ms. Kathy
Baker currently serve as senior members of the team. Mr. Callinan is also the
portfolio manager for RS Emerging Growth Fund. From 1986 until June 1996, Mr.
Callinan was employed by Putnam Investments, where, beginning in June 1994, he
served as portfolio manager of the Putnam OTC Emerging Growth Fund. Mr. Callinan
received an A.B. in economics from Harvard College, an M.S. in accounting from
New York University, and an M.B.A. from Harvard
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Business School, and is a Charter Financial Analyst.
Catherine Baker, Principal, Analyst -- Cathy joined the RS Investment
Management research team in March 1997 and is a member of Robertson Stephens
Growth Equities Group. Previously, she was a Principal and Senior Analyst
covering information technology and services companies at Robertson, Stephens
& Co. beginning in the spring of 1995. Prior to joining Robertson, Stephens &
Co., she served as an analyst at Cowen & Company. She also has previous
brokerage analyst experience at J.P. Morgan Securities and industry
experience at IBM as an analyst in software acquisitions. Cathy has a BSE in
Electrical Engineering from the University of Michigan and an MBA from
Carnegie-Mellon University. She is also a CFA.
HOW THE FUND'S SHARES ARE PRICED
CALCULATION OF NET ASSET VALUE. The Fund calculates the net asset value of
its shares by dividing the total value of its assets, less its liabilities, by
the number of shares outstanding. Shares are valued as of 4:30 p.m. eastern time
on each day the New York Stock Exchange is open. The Fund values its portfolio
securities for which market quotations are readily available at market value.
Short-term investments that will mature in 60 days or less are stated at
amortized cost, which approximates market value. The Fund values all other
securities and assets at their fair values as determined in accordance with the
guidelines and procedures adopted by the Trust's Board of Trustees.
The Fund will not price its shares on days when the New York Stock Exchange
is closed. The Fund expects that the days, other than weekend days, that the New
York Stock Exchange will be closed are New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day (observed),
Labor Day, Thanksgiving Day, and Christmas Day.
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rates or at such other rates as may be used in accordance
with procedures approved by the Trustees. As a result, fluctuations in the
values of such currencies in relation to the U.S. dollar will affect the net
asset value of the Fund's shares even though there has not been any change in
the values of such securities as quoted in such foreign currencies. All assets
and liabilities of the Fund denominated in foreign currencies are valued in U.S.
dollars based on the exchange rate last quoted by a major bank prior to the time
when the net asset value of the Fund's shares is calculated. Because certain of
the securities in which the Fund may invest may trade on days when such Fund
does not price its shares, the net asset value of the Fund's shares may change
on days when shareholders will not be able to purchase or redeem their shares.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
are computed as of such times. Also because of the amount of time required to
collect and process trading information as to large number of securities issues,
the values of certain securities (such as convertible bonds) are determined
based on market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange. Occasionally, events
affecting the value of such securities may occur between such times and the
close of the Exchange that will not be reflected in the computation of net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
following procedures
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approved by the Trustees.
During any 90-day period, the Trust is committed to pay in cash all
requests to redeem shares by each shareholder, up to the lesser of $250,000 and
1% of the value of the Fund's net assets at the beginning of the period. Should
redemptions by any shareholder of the Fund exceed this limitation, the Trust
reserves the right to redeem the excess amount in whole or in part in securities
or other assets. If shares are redeemed in this manner, the redeeming
shareholder typically will incur brokerage and other costs in converting the
securities to cash.
HOW TO PURCHASE SHARES
Currently, your minimum initial investment is $5,000 ($1,000 for IRA and
for gift/transfer-to-minor accounts), and your subsequent investments must be at
least $100 ($1 for IRA). You may obtain an Application by calling the Fund at
1-800-766-FUND, or by writing to the Fund at 388 Market Street, Suite 200, San
Francisco, CA 94111. For more information on RS Fund IRAs, please call to
request an IRA Disclosure Statement.
INITIAL INVESTMENTS
You may make your initial investment by mail or by wire transfer as
described below.
BY MAIL: Send a completed Application, together with a check made payable
to the Fund, to the Fund's Transfer Agent: State Street Bank and Trust Company,
c/o National Financial Data Services, P.O. Box 419717, Kansas City, MO
64141-6717.
BY OVERNIGHT MAIL: Send the information described above to: 330 West 9th
Street, First Floor, Kansas City, MO 64105.
BY WIRE:
(1) Telephone National Financial Data Services at 1-800-624-8025. Indicate the
name(s) to be used on the account registration, the mailing address, your social
security or tax ID number, the amount being wired, the name of your wiring bank,
and the name and telephone number of a contact person at the wiring bank.
(2) Then instruct your bank to wire the specified amount, along with your
account name and number to:
State Street Bank and Trust Company
ABA# 011 000028
Attn.: Custody
DDA# 99047177
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225 Franklin Street
Boston, MA 02110
Credit: RS Internet Age Fund
For further credit:
---------------------------------
(Shareholder's name)
---------------------------------
(Shareholder's account #)
(3) At the same time, you MUST mail a completed and signed Application to: State
Street Bank and Trust Company, c/o National Financial Data Services, P.O. Box
419717, Kansas City, MO 64141-6717. Please include your account number on the
Application. Failure to supply a signed Application may result in backup
withholding.
You also may purchase and sell shares of the Fund through certain
securities brokers. Such brokers may charge you a transaction fee for this
service; account options available to clients of securities brokers, including
arrangements regarding the purchase and sale of Fund shares, may differ from
those available to persons investing directly in the Fund. The Fund, RS
Investment Management, or Provident Distributors, Inc. ("Provident"), the Fund's
distributor, may in their discretion pay such brokers for shareholder,
subaccounting, and other services.
SUBSEQUENT INVESTMENTS
After your account is open, you may invest by mail, telephone, or wire at
any time. Please include your name and account number on all checks and wires.
Please use separate checks or wires for investments to separate accounts.
AUTOBUY. The Autobuy option allows shareholders to purchase shares by
moving money directly from their checking account to the Fund. If you have
established the Autobuy option, you may purchase additional shares in an
existing account in any amount that does not exceed the cumulative dollar value
held in the account, by calling the Transfer Agent at 1-800-624-8025 and
instructing the Transfer Agent as to the dollar amount you wish to invest. The
investment will automatically be processed through the Automatic Clearing House
(ACH) system. Shares will be issued at the net asset value per share after the
Fund accepts your order, which will typically be on the date when you provide
proper instructions to the Transfer Agent (assuming you do so prior to the close
of the New York Stock Exchange). There is no fee for this option. If you did not
establish this option at the time you opened your account, but wish to do so
now, send a letter of instruction, along with a voided check, to the Transfer
Agent.
OTHER INFORMATION ABOUT PURCHASING SHARES
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<PAGE>
All purchases of the Fund's shares are subject to acceptance by the Fund
and are not binding until accepted and shares are issued. Your signed and
completed Application (for initial investments) or account statement stub (for
subsequent investments) and full payment, in the form of either a wire transfer
or a check, must be received and accepted by the Fund before any purchase
becomes effective. Failure to include your specific Fund and account
information may delay processing of purchases. Purchases of Fund shares are made
at the net asset value next determined after the purchase is accepted. See "How
the Fund's Shares are Priced." Please initiate any wire transfer early in the
morning to ensure that the wire is received by the Fund before the close of the
New York Stock Exchange, normally 4:00 p.m. eastern time.
All purchases must be made in U.S. dollars, and checks should be drawn on
banks located in the U.S. Third-party checks will not be accepted as payment for
purchases. If your purchase of shares is canceled due to non-payment or because
a check does not clear, you will be held responsible for any loss incurred by
the Fund or the Transfer Agent. The Fund can redeem shares to reimburse it or
the Transfer Agent for any such loss.
The Fund reserves the right to reject any purchase, in whole or in part,
and to suspend the offering of its shares for any period of time and to change
or waive the minimum investment amounts specified in this Prospectus.
No share certificates will be issued.
HOW TO SELL SHARES
You may redeem your shares, or sell your shares back to the Fund on any
business day by following one of the procedures explained below.
REDEMPTIONS BY MAIL
You may redeem your shares of the Fund by mailing a written request for
redemption to the Transfer Agent that:
(1) states the number of shares or dollar amount to be redeemed;
(2) identifies your Fund and account number; and
(3) is signed by you and all other owners of the account exactly as their names
appear on the account.
If you request that the proceeds from your redemption be sent to you at an
address other than your address of record, or to another party, you must include
a signature guarantee for each such signature by an eligible signature
guarantor, such as a member firm of a national
-14-
<PAGE>
securities exchange or a commercial bank or trust company located in the United
States. If you are a resident of a foreign country, another type of
certification may be required. Please contact the Transfer Agent for more
details. Corporations, fiduciaries, and other types of shareholders may be
required to supply additional documents which support their authority to effect
a redemption.
REDEMPTIONS BY TELEPHONE
Unless you have indicated that you do not wish to establish telephone
redemption privileges (see the Account Application or call the Transfer Agent
for details), you may redeem shares by calling the Transfer Agent at
1-800-624-8025 by the close of the New York Stock Exchange, normally 4:00 p.m.
eastern time, on any day the New York Stock Exchange is open for business.
If an account has more than one owner, the Transfer Agent may rely on the
instructions of any one owner. The Fund employs reasonable procedures in an
effort to confirm the authenticity of telephone instructions. If procedures
established by the Trust are not followed, the Fund and the Transfer Agent may
be responsible for any losses because of unauthorized or fraudulent
instructions. By not declining telephone redemption privileges, you authorize
the Transfer Agent to act upon any telephone instructions it believes to be
genuine (1) to redeem shares from your account and (2) to mail or wire the
redemption proceeds. If you recently opened an account by wire, you cannot
redeem shares by telephone until the Transfer Agent has received your completed
Application.
Telephone redemption is not available for shares held in IRAs. The Fund may
change, modify, or terminate its telephone redemption services at any time upon
30 days' notice.
WIRE TRANSFER OF REDEMPTIONS
If your financial institution receives Federal Reserve wires, you may
instruct that your redemption proceeds be forwarded to you by a wire transfer.
Please indicate your financial institution's complete wiring instructions. The
Fund will forward proceeds from telephone redemptions only to the bank account
or brokerage account that you have authorized in writing. A $9.00 wire fee will
be paid either by redeeming shares from your account, or upon a full redemption,
deducting the fee from the proceeds.
AUTOSELL: The Autosell option allows shareholders to redeem shares from
their RS Fund accounts and to have the proceeds sent directly to their checking
account. If you have established the Autosell option, you may redeem shares by
calling the Transfer Agent at 1-800-624-8025 and instructing it as to the dollar
amount or number of shares you wish to redeem. The proceeds will automatically
be sent to your bank through the Automatic Clearing House (ACH) system. There is
no fee for this option. If you did not establish this option at the time you
opened your account but wish to do so now, send a letter of instruction along
with a
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<PAGE>
voided check to the Transfer Agent.
GENERAL REDEMPTION POLICIES
The redemption price per share is the net asset value per share next
determined after the Transfer Agent receives the request for redemption in
proper form, and the Fund will make payment for redeemed shares within seven
days thereafter. Under unusual circumstances, the Fund may suspend repurchases,
or postpone payment of redemption proceeds for more than seven days, as
permitted by federal securities law. If you purchase shares of the Fund by check
(including certified check) and redeem them shortly thereafter, the Fund will
delay payment of the redemption proceeds for up to fifteen days after the Fund's
receipt of the check or until the check has cleared, whichever occurs first. If
you purchase shares of the Fund through the Autobuy option and redeem them
shortly thereafter, the Fund will delay payment of the redemption proceeds for
up to fifteen days after your purchase of shares through the Autobuy option is
accepted.
You may experience delays in exercising telephone redemptions during
periods of abnormal market activity. Accordingly, during periods of volatile
economic and market conditions, you may wish to consider transmitting redemption
orders to the Transfer Agent by an overnight courier service.
EXCHANGES
Shares of the Fund may be exchanged for shares of another series of the
Trust, but only after you obtain and read the prospectus of the series into
which you are exchanging. Please call 1-800-776-FUND for a prospectus or more
information. Exchanges of shares will be made at their relative net asset
values. Shares may be exchanged only if the amount being exchanged satisfies the
minimum investment required and the shareholder is a resident of a state where
shares of the appropriate series of the Trust are qualified for sale. However,
you may not exchange your investment more than four times in any twelve-month
period (including the initial exchange of your investment during the period, and
subsequent exchanges of that investment from other series during the same
twelve-month period).
Investors should note that an exchange will result in a taxable event and
will generally result in a taxable gain or loss. Exchange privileges may be
terminated, modified, or suspended by the Fund upon 60 days' prior notice to
shareholders.
Unless you have indicated that you do not wish to establish telephone
exchange privileges (see the Account Application or call the Fund for details),
you may make exchanges by telephone.
-16-
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its net investment income and net
capital gains to shareholders at least annually (more often, if necessary to
avoid certain excise or income taxes on the Fund).
YOU MAY CHOOSE EITHER OF THE FOLLOWING DISTRIBUTION OPTIONS:
- - Reinvest your distributions in additional shares of the Fund; or
- - Receive your distributions in cash.
All distributions will be automatically reinvested in Fund shares unless
the shareholder requests cash payment on at least 10 days' prior written notice
to the Transfer Agent.
TAXES
QUALIFICATION AS A REGULATED INVESTMENT COMPANY. The Fund intends to
qualify as a "regulated investment company" under Subchapter M of the Internal
Revenue Code and to meet all other requirements that are necessary for it to be
relieved of federal taxes on income and gains it distributes to shareholders.
The Fund will distribute substantially all of its net investment income and net
capital gain income on a current basis.
TAXES ON DIVIDENDS AND DISTRIBUTIONS. For federal income tax purposes,
distributions of investment income are taxable as ordinary income. Taxes on
distributions of capital gains are determined by how long the Fund owned the
investments that generated them, rather than how long shareholders have held
Fund shares. Distributions are taxable to shareholders even if they are paid
from income or gains earned by the Fund before an investment in the Fund (and
thus were included in the price paid for the Fund shares). Distributions of
gains from investments that the Fund owned for more than one year will be
taxable as capital gains. Distributions of gains from investments that the Fund
owned for one year or less will be taxable as ordinary income. Distributions
will be taxable as described above, whether received in cash or in shares
through the reinvestment of distributions. Early in each year, the Trust will
notify you of the amount and tax status of distributions paid to you by the Fund
for the preceding year.
TAXES WHEN YOU SELL OR EXCHANGE YOUR SHARES. Any gain resulting from the
sale or exchange of your shares in the Fund will also generally be subject to
federal income or capital gains tax, depending on your holding period. The
Fund's investments in certain debt obligations may cause the Fund to recognize
taxable income in excess of the cash generated by such obligations. Thus, the
Fund could be required at times to liquidate other investments in order to
satisfy its distribution requirements.
The Fund's investments in foreign securities may be subject to foreign
withholding
-17-
<PAGE>
taxes. In that case, the Fund's yield on those securities would be decreased. In
addition, the Fund's investments in foreign securities or foreign currencies may
increase or accelerate the Fund's recognition of ordinary income and may affect
the timing or amount of the Fund's distributions. Shareholders in the Fund that
invests more than 50% of its assets in foreign securities may be entitled to
claim a credit or deduction with respect to foreign taxes.
CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This is a
summary of certain federal tax consequences of investing in the Fund. You should
consult your tax advisor for more information on your own tax situation,
including possible foreign, state, and local taxes.
DISTRIBUTION ARRANGEMENTS AND RULE 12b-1 FEES
Provident Distributors, Inc. is the principal underwriter of the Fund's
shares. To compensate Provident for the services it provides and for the
expenses it bears in connection with the distribution of the Fund's shares, the
Fund makes payments to Provident under a Distribution Plan adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, each of the
Fund pays Provident compensation, accrued daily and paid monthly, at the annual
rate of 0.25% of the Fund's average daily net assets. Provident may pay brokers
a commission expressed as a percentage of the purchase price of shares of the
Fund.
RS Investment Management or its affiliates provide certain services to
Provident in respect of the promotion of the shares of the Fund. In return for
those services, Provident pays to RS Investment Management or those affiliates a
portion of the payments received by Provident under the Distribution Plan.
RS Investment Management and its affiliates or Provident, at their own
expense and out of their own assets, may also provide other compensation to
financial institutions in connection with sales of the Fund's shares or the
servicing of shareholders or shareholder accounts. Such compensation may
include, but is not limited to, financial assistance to financial institutions
in connection with conferences, sales, or training programs for their employees,
seminars for the public, advertising or sales campaigns, or other financial
institution-sponsored special events. In some instances, this compensation may
be made available only to certain financial institutions whose representatives
have sold or are expected to sell significant amounts of shares. Dealers may not
use sales of the Fund's shares to qualify for this compensation to the extent
such may be prohibited by the laws or rules of any state or any self-regulatory
agency, such as the National Association of Securities Dealers, Inc.
The Fund pays distribution and other fees for the sale of its shares and for
services provided to shareholders out of the Fund's assets on an on-going basis.
As a result, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
-18-
<PAGE>
YEAR 2000 DISCLOSURE
The Fund receives services from RS Investment Management and its
distributor, transfer agent, custodian, and other providers which rely on the
smooth functioning of their respective systems and the systems of others to
perform those services. It is generally recognized that certain systems in use
today may not perform their intended functions adequately after the Year 1999
because of the inability of the software to distinguish the Year 2000 from the
Year 1900. RS Investment Management is taking steps that it believes is
reasonably designed to address this potential "Year 2000" problem and to obtain
satisfactory assurances that comparable steps are being taken by each of the
Fund's other major service providers. There can be no assurance, however, that
these steps will be sufficient to avoid any adverse impact on the Fund from this
problem. In considering whether to purchase or to continue to hold a security,
RS Investment Management considers, where appropriate, the likely effects of any
potential Year 2000 issues on the security's issuer.
ADDITIONAL INFORMATION
The Trust's Statement of Additional Information ("SAI") for the Fund dated
November ___, 1999 contains additional information about the Fund. The SAI is
incorporated by reference into this prospectus, which means that it is part of
this prospectus for legal purposes. You may obtain a free copy of the SAI,
request other information about the Fund, or make shareholder inquiries by
writing to the Trust at the address below or by telephoning 1-800-766-FUND.
You may review and copy information about the Trust, including the SAI, at
the Securities and Exchange Commissions Public Reference Room in Washington,
D.C. You may call the Commission at 800-SEC-0330 for information about the
operation of the public reference room. The Commission maintains a World Wide
Web site at http://www.sec.gov, which contains reports and other information
about the Fund. You may also obtain copies of these materials, upon payment of a
duplicating fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009. You may need to refer to the Trust's file number
under the Investment Company Act, which is 811-05159.
ADDRESS CORRESPONDENCE TO:
RS Investment Management
388 Market Street, Suite 200
San Francisco, CA 94111
World Wide Web Address: http://www.rsim.com
Shareholder Services
1-800-766-FUND
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<PAGE>
[LOGO]
RS INTERNET AGE FUND
----------------
RS INVESTMENT TRUST
----------------
PROSPECTUS
----------------
NOVEMBER ___, 1999
Investment Company Act File No. 811-05159
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
POST-EFFECTIVE AMENDMENT TO THE TRUST'S REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS
NOT YET BECOME EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY
BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE 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.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 8, 1999
STATEMENT OF ADDITIONAL INFORMATION
RS INTERNET AGE FUND
NOVEMBER __, 1999
RS Internet Age Fund (the "Fund") is a series of shares of RS Investment Trust
(the "Trust"), an open-end series investment company. This Statement of
Additional Information is not a prospectus and should be read in conjunction
with the Prospectus of the Fund dated November __, 1999, as it may be revised
from time to time. A copy of the Fund's Prospectus can be obtained upon request
made to RS Investment Management, 388 Market Street, Suite 200, San Francisco,
CA 94111 telephone 1-800-766-FUND.
TABLE OF CONTENTS
CAPTION PAGE
------- ----
INVESTMENTS AND RISKS.......................................................B-2
THE FUND'S INVESTMENT LIMITATIONS..........................................B-11
DISTRIBUTION PLAN..........................................................B-17
HOW NET ASSET VALUE IS DETERMINED..........................................B-17
TAXES......................................................................B-18
HOW PERFORMANCE IS DETERMINED..............................................B-20
ADDITIONAL INFORMATION.....................................................B-22
APPENDIX A.................................................................B-23
<PAGE>
TRUST INFORMATION
TRUST HISTORY AND FUND CLASSIFICATION
RS Investment Trust (formerly, Robertson Stephens Investment Trust) was
organized on May 11, 1987 under the laws of The Commonwealth of Massachusetts
and is a business entity commonly known as a "Massachusetts business trust." A
copy of the Agreement and Declaration of Trust, which is governed by
Massachusetts law, is on file with the Secretary of State of The Commonwealth of
Massachusetts.
The Trust currently offers shares of beneficial interest of various series
with separate investment objectives and policies, of which the Fund is one. The
Fund is a diversified, open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"). This means that
with respect to 75% of the Fund's total assets, the Fund may not invest in
securities of any issuer if, immediately after such investment, more than 5% of
the total assets of the Fund (taken at current value) would be invested in the
securities of that issuer (this limitation does not apply to investments in U.S.
Government securities). The Fund is not subject to this limitation with respect
to the remaining 25% of its total assets.
CAPITALIZATION
The Trust has an unlimited number of shares of beneficial interest that
may, without shareholder approval, be divided into an unlimited number of series
of such shares, which, in turn, may be divided into an unlimited number of
classes of such shares.
The proceeds received by the Fund for each issue or sale of its shares, and
all income, earnings, profits, and proceeds thereof, subject only to the rights
of creditors, will be specifically allocated to the Fund, and constitute the
underlying assets of the Fund. The underlying assets of the Fund will be
segregated on the Trust's books of account, and will be charged with the
liabilities in respect of the Fund and with a share of the general liabilities
of the Trust. Expenses with respect to the Fund and one or more other series of
the Trust may be allocated in proportion to the net asset values of the
respective series except where allocations of direct expenses can otherwise be
fairly made.
Shareholders of the Fund will have one vote for each full share owned and
proportionate, fractional votes for fractional shares held. Generally, shares of
the Fund vote separately as a single series of the Trust except when required by
law or determined by the Board of Trustees. Although the Trust is not required
to hold annual meetings of its shareholders, shareholders have the right to call
a meeting to elect or remove Trustees or to take other actions as provided in
the Declaration of Trust.
INVESTMENTS AND RISKS
In addition to the principal investment strategies and the principal risks
of the Fund described in the Prospectus, the Fund may employ other investment
practices and may be subject to additional risks which are described below.
RS Investment Management, L.P. ("RSIM, L.P.") serves as investment adviser
to the Fund.
OPTIONS
The Fund may purchase and sell put and call options on its portfolio
securities to enhance investment performance and to protect against changes in
market prices. There is no assurance that the Fund's use of put and call options
will achieve its desired objective, and the Fund's use of options may result in
losses to the Fund.
COVERED CALL OPTIONS. The Fund may write covered call options on its
securities to realize a greater current return through the receipt of premiums
than it would realize on its securities alone. Such option transactions may also
be used as a limited form of hedging against a decline in the price of
securities owned by the Fund.
A call option gives the holder the right to purchase, and obligates the
writer to sell, a security at the exercise price at any time before the
expiration date. A call option is "covered" if the writer, at all times while
obligated as a writer, either owns the
B-2
<PAGE>
underlying securities (or comparable securities satisfying the cover
requirements of the securities exchanges), or has the right to acquire such
securities through immediate conversion of securities.
In return for the premium received when it writes a covered call option,
the Fund gives up some or all of the opportunity to profit from an increase in
the market price of the securities covering the call option during the life of
the option. The Fund retains the risk of loss should the price of such
securities decline. If the option expires unexercised, the Fund realizes a gain
equal to the premium, which may be offset by a decline in price of the
underlying security. If the option is exercised, the Fund realizes a gain or
loss equal to the difference between the Fund's cost for the underlying security
and the proceeds of sale (exercise price minus commissions) plus the amount of
the premium.
The Fund may terminate a call option that it has written before it expires
by entering into a closing purchase transaction. The Fund may enter into closing
purchase transactions in order to free itself to sell the underlying security or
to write another call on the security, realize a profit on a previously written
call option, or protect a security from being called in an unexpected market
rise. Any profits from a closing purchase transaction may be offset by a decline
in the value of the underlying security. Conversely, because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss resulting from a closing purchase
transaction is likely to be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.
COVERED PUT OPTIONS. The Fund may write covered put options in order to
enhance its current return. Such options transactions may also be used as a
limited form of hedging against an increase in the price of securities that the
Fund plans to purchase. A put option gives the holder the right to sell, and
obligates the writer to buy, a security at the exercise price at any time before
the expiration date. A put option is "covered" if the writer segregates cash and
high-grade short-term debt obligations or other permissible collateral equal to
the price to be paid if the option is exercised.
In addition to the receipt of premiums and the potential gains from
terminating such options in closing purchase transactions, the Fund also
receives interest on the cash and debt securities maintained to cover the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required to purchase the underlying security for an exercise
price higher than its then current market value, resulting in a potential
capital loss unless the security later appreciates in value.
The Fund may terminate a put option that it has written before it expires
by a closing purchase transaction. Any loss from this transaction may be
partially or entirely offset by the premium received on the terminated option.
PURCHASING PUT AND CALL OPTIONS. The Fund may also purchase put options to
protect portfolio holdings against a decline in market value. This protection
lasts for the life of the put option because the Fund, as a holder of the
option, may sell the underlying security at the exercise price regardless of any
decline in its market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs that the Fund must
pay. These costs will reduce any profit the Fund might have realized had it sold
the underlying security instead of buying the put option.
The Fund may purchase call options to hedge against an increase in the
price of securities that the Fund wants ultimately to buy. Such hedge protection
is provided during the life of the call option since the Fund, as holder of the
call option, is able to buy the underlying security at the exercise price
regardless of any increase in the underlying security's market price. In order
for a call option to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the premium and
transaction costs. These costs will reduce any profit the Fund might have
realized had it bought the underlying security at the time it purchased the call
option.
The Fund may also purchase put and call options to attempt to enhance its
current return.
OPTIONS ON FOREIGN SECURITIES. The Fund may purchase and sell options on
foreign securities if RSIM, L.P. believes that the investment characteristics of
such options, including the risks of investing in such options, are consistent
with the Fund's investment objective. It is expected that risks related to such
options will not differ materially from risks related to options on U.S.
securities. However, position limits and other rules of foreign exchanges may
differ from those in the U.S. In addition, options markets in some countries,
many of which are relatively new, may be less liquid than comparable markets in
the U.S.
B-3
<PAGE>
RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve certain
risks, including the risks that RSIM, L.P. will not forecast interest rate or
market movements correctly, that the Fund may be unable at times to close out
such positions, or that hedging transactions may not accomplish their purpose
because of imperfect market correlations. The successful use of these strategies
depends on the ability of RSIM, L.P. to forecast market and interest rate
movements correctly.
An exchange-listed option may be closed out only on an exchange which
provides a secondary market for an option of the same series. There is no
assurance that a liquid secondary market on an exchange will exist for any
particular option or at any particular time. If no secondary market were to
exist, it would be impossible to enter into a closing transaction to close out
an option position. As a result, the Fund may be forced to continue to hold, or
to purchase at a fixed price, a security on which it has sold an option at a
time when RSIM, L.P. believes it is inadvisable to do so.
Higher than anticipated trading activity or order flow or other unforeseen
events might cause The Options Clearing Corporation or an exchange to institute
special trading procedures or restrictions that might restrict the Fund's use of
options. The exchanges have established limitations on the maximum number of
calls and puts of each class that may be held or written by an investor or group
of investors acting in concert. It is possible that the Fund, the Trust and
other clients of RSIM, L.P. may be considered such a group. These position
limits may restrict the Fund's ability to purchase or sell options on particular
securities.
Options which are not traded on national securities exchanges may be closed
out only with the other party to the option transaction. For that reason, it may
be more difficult to close out unlisted options than listed options.
Furthermore, unlisted options are not subject to the protection afforded
purchasers of listed options by The Options Clearing Corporation.
Government regulations may also restrict the Fund's use of options.
SPECIAL EXPIRATION PRICE OPTIONS
The Fund may purchase over-the-counter ("OTC") puts and calls with respect
to specified securities ("special expiration price options") pursuant to which
the Fund in effect may create a custom index relating to a particular industry
or sector that RSIM, L.P. believes will increase or decrease in value generally
as a group. In exchange for a premium, the counterparty, whose performance is
guaranteed by a broker-dealer, agrees to purchase (or sell) a specified number
of shares of a particular stock at a specified price and further agrees to
cancel the option at a specified price that decreases straight line over the
term of the option. Thus, the value of the special expiration price option is
comprised of the market value of the applicable underlying security relative to
the option exercise price and the value of the remaining premium. However, if
the value of the underlying security increases (or decreases) by a prenegotiated
amount, the special expiration price option is canceled and becomes worthless. A
portion of the dividends during the term of the option are applied to reduce the
exercise price if the options are exercised. Brokerage commissions and other
transaction costs will reduce the Fund's profits if the special expiration price
options are exercised. The Fund will not purchase special expiration price
options with respect to more than 25% of the value of its net assets, and will
limit premiums paid for such options in accordance with state securities laws.
FUTURES CONTRACTS
INDEX FUTURES CONTRACTS AND OPTIONS. The Fund may buy and sell stock index
futures contracts and related options for hedging purposes or to attempt to
increase investment return. A stock index futures contract is a contract to buy
or sell units of a stock index at a specified future date at a price agreed upon
when the contract is made. A unit is the current value of the stock index.
The following example illustrates generally the manner in which index
futures contracts operate. The Standard & Poor's 100 Stock Index (the "S&P 100
Index") is composed of 100 selected common stocks, most of which are listed on
the New York Stock Exchange. The S&P 100 Index assigns relative weightings to
the common stocks included in the Index, and the Index fluctuates with changes
in the market values of those common stocks. In the case of the S&P 100 Index,
contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index
were $180, one contract would be worth $18,000 (100 units X $180). The stock
index futures contract specifies that no delivery of the actual stocks making up
the index will take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference between
the contract price and the actual level of the stock index at the expiration of
the contract. For example, if the Fund enters into a futures contract to buy
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100 units of the S&P 100 Index at a specified future date at a contract price of
$180 and the S&P 100 Index is at $184 on that future date, the Fund will gain
$400 (100 units X gain of $4). If the Fund enters into a futures contract to
sell 100 units of the stock index at a specified future date at a contract price
of $180 and the S&P 100 Index is at $182 on that future date, the Fund will lose
$200 (100 units X loss of $2).
Positions in index futures may be closed out only on an exchange or board
of trade which provides a secondary market for such futures.
In order to hedge its investments successfully using futures contracts and
related options, the Fund must invest in futures contracts with respect to
indexes or sub-indexes the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the Fund's securities.
Options on index futures contracts give the purchaser the right, in return
for the premium paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option. Upon
exercise of the option, the holder would assume the underlying futures position
and would receive a variation margin payment of cash or securities approximating
the increase in the value of the holder's option position. If an option is
exercised on the last trading day prior to the expiration date of the option,
the settlement will be made entirely in cash based on the difference between the
exercise price of the option and the closing level of the index on which the
futures contract is based on the expiration date. Purchasers of options who fail
to exercise their options prior to the exercise date suffer a loss of the
premium paid.
As an alternative to purchasing and selling call and put options on index
futures contracts, the Fund may purchase and sell index futures contracts may
purchase and sell call and put options on the underlying indexes themselves to
the extent that such options are traded on national securities exchanges. Index
options are similar to options on individual securities in that the purchaser of
an index option acquires the right to buy (in the case of a call) or sell (in
the case of a put), and the writer undertakes the obligation to sell or buy (as
the case may be), units of an index at a stated exercise price during the term
of the option. Instead of giving the right to take or make actual delivery of
securities, the holder of an index option has the right to receive a cash
"exercise settlement amount." This amount is equal to the amount by which the
fixed exercise price of the option exceeds (in the case of a put) or is less
than (in the case of a call) the closing value of the underlying index on the
date of the exercise, multiplied by a fixed "index multiplier."
The Fund may purchase or sell options on stock indices in order to close
out its outstanding positions in options on stock indices which it has
purchased. The Fund may also allow such options to expire unexercised.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on an index involves less potential risk to the Fund because the
maximum amount at risk is the premium paid for the options plus transactions
costs. The writing of a put or call option on an index involves risks similar to
those risks relating to the purchase or sale of index futures contracts.
MARGIN PAYMENTS. When the Fund purchases or sells a futures contract, it is
required to deposit with its custodian an amount of cash, U.S. Treasury bills,
or other permissible collateral equal to a small percentage of the amount of the
futures contract. This amount is known as "initial margin." The nature of
initial margin is different from that of margin in security transactions in that
it does not involve borrowing money to finance transactions. Rather, initial
margin is similar to a performance bond or good faith deposit that is returned
to the Fund upon termination of the contract, assuming the Fund satisfies its
contractual obligations.
Subsequent payments to and from the broker occur on a daily basis in a
process known as "marking to market." These payments are called "variation
margin" and are made as the value of the underlying futures contract fluctuates.
For example, when the Fund sells a futures contract and the price of the
underlying index rises above the delivery price, the Fund's position declines in
value. The Fund then pays the broker a variation margin payment equal to the
difference between the delivery price of the futures contract and the value of
the index underlying the futures contract. Conversely, if the price of the
underlying index falls below the delivery price of the contract, the Fund's
futures position increases in value. The broker then must make a variation
margin payment equal to the difference between the delivery price of the futures
contract and the value of the index underlying the futures contract.
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When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
LIQUIDITY RISKS. Positions in futures contracts may be closed out only on
an exchange or board of trade which provides a secondary market for such
futures. Although the Fund intends to purchase or sell futures only on exchanges
or boards of trade where there appears to be an active secondary market, there
is no assurance that a liquid secondary market on an exchange or board of trade
will exist for any particular contract or at any particular time. If there is
not a liquid secondary market at a particular time, it may not be possible to
close a futures position at such time and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event financial futures are used to hedge
portfolio securities, such securities will not generally be sold until the
financial futures can be terminated. In such circumstances, an increase in the
price of the portfolio securities, if any, may partially or completely offset
losses on the financial futures.
The ability to establish and close out positions in options on futures
contracts will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop. Although
the Fund generally will purchase only those options for which there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange will exist for any particular option or at any particular
time. In the event no such market exists for particular options, it might not be
possible to effect closing transactions in such options, with the result that
the Fund would have to exercise the options in order to realize any profit.
HEDGING RISKS. There are several risks in connection with the use by the
Fund of futures contracts and related options as a hedging device. One risk
arises because of the imperfect correlation between movements in the prices of
the futures contracts and options and movements in the underlying securities or
index or movements in the prices of the Fund's securities which are the subject
of a hedge. RSIM, L.P. will, however, attempt to reduce this risk by purchasing
and selling, to the extent possible, futures contracts and related options on
securities and indexes the movements of which will, in its judgment, correlate
closely with movements in the prices of the underlying securities or index and
the Fund's portfolio securities sought to be hedged.
Successful use of futures contracts and options by the Fund for hedging
purposes is also subject to RSIM, L.P.'s ability to predict correctly movements
in the direction of the market. It is possible that, where the Fund has
purchased puts on futures contracts to hedge its portfolio against a decline in
the market, the securities or index on which the puts are purchased may increase
in value and the value of securities held in the portfolio may decline. If this
occurred, the Fund would lose money on the puts and also experience a decline in
value in its portfolio securities. In addition, the prices of futures, for a
number of reasons, may not correlate perfectly with movements in the underlying
securities or index due to certain market distortions. First, all participants
in the futures market are subject to margin deposit requirements. Such
requirements may cause investors to close futures contracts through offsetting
transactions which could distort the normal relationship between the underlying
security or index and futures markets. Second, the margin requirements in the
futures markets are less onerous than margin requirements in the securities
markets in general, and as a result the futures markets may attract more
speculators than the securities markets do. Increased participation by
speculators in the futures markets may also cause temporary price distortions.
Due to the possibility of price distortion, even a correct forecast of general
market trends by RSIM, L.P. still may not result in a successful hedging
transaction over a very short time period.
OTHER RISKS. The Fund will incur brokerage fees in connection with its
futures and options transactions. In addition, while futures contracts and
options on futures will be purchased and sold to reduce certain risks, those
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of futures and related options, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for the Fund than if it had not entered into any futures contracts
or options transactions. Moreover, in the event of an imperfect correlation
between the futures position and the portfolio position which is intended to be
protected, the desired protection may not be obtained and the Fund may be
exposed to risk of loss.
REPURCHASE AGREEMENTS
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The Fund may enter into repurchase agreements. A repurchase agreement is a
contract under which the Fund acquires a security for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such security at a fixed time and price
(representing the Fund's cost plus interest). It is the Fund's present intention
to enter into repurchase agreements only with member banks of the Federal
Reserve System and securities dealers meeting certain criteria as to
creditworthiness and financial condition established by the Trustees of the
Trust and only with respect to obligations of the U.S. Government or its
agencies or instrumentalities or other high-quality, short-term debt
obligations. Repurchase agreements may also be viewed as loans made by the Fund
which are collateralized by the securities subject to repurchase. RSIM, L.P.
will monitor such transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total amount of the
repurchase obligation, including the interest factor. If the seller defaults,
the Fund could realize a loss on the sale of the underlying security to the
extent that the proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In addition, if the
seller should be involved in bankruptcy or insolvency proceedings, the Fund may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's estate.
SECURITIES LENDING
The Fund may lend its portfolio securities, provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities,
cash, or cash equivalents adjusted daily to have market value at least equal to
the current market value of the securities loaned; (2) the Fund may at any time
call the loan and regain the securities loaned; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities of the Fund loaned will not at any time exceed
one-third (or such other limit as the Trustees may establish) of the total
assets of the Fund. In addition, it is anticipated that the Fund may share with
the borrower some of the income received on the collateral for the loan or that
it will be paid a premium for the loan.
Before the Fund enters into a loan, RSIM, L.P. considers all relevant facts
and circumstances, including the creditworthiness of the borrower. The risks in
lending portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. Although voting rights or
rights to consent with respect to the loaned securities pass to the borrower,
the Fund retains the right to call the loans at any time on reasonable notice,
and it will do so in order that the securities may be voted by the Fund if the
holders of such securities are asked to vote upon or consent to matters
materially affecting the investment. The Fund will not lend portfolio securities
to borrowers affiliated with the Fund.
FOREIGN INVESTMENTS
Investments in foreign securities may involve considerations different from
investments in domestic securities due to limited publicly available
information, non-uniform accounting standards, lower trading volume and possible
consequent illiquidity, greater volatility in price, the possible imposition of
withholding or confiscatory taxes, the possible adoption of foreign governmental
restrictions affecting the payment of principal and interest, expropriation of
assets, nationalization, or other adverse political or economic developments.
Foreign companies may not be subject to auditing and financial reporting
standards and requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than in the
United States. It may be more difficult to obtain and enforce a judgment against
a foreign issuer.
In addition, to the extent that the Fund's foreign investments are not U.S.
dollar-denominated, the Fund may be affected favorably or unfavorably by changes
in currency exchange rates or exchange control regulations and may incur costs
in connection with conversion between currencies.
DEVELOPING COUNTRIES. The considerations noted above for foreign
investments generally are intensified for investments in developing countries.
These risks include (i) volatile social, political and economic conditions; (ii)
the small current size of the markets for such securities and the currently low
or nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) the existence of national policies which may
restrict the Fund's investment opportunities, including restrictions on
investment in issuers or industries deemed sensitive to national interests; (iv)
foreign taxation; (v) the absence of developed structures governing private or
foreign investment or allowing for judicial redress for injury to private
property; (vi) the absence, until recently in certain developing countries, of a
capital market structure or market-oriented economy; (vii) economies based on
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only a few industries; and (viii) the possibility that recent favorable economic
developments in certain developing countries may be slowed or reversed by
unanticipated political or social events in such countries.
FOREIGN CURRENCY TRANSACTIONS
The Fund may engage in currency exchange transactions to protect against
uncertainty in the level of future foreign currency exchange rates and to
increase current return. The Fund may engage in both "transaction hedging" and
"position hedging."
There can be no assurance that appropriate foreign currency transactions
will be available for the Fund at any time; or that the Fund will enter into
such transactions at any time or under any circumstances even if appropriate
transactions are available to it.
When it engages in transaction hedging, the Fund enters into foreign
currency transactions with respect to specific receivables or payables of the
Fund generally arising in connection with the purchase or sale of its portfolio
securities. The Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, the Fund will attempt to protect against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
The Fund may purchase or sell a foreign currency on a spot (I.E., cash)
basis at the prevailing spot rate in connection with transaction hedging. The
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes, the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a currency at a specified exercise price until the expiration of
the option. A call option on a futures contract gives the Fund the right to
assume a long position in the futures contract until the expiration of the
option. A call option on currency gives the Fund the right to purchase a
currency at the exercise price until the expiration of the option. The Fund will
engage in over-the-counter transactions only when appropriate exchange-traded
transactions are unavailable and when, in the opinion of RSIM, L.P., the pricing
mechanism and liquidity are satisfactory and the participants are responsible
parties likely to meet their contractual obligations.
When it engages in position hedging, the Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which securities held by the Fund are denominated or are quoted in
their principle trading markets or an increase in the value of currency for
securities which the Fund expects to purchase. In connection with position
hedging, the Fund may purchase put or call options on foreign currency and
foreign currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The Fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the values of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of the Fund's
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and if a decision is
made to sell the security or securities and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of the
foreign currency received upon
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the sale of the portfolio security or securities of the Fund if the market value
of such security or securities exceeds the amount of foreign currency the Fund
is obligated to deliver.
To offset some of the costs to the Fund of hedging against fluctuations in
currency exchange rates, the Fund may write covered call options on those
currencies.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the Fund owns or intends to purchase
or sell. They simply establish a rate of exchange which one can achieve at some
future point in time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged currency, they tend
to limit any potential gain which might result from the increase in the value of
such currency.
The Fund may also seek to increase its current return by purchasing and
selling foreign currency on a spot basis, by purchasing and selling options on
foreign currencies and on foreign currency futures contracts, and by purchasing
and selling foreign currency forward contracts.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency exchange
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the parties, at a price set at the time of the contract. In the
case of a cancelable forward contract, the holder has the unilateral right to
cancel the contract at maturity by paying a specified fee. The contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the Commodity Futures Trading Commission (the "CFTC"), such as the
New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. For example, the maturity date of a
forward contract may be any fixed number of days from the date of the contract
agreed upon by the parties, rather than a predetermined date in a given month.
Forward contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase or
sale of an offsetting contract. Closing transactions with respect to forward
contracts are usually effected with the currency trader who is a party to the
original forward contract. Closing transactions with respect to futures
contracts are effected on a commodities exchange; a clearing corporation
associated with the exchange assumes responsibility for closing out such
contracts.
Positions in foreign currency futures contracts and related options may be
closed out only on an exchange or board of trade which provides a secondary
market in such contracts or options. Although the Fund will normally purchase or
sell foreign currency futures contracts and related options only on exchanges or
boards of trade where there appears to be an active secondary market, there is
no assurance that a secondary market on an exchange or board of trade will exist
for any particular contract or option or at any particular time. In such event,
it may not be possible to close a futures or related option position and, in the
event of adverse price movements, the Fund would continue to be required to make
daily cash payments of variation margin on its futures positions.
FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate similarly
to options on securities, and are traded primarily in the over-the-counter
market, although options on foreign currencies have recently been listed on
several exchanges. Such options will be purchased or written only when RSIM,
L.P. believes that a liquid secondary market exists for such options. There can
be no assurance that a liquid secondary market will exist for a particular
option at any specific time. Options on foreign currencies are affected by all
of those factors which influence exchange rates and investments generally.
The value of a foreign currency option is dependent upon the value of the
foreign currency and the U.S. dollar, and may have no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, investors may
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be disadvantaged by having to deal in an odd lot market (generally consisting of
transactions of less than $1 million) for the underlying foreign currencies at
prices that are less favorable than for round lots.
There is no systematic reporting of last-sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (less than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-the-clock market. To
the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the U.S. options
markets.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they buy and sell various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
resell that currency to the dealer.
The Fund may purchase pay-in-kind securities. Pay-in-kind securities pay
all or a portion of their interest or dividends in the form of additional
securities.
TEMPORARY DEFENSIVE STRATEGIES
At times, RSIM, L.P. may judge that market conditions make pursuing the
Fund's basic investment strategy inconsistent with the best interests of its
shareholders. At such times, RSIM, L.P. may temporarily use alternative
strategies, primarily designed to reduce fluctuations in the values of the
Fund's assets. In implementing these "defensive strategies", the Fund may invest
in U.S. Government securities, other high-quality debt instruments, and other
securities RSIM, L.P. believes to be consistent with the Fund's best interests.
THE FUND'S INVESTMENT LIMITATIONS
The Trust has adopted the following fundamental investment restrictions
which may not be changed without the affirmative vote of a majority of the
outstanding voting securities of the Fund.
1. issue any class of securities which is senior to the Fund's shares of
beneficial interest, except that the Fund may borrow money to the
extent contemplated by Restriction 3 below;
2. purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions) (Margin
payments or other arrangements in connection with transactions in
short sales, futures contracts, options, and other financial
instruments are not considered to constitute the purchase of
securities on margin for this purpose.);
3. borrow more than one-third of the value of its total assets less all
liabilities and indebtedness not represented by senior securities;
4. act as underwriter of securities of other issuers except to the extent
that, in connection with the disposition of portfolio securities, it
may be deemed to be an underwriter under certain federal securities
laws;
5. (i) (as to 75% of the Fund's total assets) purchase any security
(other than obligations of the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the Fund's total
assets (taken at current value) would then be invested in securities
of a single issuer, or (ii) purchase any security if as a result 25%
or more of the Fund's total assets (taken at current value) would be
invested in a single industry;
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6. make loans, except by purchase of debt obligations or other financial
instruments in which the Fund may invest consistent with its
investment policies, by entering into repurchase agreements, or
through the lending of its portfolio securities;
7. purchase or sell commodities or commodity contracts, except that the
Fund may purchase or sell financial futures contracts, options on
financial futures contracts, and futures contracts, forward contracts,
and options with respect to foreign currencies, and may enter into
swap transactions or other financial transactions, and except as
required in connection with otherwise permissible options, futures,
and commodity activities as described elsewhere in the Prospectus or
this Statement at the time;
8. purchase or sell real estate or interests in real estate, including
real estate mortgage loans, although (i) it may purchase and sell
securities which are secured by real estate and securities of
companies, including limited partnership interests, that invest or
deal in real estate and it may purchase interests in real estate
investment trusts. (For purposes of this restriction, investments by
the Fund in mortgage-backed securities and other securities
representing interests in mortgage pools shall not constitute the
purchase or sale of real estate or interests in real estate or real
estate mortgage loans.)
In addition, it is contrary to the current policy of the Fund, which policy
may be changed without shareholder approval, to invest more than 15% of its net
assets in securities which are not readily marketable, including securities
restricted as to resale (other than securities restricted as to resale but
determined by the Trustees, or persons designated by the Trustees to make such
determinations, to be readily marketable).
All percentage limitations on investments will apply at the time of
investment and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of such investment. Except
for the investment restrictions listed above as fundamental or to the extent
designated as such in the Prospectus, the other investment policies described in
this Statement or in the Prospectus are not fundamental and may be changed by
approval of the Trustees. As a matter of policy, the Trustees would not
materially change the Fund's investment objective without shareholder approval.
The 1940 Act provides that a "vote of a majority of the outstanding voting
securities" of the Fund means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund, or (2) 67% or more of the shares
of the Fund present at a meeting if more than 50% of the outstanding shares of
the Fund are represented at the meeting in person or by proxy.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Trustees of the Trust are responsible for generally overseeing the
conduct of the Trust's (and the Fund's) business. Set forth below is
certain information about the Trust's trustees and executive officers:
LEONARD B. AUERBACH, TRUSTEE
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco, CA
94111 Mr. Auerbach, 52, is the President and Chairman of the Board of
Auerbach Associates, Inc., a management consulting firm which he founded in
1979. Mr. Auerbach is also President of LBA&C, Inc., which served until
July 1997 as general partner of Tuttle & Company, which provides mortgage
pipeline interest rate hedging services and related software to a variety
of institutional clients. He also served until July 1997 as President of
Tuttle & Auerbach Securities, Inc., an introducing broker trading futures
on behalf of institutional hedging clients and individuals. He is also a
Director of Roelof Mining, Inc. and Headlands Mortgage Corp. Mr. Auerbach
is President of All Performance Mortgage Trust LLC, a manager of mortgage
assets. Mr. Auerbach is a limited partner in Robertson Stephens Residential
Fund, L.P., RS Property Fund I, L.P., and Robertson Stephens Commercial
Property Fund, L.P., of which RSRF Company, L.L.C., RSRE II., L.L.C., and
Robertson, Stephens & Company, Inc., respectively, affiliates of RSIM,
L.P., and RS Investment Management, Inc. ("RSIM, Inc."), another adviser to
several series of the Trust, are the general partners. Mr. Auerbach has
been a Trustee of the Trust since June 1987.
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JOHN W. GLYNN, JR., TRUSTEE
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco,
CA 94111 Mr. Glynn, 57, is the Principal and Chairman of the Board of
Glynn Capital Management, an investment management firm which he
founded in 1983. Mr. Glynn is a Director of Sterling Payot Company, a
private investment banking firm that advises executives and companies
on financial and strategic matters. He is also a director of several
private companies. He is also a lecturer at the Darden School of
Business at the University of Virginia and at the Stanford Business
School. Mr. Glynn was until June 1997 a limited partner in The Orphan
Fund, of which RSIM, L.P. is a general partner. He has been a Trustee
of the Trust since July , 1997.
*G. RANDALL HECHT, TRUSTEE, PRESIDENT, AND PRINCIPAL EXECUTIVE OFFICER
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco,
CA 94111
Mr. Hecht, 47, was elected President and Principal Executive Officer of the
Trust in February 1999. Mr. Hecht is the chief executive officer of RSIM, L.P.
and RSIM, Inc. He is also the chief executive officer and a member of RS
Investment Management Co., LLC, the parent company to RSIM, L.P. and RSIM, Inc.
Mr. Hecht served as Chief Operating Officer of Robertson, Stephens & Company,
Inc. from January 1993 to 1997 as Chief Financial Officer of Robertson, Stephens
& Company LLC (and its predecessors) from June 1984 to January 1993 and as the
head of that firm's Investment Management Group. He was also a limited partner
of Robertson, Stephens & Company LLC, and a member of the Management and
Executive Committees of Robertson, Stephens & Company, Inc. He was a Trustee of
the Trust from June 1987 until December 1997.
JAMES K. PETERSON, TRUSTEE
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco,
CA 94111 Mr. Peterson, 56, is a Managing Director of Oak Glen
Consultancy, L.L.C., a firm which advises pension funds and other
institutions on investment issues. From October 1998 until April 1999,
Mr. Peterson was an employee of Mitchum, Jones & Templeton, Inc. a
registered broker-dealer. He served as Director of Investment
Management for the IBM Retirement Funds from April 1988 until October
1996. Mr. Peterson was a Manager of the IBM Retirement Funds from
March 1981 until April 1988. Mr. Peterson is a limited partner of
Robertson Stephens Residential Fund, L.P., a limited partnership of
which RSRF Company, L.L.C., an affiliate of RSIM, L.P. and RSIM, Inc.,
is the general partner. He has been a Trustee of the Trust since June
1987.
STEVEN COHEN, TREASURER
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco,
CA 94111 Mr. Cohen, 32, is the Chief Financial Officer of RSIM, L.P.
and RSIM, Inc. Prior to joining RS Investment Management in April
1999, Mr. Cohen was Trading Operations Manager of Ziff Brothers
Investments from 1997 until 1998. From 1994 until 1997, he served as
an Audit Manager at Ernst & Young. Mr. Cohen has been Treasurer of the
Trust since April 1999.
SUZANNE DUFRANE, SECRETARY
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco,
CA 94111 Prior to joining RS Investment Management, Ms. DuFrane was a
Vice President at Credit Suisse First Boston in New York. From 1996-
1997, Ms. DuFrane worked at Robertson Stephens Investment Management
as a controller in the hedge fund group. Before joining Robertson
Stephens Investment Management in 1996, Ms. DuFrane was a senior tax
consultant at Price Waterhouse in San Francisco for three years. She
has a B.A. in Social Science from U.C. Berkeley. Ms. DuFrane has been
Secretary of the Trust since July, 1999.
Pursuant to the terms of the Advisory Agreement with the Fund, RS
Investment Management pays all compensation of officers of the Trust as well as
the fees and expenses of all Trustees of the Trust who are affiliated persons of
RSIM, L.P. or RSIM, Inc. The Trust pays each unaffiliated Trustee an annual fee
of $5,000 for each series of the Trust, including the Fund and reimburses their
actual out-of-pocket expenses relating to attendance at meetings of the Board of
Trustees.
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<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------
Name of Aggregate Pension or Estimated Annual Total
Person, Position Compensation Retirement Benefits Upon Compensation
From Trust Benefits Accrued Retirement From Fund Paid to
in 1998 As Part of Trust Trustees in 1998
Expenses
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leonard Auerbach, Trustee $90,000 -- -- $0
John W. Glynn, Jr., Trustee $90,000 -- -- $0
James K. Peterson, Trustee $95,488 -- -- $0
G. Randall Hecht*, Trustee -- -- -- --
- ------------------------
* Denotes a Trustee who is an "interested person," as defined in the 1940 Act.
</TABLE>
CONTROL PERSONS AND SHARE OWNERSHIP
As of October ___, 1999, all outstanding shares of the Fund were owned by
__________.
On October ___, 1999 the officers and Trustees of the Trust, as a group,
beneficially owned less than 1% of the outstanding shares of the Fund.
The Trust's Declaration of Trust and By-Laws provide that the Trust will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Trust, except if it is determined in the manner specified in
the Declaration of Trust and By-Laws that they have not acted in good faith in
the reasonable belief that their actions were in the best interests of the Trust
or that such indemnification would relieve any officer or Trustee of any
liability to the Trust or its shareholders by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of his or her duties. The Trust,
at its expense, provides liability insurance for the benefit of its Trustees and
officers.
RSIM, L.P.
RS Investment Management Co. LLC ("RSIM Co."), a Delaware limited liability
company, is the owner of all of the outstanding beneficial interest in RSIM,
L.P. G. Randall Hecht, Chairman and Chief Executive Officer of RSIM Co., owns
29% of the membership interest in RSIM Co.; Mr. Paul Stephens, Mr. Andrew P.
Pilara, and Mr. James Callinan, portfolio managers of certain of the series of
the Trust, own 22%, 15%, and 20%, respectively. The remainder of the membership
interests is owned by other employees of RSIM Co. or its affiliates and by other
persons otherwise unaffiliated with RSIM Co. Each of Messrs. Callinan, Hecht,
Pilara, and Stephens and Messrs. David Evans and James Foster, employees of RSIM
Co. or its affiliates, is a member of the Board of Managers of RSIM Co. Mr.
Hecht serves as the President and Principal Executive Officer of the Trust. Mr.
Pilara serves as a Trustee of the Trust.
Pursuant to an Investment Advisory Agreement (the "Advisory Agreement"),
RSIM, L.P., at its expense, furnishes investment management services with
respect to the assets of the Fund, consistent with the investment objective and
policies of the Fund and subject to the supervision and direction of the Trust's
Board of Trustees, and (i) furnishes the Fund with investment advice, research,
and recommendations with respect to the investment of the Fund's assets and the
purchase and sale of its portfolio securities, (ii) furnishes the Trust and the
Fund with reports, statements, and other data on securities, economic
conditions, and other pertinent subjects, and (iii) in general superintends and
manages the investments of the Fund, subject to the ultimate supervision and
direction of the Board of Trustees. In addition, RSIM, L.P. provides all
administrative services needed for the management and operation of the Fund and
furnishes such office space and personnel as are needed by the Fund pursuant to
an Administrative Services Agreement with the Fund, as described in
"Administrative Services" below. The services of RSIM, L.P. to the Fund are not
deemed to be exclusive, and RSIM, L.P. or any affiliate may provide similar
services to other series of the Trust, other investment companies, and other
clients, and may engage in other activities. The
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<PAGE>
Fund may reimburse RSIM, L.P. (on a cost recovery basis only) for any services
performed for the Fund by it outside its duties under the Advisory Agreement.
The Advisory Agreement provides that RSIM, L.P. shall not, in the absence
of willful misfeasance, bad faith, gross negligence, or reckless disregard by it
of its obligations or duties, be subject to liability to the Trust, the Fund or
the shareholders of the Fund for any act or omission in the course of, or
connected with, its rendering services thereunder, or for any losses that may be
sustained in the purchase, holding, or sale of any security by the Fund.
The Advisory Agreement is subject to annual approval, commencing in 2001,
by (i) the vote of the Trustees or of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, and (ii) the vote of a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or RSIM, L.P. It is terminable by RSIM, L.P., the Trust,
or a vote of a majority of the outstanding voting securities of the Fund,
without penalty, on 60 days' written notice and will terminate automatically in
the event of its assignment.
The Advisory Agreement also provides that RSIM, L.P. may, at its own
expense, delegate certain of its responsibilities under the Agreement to
sub-advisers for the Fund, who would be required to furnish an investment
program and make investment decisions for the Funds. RSIM, L.P. has not entered
into sub-advisory agreements in respect of the Fund.
MANAGEMENT AND ADMINISTRATIVE FEES
MANAGEMENT FEES. The Fund pays RSIM, L.P. fees as compensation for the
services provided by it under the Advisory Agreement. The amount of these
management fees is calculated daily and payable monthly at the annual rate of
1.25% of the average daily net assets of the Fund.
These management fees are higher than those paid by most other investment
companies. RSIM, L.P. also may at its discretion from time to time pay Fund
expenses from its own assets, or reduce the management fee of the Fund.
ADMINISTRATIVE SERVICES. The Fund has entered into an Administrative
Services Agreement with RSIM, L.P., pursuant to which RSIM, L.P. continuously
provides business management services to the Fund and generally manages all of
the business and affairs of the Fund, subject to the general oversight of the
Trustees. No fees are payable by the Fund under the Administrative Services
Agreement.
The Administrative Services Agreement is subject to annual approval,
commencing in 2001, by (i) the Board of Trustees, and (ii) the vote of a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act). The Administrative Services Agreement may be terminated without
penalty, by the Trust or by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund, on 30 days' notice to RSIM,
L.P.
EXPENSES
The Fund will pay all expenses related to its operation which are not borne
by an RSIM, L.P., including but not limited to taxes, interest, brokerage fees
and commissions, compensation paid to Provident Distributors, Inc., Four Falls
Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428 ("Provident"
or the "Distributor"), the Trust's distributor, under the Fund's 12b-1 Plan,
fees paid to members of the Board of Trustees who are not officers, directors,
stockholders, or employees of RSIM, L.P. or Provident, SEC fees and related
expenses, state Blue Sky qualification fees, charges of custodians, transfer
agents, registrars or other agents,outside auditing, accounting, and legal
services, charges for the printing of prospectuses and statements of additional
information for regulatory purposes or for distribution to shareholders,
certain shareholder report charges, and charges relating to corporate matters.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Investment decisions for the Fund and for the other investment advisory
clients of RSIM, L.P. and its affiliates are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be
B-14
<PAGE>
bought for one or more clients when one or more other clients are selling the
security. In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more clients
simultaneously purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged as to price and
allocated between such clients in a manner which in opinion of RSIM, L.P. is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio securities
for one or more clients will have an adverse effect on other clients. RSIM, L.P.
employs professional staffs of portfolio managers who draw upon a variety of
resources for research information for the Fund.
Transactions on U.S. stock exchanges, commodities markets, and futures
markets and other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among different brokers.
A particular broker may charge different commissions according to such factors
as the difficulty and size of the transaction. Transactions in foreign
investments often involve the payment of fixed brokerage commissions, which may
be higher than those in the United States. There is generally no stated
commission in the case of securities traded in the over-the-counter markets, but
the price paid by the Fund usually includes an undisclosed dealer commission or
mark-up. In underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the underwriter or dealer.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional investors
to receives brokerage and research services (as defined in the Securities
Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, RSIM, L.P. receives brokerage and research services and other similar
services from many broker-dealers with which they place the Fund's portfolio
transactions and from third parties with which these broker-dealers have
arrangements. These services include such matters as general economic and market
reviews, industry and company reviews, evaluations of investments,
recommendations as to the purchase and sale of investments, newspapers,
magazines, pricing services, quotation services, news services, and personal
computers utilized by managers and analysts of RSIM, L.P. Where the services
referred to above are not used exclusively by RSIM, L.P. for research purposes,
RSIM, L.P., based upon its own allocations of expected use, bears that portion
of the cost of these services which directly relates to its non-research use.
Some of these services are of value to RSIM, L.P. and its affiliates in advising
various of its clients (including the Fund), although not all of these services
are necessarily useful and of value in managing the Fund. The management fee
paid by the Fund is not reduced because RSIM, L.P. or its affiliates receive
these services, even though RSIM, L.P. might otherwise be required to purchase
some of these services for cash.
RSIM, L.P. places all orders for the purchase and sale of portfolio
investments for the Fund and buys and sells investments for the Fund through a
substantial number of brokers and dealers. RSIM, L.P. seeks the best overall
terms available for the Fund, except to the extent RSIM, L.P. may be permitted
to pay higher brokerage commissions as described below. In doing so, RSIM, L.P.,
having in mind the Fund's best interests, considers all factors it deems
relevant, including, by way of illustration, price, the size of the transaction,
the nature of the market for the security or other investment, the amount of the
commission, the timing of the transaction taking into account market prices, and
trends, the reputation, experience, and financial stability of the broker-dealer
involved and the quality of service rendered by the broker-dealer in other
transactions.
As permitted by Section 28(e) of the 1934 Act, RSIM, L.P. may cause the
Fund to pay a broker-dealer which provides "brokerage and research services" (as
defined in the 1934 Act) to RSIM, L.P. an amount of disclosed commission for
effecting securities transactions on stock exchanges and other transactions for
the Fund on an agency basis in excess of the commission which another
broker-dealer would have charged for effecting that transaction. The authority
of RSIM, L.P. to cause the Fund to pay any such greater commissions is also
subject to such policies as the Trustees may adopt from time to time. RSIM, L.P.
does not currently intend to cause the Fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission that Section
28(e) does not apply to the payment of such greater commissions in "principal"
transactions. Accordingly, RSIM, L.P. will use its best efforts to obtain the
best overall terms available with respect to such transactions.
DISTRIBUTION PLAN
B-15
<PAGE>
The Fund has adopted a Distribution Plan under Rule 12b-l of the 1940 Act
(the "Plan"). Pursuant to the Plan, the Fund may pay distribution fees to
Provident Distributors, Inc. (the "Distributor") for services the Distributor
renders and costs and expenses it incurs in connection with the promotion and
distribution of the Fund's shares, at an annual rate of 0.25% of the Fund's
average daily net assets. Such expenses may include, but are not limited to,
costs of advertising and promoting the sale of shares of the Fund and payments
to dealers, financial institutions, advisers, or other firms. They may also
include the Distributor's overhead expenses attributable to the distribution of
the Fund's shares, which may include, for example, expenses for office space,
communications, and salaries of the Distributor's personnel, and any other of
the Distributor's expenses attributable to the distribution of the Fund's
shares. RSIM, L.P. and its affiliates provide certain services to the
Distributor in respect of the promotion of the shares of the Funds. In return
for those services, the Distributor pays to RSIM, L.P. a portion of the payments
received by the Distributor under the Plan. The Plan is a "compensation" plan.
HOW NET ASSET VALUE IS DETERMINED
The Fund determines the net asset value per share once daily, as of 4:30
p.m. eastern time, on each day the New York Stock Exchange (the "Exchange") is
open. The Exchange is closed Saturdays, Sundays, New Year's Day, Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, the Independence Day
(observed), Labor Day, Thanksgiving, and Christmas.
Securities for which market quotations are readily available are valued
using the last reported sale price or, if no sales are reported (as in the case
of some securities traded over-the-counter), at the mean between the closing bid
and asked prices, except that certain U.S. Government securities are stated at
the mean between the last reported bid and asked prices. Short-term investments
having remaining maturities of 60 days or less are stated at amortized cost,
which approximates market value. All other securities and assets are valued at
their fair value following procedures approved by the Trustees.
Reliable market quotations are not considered to be readily available for
long-term corporate bonds and notes, certain preferred stocks, or certain
foreign securities. These investments are stated at fair value on the basis of
valuations furnished by pricing services, which determine valuations for normal,
institutional-size trading units of such securities using methods based on
market transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders.
If any securities held by the Fund are restricted as to resale, their fair
value is determined in accordance with the guidelines and procedures adopted by
the Trust's Board of Trustees. The fair value of such securities is generally
determined as the amount which the Fund could reasonably expect to realize from
an orderly disposition of such securities over a reasonable period of time. The
valuation procedures applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to the financial
position of the issuer and other fundamental analytical data relating to the
investment and to the nature of the restrictions on disposition of the
securities (including any registration expenses that might be borne by the Fund
in connection with such disposition). In addition, specific factors are also
generally considered, such as the cost of the investment, the market value of
any unrestricted securities of the same class (both at the time of purchase and
at the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities, and any available
analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset value
of the Fund's shares are computed as of such times. Also, because of the amount
of time required to collect and process trading information as to large numbers
of securities issues, the values of certain securities (such as convertible
bonds and U.S. Government securities) are determined based on market quotations
collected earlier in the day at the latest practicable time prior to the close
of the Exchange. Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will not be
reflected in the computation of the Fund's net asset value. If events materially
affecting the value
B-16
<PAGE>
of such securities occur during such period, then these securities will be
valued at their fair value following procedures approved by the Trustees.
TAXES
The Fund intends to qualify each year and elect to be taxed as a regulated
investment company under Subchapter M of the United States Internal Revenue Code
of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its tax liability
determined under Subchapter M, the Fund would not be subject to federal income
tax on any of its net investment income or net realized capital gains that are
distributed to shareholders.
In order to qualify as a "regulated investment company," the Fund must,
among other things, (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, gains from the sale or
other dispositions of stock, securities, or foreign currencies, and other income
(including gains from options, futures, or forward contracts) derived with
respect to its business of investing in such stock, securities, or currencies
and (b) diversify its holdings so that, at the close of each quarter of its
taxable year, (i) at least 50% of the value of its total assets consists of
cash, cash items, U.S. Government securities, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is invested in the
securities of any issuer (other than U.S. Government securities). In order to
receive the favorable tax treatment accorded regulated investment companies and
their shareholders, moreover, the Fund must in general distribute with respect
to each taxable year at least 90% of the sum of its taxable net investment
income, its net tax-exempt income, and the excess, if any, of net short-term
capital gains over net long-term capital gains.
An excise tax at the rate of 4% will be imposed on the excess, if any, of
the Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is 98% of the Fund's ordinary
income for the calendar year plus 98% of its capital gain net income recognized
during the one-year period ending on October 31 (or December 31, if the Fund so
elects) plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by the Fund during October, November, or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which declared.
With respect to investment income and gains received by the Fund from
sources outside the United States, such income and gains may be subject to
foreign taxes which are withheld at the source. Thus, the Fund's yield on
foreign investments would be decreased by such taxes. The effective rate of
foreign taxes to which the Fund will be subject depends on the specific
countries in which its assets will be invested and the extent of the assets
invested in each such country and therefore cannot be determined in advance.
If the Fund engages in hedging transactions, including hedging transactions
in options, futures contracts, and straddles, or other similar transactions, it
will be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, convert long-term
capital gains into short-term capital gains, or convert short-term capital
losses into long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders. The Fund will
endeavor to make any available elections pertaining to such transactions in a
manner believed to be in the best interests of the Fund.
The Fund's transactions in foreign currencies, foreign currency-denominated
debt securities and certain foreign currency options, futures contracts and
forward contracts (and similar instruments) may give rise to ordinary income or
loss to the extent such income or loss results from fluctuations in the value of
the foreign currency concerned.
B-17
<PAGE>
The Fund's transactions in foreign currency-denominated debt instruments
and its hedging activities will likely produce a difference between its book
income and its taxable income. This difference may cause a portion of the Fund's
distributions of book income to constitute returns of capital for tax purposes
or require the Fund to make distributions exceeding book income in order to
permit the Fund to continue to qualify, and be taxed under Subchapter M of the
Code, as a regulated investment company.
Under federal income tax law, a portion of the difference between the
purchase price of zero-coupon securities in which the Fund has invested and
their face value ("original issue discount") is considered to be income to the
Fund each year, even though the Fund will not receive cash interest payments
from these securities. This original issue discount (imputed income) will
comprise a part of the net investment income of the Fund which must be
distributed to shareholders in order to maintain the qualification of the Fund
as a regulated investment company and to avoid federal income tax at the level
of the Fund. Thus, the Fund could be required at times to liquidate other
investments in order to satisfy its distribution requirements.
The Fund generally is required to withhold and remit to the U.S. Treasury
31% of the taxable dividends and other distributions paid to non-corporate
shareholders who fail to furnish the Fund with a correct taxpayer identification
number, who have underreported dividends or interest income, or who fail to
certify to the Fund that they are not subject to such withholding. An
individual's taxpayer identification number is his or her social security
number. Tax-exempt shareholders are not subject to these back-up withholding
rules so long as they furnish the Fund with a proper certification.
Non-resident alien individuals, foreign corporations and certain other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net capital gain received by such shareholders and any gain
from the sale or other disposition of shares of the Fund generally will not be
subject to U.S. Federal income taxation, provided that non-resident alien status
has been certified by the shareholder. Different U.S. tax consequences may
result if the shareholder is engaged in a trade or business in the United
States, is present in the United States for a sufficient period of time during a
taxable year to be treated as a U.S. resident, or fails to provide any required
certifications regarding status as a non-resident alien investor. Foreign
shareholders should consult their tax advisors regarding the U.S. and foreign
tax consequences of an investment in the Fund.
The IRS recently revised its regulations affecting the application to
foreign investors of the back-up withholding and withholding tax rules described
above. The new regulations will generally be effective for payments made on or
after January 1, 2000 (although transition rules will apply). In some
circumstances, the new rules will increase the certification and filing
requirements imposed on foreign investors in order to qualify for exemption from
31% back-up withholding tax and for reduced withholding tax rates under income
tax treaties. Foreign investors in the Fund should consult their tax advisors
with respect to the potential application of these new regulations.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and related regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative actions. Dividends and distributions also may be subject to
local, state and foreign taxes. Shareholders are urged to consult their tax
advisers regarding specific questions as to federal, state, local, and foreign
taxes. The foregoing discussion relates solely to U.S. federal income tax law.
Non-U.S. investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the Fund. Statements as to the tax status
of distributions will be mailed annually.
HOW PERFORMANCE IS DETERMINED
STANDARDIZED PERFORMANCE INFORMATION
Average annual total return of a class of shares of the Fund for one-,
five-, and ten-year periods (or for such shorter periods as shares of that class
of shares of the Fund have been offered) is determined by calculating the actual
dollar amount of
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<PAGE>
investment return on a $1,000 investment in that class of shares at the
beginning of the period, and then calculating the annual compounded rate of
return which would produce that amount. Total return for a period of one year or
less is equal to the actual return of that class of shares during that period.
Total return calculations assume reinvestment of all Fund distributions at net
asset value on their respective reinvestment dates. Total return may be
presented for other periods.
At times, RSIM, L.P. may reduce its compensation or assume expenses of the
Fund in order to reduce the Fund's expenses. Any such fee reduction or
assumption of expenses would increase the Fund's total return during the period
of the fee reduction or assumption of expenses.
All data are based on past performance and do not predict future results.
PERFORMANCE INFORMATION
Yield and total return data for the Fund's shares may from time to time be
included in advertisements about the Fund. The Fund's "yield" is calculated by
dividing the annualized net investment income per share during a recent 30-day
period by the net asset value per share on the last day of that period. "Total
return" for one-, five-, and ten-year periods, and for the life of the Fund,
through the most recent calendar quarter represents the average annual
compounded rate of return (or, in the case of a period of one year or less, the
actual rate of return) on an investment of $1,000 in the Fund's shares. Total
return may also be presented for other periods. Quotations of yield or total
return for a period when an expense limitation was in effect will be greater
than if the limitation had not been in effect. The Fund's performance may be
compared to various indices. Information may be presented in advertisements
about the Fund describing the background and professional experience of RSIM,
L.P. or any portfolio manager.
All data are based on the Fund's past investment results and do not predict
future performance. Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio,
and the Fund's investments expenses. Investment performance also often reflects
the risks associated with the Fund's investment objective and policies. These
factors should be considered when comparing the Fund's investment results to
those of other mutual funds and other investment vehicles.
NON-STANDARDIZED TOTAL RETURN INFORMATION
From time to time, the Fund may present non-standardized total return
information, in addition to standardized performance information, which may
include such results as the growth of a hypothetical $10,000 investment in the
Fund's shares, and cumulative total return. Cumulative total return is
calculated in a similar manner to average annual total return, except that the
results are not annualized. Each calculation assumes that all dividends and
distributions are reinvested at net asset value on the reinvestment dates during
the period.
INDICES AND PUBLICATIONS
The Fund may compare its performance with that of appropriate indices such
as the Standard & Poor's Composite Index of 500 stocks ("S&P 500"), Standard &
Poor's MidCap 400 Index ("S&P 400"), the NASDAQ Industrial Index, the NASDAQ
Composite Index, Russell 2000 Index, or other unmanaged indices so that
investors may compare such results with those of a group of unmanaged
securities. The S&P 500, the S&P 400, the NASDAQ Industrial Index, the NASDAQ
Composite Index, and the Russell 2000 Index are unmanaged groups of common
stocks traded principally on national securities exchanges and the over the
counter market, as the case may be. The Fund may also, from time to time,
compare its performance to other mutual funds with similar investment objectives
and to the industry as a whole, as quoted by rating services and publications,
such as Lipper Analytical Services, Inc., Morningstar Mutual Funds, Forbes,
Money, and Business Week.
B-19
<PAGE>
In addition, one or more portfolio managers or other employees of RSIM,
L.P. may be interviewed by print media, such as THE WALL STREET JOURNAL or
BUSINESS WEEK, or electronic news media, and such interviews may be reprinted or
excerpted for the purpose of advertising regarding the Fund.
RELATIVE VOLATILITY - BETA
From time to time the Fund may present a statistical measure of the
volatility of the Fund's performance relative to the volatility of the
performance of the S&P 500. The Fund calls this comparative measure its "beta."
Beta is approximate, because it is statistical, and is not necessarily
indicative of future fund performance volatility. Thus, if the Fund's portfolio
volatility perfectly represents that of the S&P 500, the Fund's beta would be
1.0. If the Fund's beta is greater than 1.0, the Fund's portfolio would tend to
represent a greater market risk than the S&P 500 because the Fund's portfolio
would tend to be more sensitive to movements in the securities markets. For
example, if the Fund's beta is 1.1, the Fund's performance would tend to vary
approximately 10% more than would the performance of the S&P 500. If the Fund's
beta is 0.9, the Fund's performance would tend to vary 10% less than the
performance of the S&P 500. The correlation is not usually exact because,
depending upon the diversification of the Fund's portfolio, a beta of less than
1.0 may indicate only that the portfolio is less sensitive to market movements,
not that the Fund's portfolio has low overall risk.
The beta included with any presentation of the Fund's performance data will be
calculated according to the following formula:
n _
(Sum of)R R - nR R
ft mt f m
(beta) = --------------
n 2 _ 2
(Sum of)R - nR
mt m
Where: n = number of months measured
R = rate of return on the Fund in month T
ft
R = rate of return on the market index, I.E.,
mt the S&P 500, in month T
-
R = arithmetic average monthly rate of return of the Fund
- f
R = arithmetic average monthly rate of return on the market
m index, I.E., the S&P 500
ADDITIONAL INFORMATION
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company, c/o National Financial Data Services,
at P.O. Box 419717, Kansas City, MO 64141, serves as the Fund's transfer agent
and dividend-paying agent ("Transfer Agent"). PFPC Trust Company ("PFPC Trust"),
400 Bellevue Parkway, Wilmington, DE 19809, serves as the Fund's custodian
("Custodian"). As Custodian, PFPC Trust and subcustodians approved by the Board
of Trustees hold the securities in the Fund's portfolio and other assets for
safekeeping. The Transfer Agent and Custodian do not participate in making
investment decisions for the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 555 California Street, San Francisco,
California 94104, are the Trust's independent accountants, providing audit
services, tax return review, and other tax consulting services and assistance
and consultation in connection with the review of various Securities and
Exchange Commission filings.
B-20
<PAGE>
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by the Trust
or the Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the Fund's property for all loss and expense of any
shareholder held personally liable for the obligations of that Fund. Thus the
risk of a shareholder's incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund would be unable to meet
its obligations.
APPENDIX A
DESCRIPTION OF SECURITIES RATINGS
This Appendix describes ratings applied to corporate bonds by Standard & Poor's
("S&P"), Moody's Investors Service, Inc. ("Moody's") and Fitch Investor
Services, Inc. ("Fitch").
S&P'S RATINGS
AAA: Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated 'A' has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB: Debt rated 'BBB' is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
Debt rated 'BB,' 'B,' 'CCC,' 'CC,' and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective characteristics,
these are outweighed by large uncertainties of major exposures to adverse
markets.
BB: Debt rated 'BB' has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The 'BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'BBB-' rating.
B: Debt rated 'B' has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.
B-21
<PAGE>
CCC: Debt rated 'CCC' has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The 'CCC' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
'B' or 'B-' rating.
CC: The rating 'CC' typically is applied to debt subordinated to senior debt
that is assigned an actual or implied 'CCC' rating.
C: The rating 'C' typically is applied to debt subordinated to senior debt that
is assigned an actual or implied 'CCC-' rating. The 'C' rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI: The rating 'CI' is reserved for income bonds on which no interest is being
paid.
D: Debt rated 'D' is in payment default. The 'D' rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings from 'AA' to 'CCC' may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
MOODY'S RATINGS
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
B-22
<PAGE>
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
FITCH RATINGS
AAA: Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated 'AAA.' Because bonds rate in the 'AAA' and
'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+.'
A: Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the rating of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB: Bonds are considered to be speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B: Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issues.
CCC: Bonds have certain identifiable characteristics that, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC: Bonds are minimally protected. Default in payment of interest and/or
principal seems probable.
C: Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D: Bonds in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. "DDD"
represents the highest potential for recovery on these bonds, and 'D' represents
the lowest potential for recovery.
Note: Fitch ratings (other than the "AAA," "DDD," "DD," or "D" categories) may
be modified by the addition of a plus (+) or minus (-) sign to show relative
position of a credit within the rating category.
B-23
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
a(i). Amended and Restated Agreement and Declaration of Trust of
Registrant.(C)
a(ii). Amendment to Amended and Restated Agreement and Declaration of Trust
of Registrant dated February 26, 1999.(C)
b. Copy of By-Laws of Registrant as amended through July 22, 1997.(B)
c(i). Specimen Share Certificate.(A)
c(ii). Portions of Amended and Restated Agreement and Declaration of Trust
Relating to Shareholders' Rights.(C)
c(iii). Portions of By-laws Relating to Shareholders' Rights.(C)
d(i). Form of Investment Advisory Agreement between RS Investment
Management, L.P. and Registration behalf of RS Venture Technology
Fund.*
e. Distribution Agreement with Provident Distributors, Inc.(C)
f. Inapplicable.
g(i). Form of Custodian Services Agreement between Registrant and PFPC
Trust Company.(C)
h(i). Administrative Services Agreement with RS Investment Management,
L.P.(C)
h(ii) Form of Revised Schedule A to Administrative Services Agreement.*
i. Opinion of Fund Counsel.*
j. Inapplicable.
k. Inapplicable.
l. Inapplicable.
m(i). Distribution Plan Pursuant to Rule 12b-1 dated September 30, 1997.(B)
m(ii) Form of Revised Schedule A to Distribution Plan.*
n. Inapplicable.
o. Inapplicable.
Incorporated by a reference to like-numbered exhibits:
(A) Previously filed as part of the Registration Statement filed
August 12, 1987.
(B) Previously filed as part of the Post-Effective Amendment No. 30
to the Registration Statement on December 29, 1997.
<PAGE>
(C) Previously filed as part of the Post. Effective Amendment No.34
to the Registration Statement on March 4, 1999.
* Filed herewith.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not Applicable.
ITEM 25. INDEMNIFICATION.
Under the terms of Registrant's By-laws, Article VI, Registrant is required,
subject to certain exceptions and limitations, to indemnify and insure its
trustees, officers, employees, agents and other persons who may be indemnified
by Registrant under the Investment Company Act of 1940 (the "1940 Act").
Insofar as indemnification for liabilities arising under the Securities Act is
permitted to trustees and officers and controlling persons of Registrant
pursuant to the foregoing provisions, or otherwise, Registrant has been advised
that in the opinion of the Securities and Exchange Commission, such
indemnification by Registrant is against public policy as expressed in the
Securities Act, and therefore may be unenforceable. In the event that a claim
for such indemnification (except insofar as it provides for the payment by
Registrant of expenses incurred or paid by a trustee, officer or controlling
person in the successful defense of any action, suit or proceeding) is asserted
against Registrant by any trustee, officer or controlling person and the
Securities and Exchange Commission is still of the same opinion, Registrant
will, unless in the opinion of its counsel the matter has been settled by a
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act, and will be governed by the final adjudication
of such issue.
The Trust, at its expense, provides liability insurance for the benefit of its
Trustees and officers.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
RS Investment Management, L.P. (formerly Robertson, Stephens & Company
Investment Management, L.P.) (RSIM, L.P.) is engaged in the provision of
investment advisory and management services to mutual funds, private investment
pools (including hedge funds), and private accounts.
Information about the managing directors of RSIM, L.P. is set forth in Parts A
and B herein.
Paul H. Stevens, a managing director of RSIM, L.P., was previously a founding
partner, managing director, and chief investment officer of Robertson, Stephens
& Company LLC (now BancBoston Robertson Stephens).
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) Provident Distributors, Inc., the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies, including the Registrant: Pacific Horizon Funds, Inc., Time
Horizon Funds, World Horizon Funds, Inc., Pacific Innovations Trust,
International Dollar Reserve Fund I, Ltd., Municipal Fund for Temporary
Investment, Municipal Fund for New York Investors, Inc., Municipal Fund for
California Investors, Inc., Temporary Investment Fund, Inc., Trust for
Federal Securities, Columbia Common Stock Fund, Inc., Columbia Growth Fund,
Inc., Columbia International Stock Fund, Inc., Columbia Special Fund, Inc.,
Columbia Small Cap Fund, Inc., Columbia Real Estate Equity Fund, Inc.,
Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S.
Government Securities Fund, Inc., Columbia Fixed Income Securities Fund,
Inc., Columbia Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc.,
WT Mutual Fund, Kalmar Pooled Investment Trust, The RBB Fund, Inc., RS
Investment Trust, Hilliard- Lyons Government Fund, Inc., Hilliard-Lyons
Growth Fund, Inc., The Rodney Square Fund, Inc., The Rodney Square Tax-
Exempt Fund, Inc., The Rodney Square Strategic Equity Fund, Inc., The
Rodney Square Strategic Fixed-Income Fund, Inc., The
<PAGE>
BlackRock Funds, Inc. (distributed by BlackRock Distributors, Inc., a
wholly owned subsidiary of Provident Distributors, Inc.), The OffitBank
Investment Fund, Inc. (distributed by Offit Funds Distributor, Inc., a
wholly owned subsidiary of Provident Distributors, Inc.), The OffitBank
Variable Insurance Fund, Inc. (distributed by Offit Funds Distributor,
Inc., a wholly owned subsidiary of Provident Distributors, Inc.) and CVO
Greater China Fund, Inc. (distributed by Offit Funds Distributor, Inc., a
wholly owned subsidiary of Provident Distributors, Inc.).
(b) For information as to the business, profession, vocation or employment of a
substantial nature of each of the Distributor, its officers and partners,
reference is made to the Form BD filed by the Distributor (File No.
8-46564), which is incorporated by reference herein.
(c) Inapplicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The records required by Section 31(a) and Rule 31a-1 through 3 under the 1940
Act will be maintained by Registrant at its offices, 388 Market Street, Suite
200, San Francisco, CA 94111 except that pursuant to Rule 31a-3 under the 1940
Act, the Transfer Agent (located at 1004 Baltimore, Kansas City, MO 64105) and
Custodian (located at Airport Business Center, International Court 2, 200
Stevens Drive, Lester, Pennsylvania 19113) for Registrant, will maintain the
records required by subparagraphs (b)(1) and (b)(2)(D) of Rule 31a-1.
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. UNDERTAKINGS.
The Registrant has made the following undertakings which are still
applicable:
(a) Registrant has undertaken to comply with Section 16(a) of the Investment
Company Act of 1940, as amended, which requires the prompt convening of a
meeting of shareholders to elect trustees to fill existing vacancies in the
Registrant's Board of Trustees in the event that less than a majority of
the trustees have been elected to such position by shareholders. Registrant
has also undertaken to promptly call a meeting of shareholders for the
purpose of voting upon the question of removal of any Trustee or Trustees
when requested in writing to do so by the record holders of not less than
10 percent of the Registrant's outstanding shares and to assist its
shareholders in communicating with other shareholders in accordance with
the requirements of Section 16(c) of the Investment Company Act of 1940, as
amended.
(b) Registrant undertakes to file a post-effective amendment containing
financial statements (that need not be certified) as to RS Internet Age
Fund within four to six months following the effective date of this
amendment.
(c) Registrant has undertaken to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders when available, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company of 1940, the Registrant, RS Investment Trust, has duly caused this
Amendment to be signed on behalf of the undersigned, thereunto duly authorized,
in the City and County of San Francisco and State of California, on the 5th of
October, 1999.
RS INVESTMENT TRUST
By: /s/ G. Randall Hecht
--------------------------------------
President and Principal Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below, on October 5, 1999, by the
following persons in the capacities indicated.
SIGNATURE CAPACITY
/s/G. RANDALL HECHT Principal Executive Officer
- ------------------------ and Trustee
G. Randall Hecht
/s/STEVEN COHEN Treasurer
- ------------------------
Steven Cohen
LEONARD B. AUERBACH* Trustee
- ------------------------
Leonard B. Auerbach
JOHN W. GLYNN, Jr.* Trustee
- ------------------------
John W. Glynn, Jr.
JAMES K. PETERSON* Trustee
- ------------------------
James K. Peterson
*BY /s/ G. RANDALL HECHT
- ------------------------
G. RANDALL HECHT, ATTORNEY-IN-FACT PURSUANT
TO THE POWERS OF ATTORNEY PREVIOUSLY FILED.
<PAGE>
EXHIBIT INDEX
Exhibit No. Title
- ----------- -----
d(i). Form of Investment Advisory Agreement between RS Investment
Management, L.P. and Registrant (on behalf of RS Internet
Age Fund).
h(i). Form of Revised Schedule A to Administrative Services
Agreement.
i. Opinion of Fund Counsel.
m(ii). Form of Revised Schedule A to Distribution Plan.
<PAGE>
RS INTERNET AGE FUND
INVESTMENT ADVISORY AGREEMENT
This INVESTMENT ADVISORY AGREEMENT ("Agreement") is made as of the ____ day
of __________, 1999, by and between RS INVESTMENT TRUST, a business trust
organized and existing under the laws of the Commonwealth of Massachusetts (the
"Trust"), with respect to its series of shares known as RS INTERNET AGE FUND
(the "Fund"), and RS INVESTMENT MANAGEMENT, L.P. (the "Adviser")
W I T N E S S E T H :
WHEREAS, the Trust is an open-end, management investment company,
registered as such under the Investment Company Act of 1940, as amended
(the "Act"); and
WHEREAS, the Trust desires to retain the Adviser to render advice and
services to the Trust and Fund pursuant to the terms and provisions of this
Agreement, and the Adviser is interested in furnishing said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual
promises hereinafter set forth, the parties hereto mutually agree as follows:
1. EMPLOYMENT OF ADVISER. (a) The Trust hereby employs the
Adviser, and the Adviser hereby accepts such employment, to render investment
advice and investment management services with respect to the assets of the
Fund, consistent with the investment objective and policies of the Fund and
subject to the supervision and direction of the Trust's Board of Trustees. The
Adviser shall, except as otherwise provided for herein, as part of its duties
hereunder, (i) furnish the Trust with investment advice, research and
recommendations with respect to the investment of the Fund's assets and the
purchase and sale of its portfolio securities, including the taking of such
other steps as may be necessary to implement such advice and recommendations,
(ii) furnish the Trust and Fund with reports, statements and other data on
securities, economic conditions and other pertinent subjects in respect of the
investment management of the Fund which the Trust's Board of Trustees may
request, and (iii) in general superintend and manage the investments of the
Fund, subject to the ultimate supervision and direction of the Trust's Board of
Trustees.
(b) The Adviser shall determine the securities to be purchased
or sold by the Fund and will place orders pursuant to its determinations with or
through such persons, brokers or dealers in conformity with the policy with
respect to brokerage as set forth in the Trust's Registration Statement and the
Fund's Prospectus and Statement of Additional Information or as the Trustees may
direct from time to time.
(c) In all matters relating to the performance of this
Agreement, the Adviser will act in conformity with the Trust's Declaration of
Trust, By-Laws and Registration Statement, the Fund's current Prospectus and
Statement of Additional Information and all procedures adopted by the Trust's
Board of Trustees from time to time, and will conform to and comply with all
applicable requirements of the Investment Company Act of 1940, as amended, the
rules and regulations thereunder, and all other applicable Federal or state laws
and regulations.
<PAGE>
2. SUB-ADVISERS AND CONSULTANTS. The Adviser may from time to
time, in its discretion, delegate certain of its responsibilities under this
Agreement to one or more qualified companies, each of which is registered under
the Investment Advisers Act of 1940, as amended, provided that the separate
costs of employing such companies and of the companies themselves are borne by
the Adviser and not by the Fund.
3. ADVISER IS INDEPENDENT CONTRACTOR. The Adviser shall, for all
purposes herein, be deemed to be an independent contractor, and shall, unless
otherwise expressly provided and authorized, have no authority to act for or
represent the Trust or Fund in any way, or in any way be deemed an agent for the
Trust or Fund. It is expressly understood and agreed that the services to be
rendered by the Adviser to the Trust and Fund under the provisions of this
Agreement are not to be deemed exclusive, and the Adviser shall be free to
render similar or different services to others so long as its ability to render
the services provided for in this Agreement shall not be impaired thereby.
4. RESPONSIBILITIES AND PERSONNEL OF ADVISER. The Adviser agrees to
use its best efforts in the furnishing of investment advice, research and
recommendations to the Fund, in the preparation of reports and information, and
in the management of the Fund's assets, all pursuant to this Agreement, and for
this purpose the Adviser shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as it shall
from time to time determine to be necessary to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Adviser shall be deemed to include
persons employed or retained by the Adviser to furnish statistical, research,
and other factual information, advice regarding economic factors and trends,
information with respect to technical and scientific developments, and such
other information, advice and assistance as the Adviser may desire and request.
5. FURNISHING OF STATEMENTS AND REPORTS. The Trust shall from time
to time furnish to the Adviser detailed statements of the portfolio investments
and assets of the Fund and information as to its investment objectives and
needs, and shall make available to the Adviser such financial reports, business
descriptions and plans, proxy statements, legal and other information relating
to its investments as may be in the possession of the Trust or available to it
and such other information as the Adviser may reasonably request.
6. EXPENSES OF EACH PARTY. (a) The Adviser shall bear all
expenses in connection with the performance of its services under this
Agreement. The Adviser shall also pay (i) all compensation, if any, to the
executive officers of the Fund and their related expenses and (ii) all
compensation, if any, and out-of-pocket expenses of the Trust's trustees, who
are "interested persons" of the Trust (as defined in the Act).
(b) The Trust shall bear all expenses of the Fund's
organization, operations, and business not specifically assumed or agreed to be
paid by the Adviser as provided in this Agreement. In particular, but without
limiting the generality of the foregoing, the Trust on behalf of the Fund and
out of its assets shall pay:
(A) CUSTODY AND ACCOUNTING SERVICES. All expenses of the
transfer, receipt, safekeeping, servicing and accounting for the cash,
securities, and other property of the Fund, including all charges of
depositories, custodians, and other agents, if any;
(B) SHAREHOLDER SERVICING. All expenses of maintaining and
servicing shareholder accounts, including all charges for transfer,
shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Fund;
-2-
<PAGE>
(C) BOOKS AND RECORDS. All costs and expenses associated with
the maintenance of the Fund's books of account and records as
required by the Act;
(D) SHAREHOLDER MEETINGS. All fees and expenses incidental to
holding meetings of shareholders, including the printing of notices
and proxy material, and proxy solicitation therefor, provided that the
Adviser shall be responsible for and assume all expenses and fees with
respect to meetings of the Fund's shareholders held solely for the
benefit of the Adviser;
(E) PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION. All
expenses of preparing and printing of annual or more frequent
revisions of the Prospectus and Statement of Additional Information
relating to the offering of the Fund's shares and of mailing them to
shareholders;
(F) PRICING. All expenses of computing the Fund's net asset
value per share, including the cost of any equipment or services used
for obtaining price quotations;
(G) COMMUNICATION EQUIPMENT. All charges for equipment or
services used for communication between the Adviser or the Trust and
the custodian, transfer agent or any other agent selected by the
Trust;
(H) LEGAL AND ACCOUNTING FEES AND EXPENSES. All charges for
services and expenses of the Trust's legal counsel and independent
auditors for the benefit of the Trust;
(I) TRUSTEES' FEES AND EXPENSES. All compensation of trustees,
other than those who are interested persons of or affiliated with the
Adviser, and all expenses incurred in connection with their service
and meetings;
(J) FEDERAL REGISTRATION FEES. All fees and expenses of
registering and maintaining the registration of the Trust under the
Act and the registration of Fund shares under the Securities Act of
1933, as amended (the "1933 Act"), including all fees and expenses
incurred in connection with the preparation, printing and filing of
any registration statement, Prospectus and Statement of Additional
Information under the 1933 Act or the Act, and any amendments or
supplements thereto that may be made from time to time;
(K) STATE REGISTRATION FEES. All fees and expenses (including
the compensation of personnel who may be employed by the Adviser or an
affiliate) of qualifying and maintaining qualification of the Trust
and of the Fund shares for sale under securities laws of various
states or jurisdictions, and of registration and qualification of the
Trust under all other laws applicable to the Trust or its business
activities (including registering the Trust as a broker-dealer, or any
officer of the Trust or any person as agent or salesman of the Trust
in any state);
(L) ISSUE AND REDEMPTION OF TRUST SHARES. All expenses incurred
in connection with the issue, redemption, and transfer of Fund shares,
including the expense of confirming all Fund share transactions, and
of preparing and transmitting the Fund's share certificates;
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<PAGE>
(M) BONDING AND INSURANCE. All expenses of bond, liability, and
other insurance coverage required by law or deemed advisable by the
Board of Trustees;
(N) BROKERAGE COMMISSIONS. All brokerage commissions and
other charges incident to the purchase, sale, or lending of the Fund's
portfolio securities;
(O) TAXES. All taxes or governmental fees payable by or in
respect of the Trust or Fund to federal, state, or other governmental
agencies, domestic or foreign, including stamp or other transfer
taxes;
(P) TRADE ASSOCIATION FEES. All fees, dues, and other expenses
incurred in connection with the Trust's membership in any trade
association or other investment organization;
(Q) INTEREST. All interest which may accrue and be payable as
a result of the Fund's activities;
(R) STATIONERY AND POSTAGE. The cost of all stationery and
postage required by the Fund, unless otherwise payable by another
party with respect to an activity or expense referred to above; and
(S) NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring
expenses as may arise, including the costs of actions, suits, or
proceedings to which the Trust on behalf of the Fund is a party and
the expenses the Trust on behalf of the Fund may incur as a result of
its legal obligation to provide indemnification to its officers,
trustees, and agents.
(c) In the event that the Trust offers other series of its
shares in the future, then the Fund shall only be responsible for expenses
directly attributable to it and its operations and for such other costs and
expenses of the Trust as the Board of Trustees may by resolution or otherwise
direct.
7. REIMBURSEMENT FOR ADVANCED COSTS AND EXPENSES. To the extent the
Adviser incurs any costs or performs any services which are an obligation of the
Trust or Fund, as set forth herein, the Trust on behalf of the Fund and out of
the Fund's assets shall promptly reimburse the Adviser for such costs and
expenses. To the extent the services for which the Fund is obligated to pay are
performed by the Adviser, the Adviser shall be entitled to recover from the Fund
only to the extent of its actual costs for such services.
8. FEES. (a) The Trust on behalf of the Fund and out of the Fund's
assets agrees to pay to the Adviser, and the Adviser agrees to accept, as full
compensation for all services furnished or provided to the Trust and Fund
hereunder, and as full reimbursement for all expenses assumed by the Adviser, a
management fee computed at the rate of 1.25% per annum of the average daily net
assets of the Fund.
(b) The management fee shall be accrued daily during each month
by the Trust on behalf of the Fund and paid to the Adviser on the first business
day of the succeeding month. The initial monthly fee under this Agreement shall
be payable on the first business day of the first month following the effective
date of this Agreement. The fee to the Adviser shall be prorated for the portion
of any month in which this Agreement is in effect which is not a complete month
according to the proportion which the number of calendar days in the month
during which the Agreement is in effect
-4-
<PAGE>
bears to the calendar days in the month. If this Agreement is terminated prior
to the end of any month, the fee to the Adviser shall be payable within ten (10)
days after the date of termination.
(c) The Adviser may reduce or waive any portion of the
compensation due to it hereunder, or for reimbursement of expenses by the Trust
pursuant to Paragraph 7 of this Agreement, and any such reduction or waiver
shall be applicable only with respect to the specific items waived and shall not
constitute a waiver of any future compensation or reimbursement due to the
Adviser hereunder. In the event that expenses of the Fund for any fiscal year
should exceed the expense limitation on investment company expenses imposed by
any statute or regulatory authority of any jurisdiction in which shares of the
Fund are qualified for offer or sale, the compensation due the Adviser for such
fiscal year shall be reduced by the amount of such excess by a reduction or
refund thereof, or by the Adviser's assumption of expenses of the Fund. Any fee
withheld pursuant to this paragraph from the Adviser (including by way of the
assumption of expenses by the Adviser) shall be reimbursed by the Trust to the
Adviser in the first fiscal year or the second fiscal year next succeeding the
fiscal year of the withholding to the extent permitted by the applicable state
law to the extent the expenses of the Fund for the next succeeding fiscal year
or second succeeding fiscal year do not exceed any such expense limitation in
effect at the time, or any more restrictive limitation to which the Adviser has
agreed.
(d) The Adviser may agree not to require payment of any portion
of the compensation or reimbursement of expenses otherwise due to it pursuant to
this Agreement prior to the time such compensation or reimbursement has accrued
as a liability of the Trust. Any such agreement shall be applicable only with
respect to the specific items covered thereby and shall not constitute an
agreement not to require payment of any future compensation or reimbursement due
to the Adviser hereunder.
9. SHORT POSITIONS IN FUND'S SHARES. The Adviser agrees that
neither it nor any of its officers or employees shall take any short position in
the shares of the Fund. This prohibition shall not prevent the purchase of such
shares by any of the officers and Trustees or employees of the Adviser or any
trust, pension, profit-sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof at the
time of purchase, as allowed pursuant to rules promulgated under the Act.
10. RELATIONSHIP TO PROVISIONS OF AGREEMENT AND DECLARATION OF
TRUST. Nothing herein contained shall be deemed to require the Trust to take any
action contrary to its Agreement and Declaration of Trust or any applicable
statute or regulation, or to relieve or deprive the Board of Trustees of the
Trust of its responsibility for and control of the conduct of the affairs of the
Trust and Fund.
11. DUTIES AND STANDARDS OF CARE. (a) In the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard of obligations
or duties hereunder on the part of the Adviser, the Adviser shall not be subject
to liability to the Fund or to any shareholder of the Fund for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security by the Fund.
(b) No provision of this Agreement shall be construed to protect
any Trustee or officer of the Trust or director or officer of the Adviser from
liability in violation of Sections 17(h) and (i) of the Act.
(c) A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this
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<PAGE>
Agreement is executed on behalf of the Trustees of the Trust as Trustees, and
not individually, and that the obligations arising out of this Agreement are not
binding upon the Trustees or holders of the Trust's shares individually but are
binding only upon the assets and property of the Fund. The Adviser acknowledges
that it has received notice of and accepts the limitations of liability as set
forth in the Agreement and Declaration of Trust of the Trust. The Adviser agrees
that the Trust's obligations hereunder shall be limited to the Fund and to its
assets, and that the Adviser or any affiliated or related party shall not seek
satisfaction of any such obligation from any shareholder of the Fund nor from
any trustee, officer, employee or agent of the Trust.
12. TERM AND RENEWAL. This Agreement shall remain in effect for a
period of two (2) years, unless sooner terminated in accordance with Paragraph
13 hereof, and shall continue in effect from year to year thereafter so long as
such continuation is approved at least annually by (i) the Board of Trustees of
the Trust or by the vote of a majority of the outstanding voting securities of
the Fund, and (ii) the vote of a majority of the Trustees of the Trust who are
not parties to this Agreement or interested persons of any such party, cast in
person at a meeting for the purpose of voting on such approval.
13. TERMINATION. This Agreement may be terminated at any time,
without payment of any penalty, by the Board of Trustees of the Trust or by a
vote of a majority of its outstanding voting securities, upon sixty (60) days'
written notice to the Adviser, and by the Adviser upon sixty (60) days' written
notice to the Trust. This Agreement shall also terminate in the event of any
transfer or assignment thereof, as defined in the Act.
14. CERTAIN DEFINITIONS. The terms "majority of the outstanding
voting securities" of the Trust or Fund and "interested persons" shall have the
meanings as set forth in the Act. The term "net assets" shall have the meaning
and shall be calculated as set forth in the Trust's Registration Statement from
time to time.
15. SEVERABILITY. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule, or otherwise, the
remainder of this Agreement shall not be affected thereby.
16. HEADINGS. The headings used herein are for convenience and ease
of reference only. No legal effect is intended, nor is to be derived from such
headings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested by their duly authorized officers, all as of the
day and year first above written.
RS INVESTMENT TRUST
-----------------
President
RS INVESTMENT MANAGEMENT, L.P.
By:
-----------------
General Partner
-----------------
President
-6-
<PAGE>
SCHEDULE A
November ___, 1999
RS Diversified Growth
RS Growth & Income Fund
The Information Age Fund-TM-
RS MicroCap Growth Fund
RS Global Natural Resources Fund
RS Internet Age Fund
<PAGE>
ROPE & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110-2624
October 7, 1999
RS Investment Trust
388 Market Street
San Francisco, California 94104
Ladies and Gentlemen:
We are furnishing this opinion in connection with Post-Effective Amendment
No. 36 to the Registration Statement on form N-1A of RS Investment Trust (the
"Trust") for the registration of an indefinite number of shares of beneficial
interest (the "Shares") of RS Internet Age Fund (the "Fund").
In connection with this opinion, we have examined:
1. A copy of the Agreement and Declaration of Trust of the Trust, dated
May 11, 1987 certified by the Secretary of the Trust.
2. A copy of the Amended and Restated Agreement and Declaration of Trust
of the Trust, dated June 3, 1987 certified by the Secretary of State
of The Commonwealth of Massachusetts.
3. A Certificate of Amendment of Agreement and Declaration of Trust dated
October 15, 1990, certified by the Secretary of State of The
Commonwealth of Massachusetts.
4. A Certificate of Amendment of Agreement and Declaration of Trust dated
March 10, 1992, certified by the Secretary of State of The
Commonwealth of Massachusetts.
5. A Certificate of Amendment of Agreement and Declaration of Trust dated
December 1, 1994, certified by the Secretary of State of The
Commonwealth of Massachusetts.
6. A copy of the Amended and Restated Agreement and Declaration of Trust
of the Trust, dated March 13, 1997, and evidence of the filing thereof
with the Secretary of State of The Commonwealth of Massachusetts.
7. A copy of an Amendment to the Amended and Restated Agreement and
Declaration of Trust, dated February 26, 1999, and evidence of the
filing thereof with the Secretary of State of The Commonwealth of
Massachusetts.
8. A copy of the By-Laws of the Trust.
9. Such other certificates, documents, and records as we have deemed
necessary for the purpose of this opinion.
<PAGE>
We are familiar with the action taken by the Board of Trustees of the Trust
to authorize the issuance of the Shares. We assume that appropriate action has
been taken to register or qualify the sale of the Shares under any applicable
state and federal laws regulating offerings and sales of securities. We have
also assumed that each of the Shares will be sold for the consideration
described in the Registration Statement of the Trust on Form N-1A, as amended to
the date of such sale, and that such consideration will in each event be at
least equal to the net asset value per Share of such Shares.
We were not involved in the organization of the Trust, and understand that
in connection with the filing of the original registration statement of the
Trust under the Securities Act of 1933, as amended, you received an opinion of
other Massachusetts counsel to the effect that the Trust is an entity of the
type commonly known as a "Massachusetts business trust". We have not examined
independently the question of what law would govern the interpretation or
enforcement of any provision of the Agreement and Declaration of Trust and have
for this purpose assumed that the Trust is a duly established and validly
existing unincorporated voluntary association with transferable shares under
Massachusetts law (commonly known as a "Massachusetts business trust") and that
the interpretation and enforcement of each provision of the Agreement and
Declaration of Trust will be governed by the laws of The Commonwealth of
Massachusetts.
We have made such examination of Massachusetts law as we have deemed
relevant for purposes of this opinion. We express no opinion as to the effect of
laws, rules, and regulations of any state or jurisdiction other than The
Commonwealth of Massachusetts.
Based upon and subject to the foregoing, we are of the opinion that the
Trust is authorized to issue an unlimited number of Shares of the Fund, and
that, when the Shares are issued and sold on the terms described in the
Registration Statement, such Shares will be validly issued, fully paid, and
nonassessable by the Trust.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the
obligations of the trust. However, the Agreement and Declaration of Trust
disclaims liability of any shareholder for payment under any credit, contract,
or claim against the Trust or any series of the Trust. The Agreement and
Declaration of Trust provides for indemnification by the Trust of any
shareholder or former shareholder held liable solely by reason of his or her
being or having been a shareholder and not because of his or her acts or
omissions or for some other reason. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Trust itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE>
EXHIBIT A
to the
Shareholder Service Plan
RS INVESTMENT TRUST
Shares of the following Funds:
<TABLE>
<S><C>
The Asia Fund The Contrarian Fund -TM- Developing Countries Fund
Diversified Growth Fund The Emerging Growth Fund Global Low-Priced Stock Fund
Global Natural Resources Fund Global Value Fund Growth & Income Fund
Information Age Fund -TM- International Fund International Investors Fund
50/500 Fund Large Capitalization Value Fund MicroCap Growth Fund
Partners Fund Value + Growth Fund Large Capitalization Equity Income Fund
RS Internet Age Fund
</TABLE>
This Plan is adopted by Robertson Stephens Investment Trust with
respect to the Classes of shares of the Funds set forth above.
Witness the due execution hereof this ____ day of _______, 199_.
RS INVESTMENT TRUST
By:
------------------------
