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As filed with the Securities and Exchange Commission on January 9, 2001
Registration No. 33-16439
811-5159
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
/X/ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO.40 /X/
and
/X/ REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 42 /X/
RS 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, ESQ.
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 RS MONEY MARKET FUND, AND,
EXCEPT AS TO PART C, DOES NOT AMEND OR SUPERSEDE ANY PORTION OF THE
REGISTRATION STATEMENT RELATING TO ANY OTHER SERIES OF THE REGISTRANT.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 9, 2001
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 IN 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 January ___, 2001
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RS MONEY MARKET FUND
The RS MONEY MARKET Fund is a money market fund. The Fund seeks to
provide current income and to preserve capital.
The RS MONEY MARKET 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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SUMMARY INFORMATION
OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES, AND PRINCIPAL RISKS.
-- INVESTMENT OBJECTIVE. To seek a high level of income consistent with
liquidity and the preservation of capital.
-- PRINCIPAL INVESTMENT STRATEGIES. The Fund invests in high-quality,
short-term government, bank and corporate debt. Short-term securities
have a remaining maturity of 397 days or less. The Fund will maintain
a dollar-weighted average portfolio maturity of 90 days or less.
The Fund invests all of its assets in a Master Portfolio that has an
investment objective and investment policies that are substantially
similar to those of the Fund. For simplicity's sake, all discussion of
investment objectives, strategies, and risks of the Fund refer also to
the objectives, strategies, and risks of that Master Portfolio, unless
otherwise indicated. A description of the relationship of the Fund to
the Master Portfolio appears under the heading "Master/Feeder Mutual
Fund Structure," below.
-- PRINCIPAL RISKS.
-- The values of the short-term securities in which the Fund invests
may fall because of an increase in interest rates. Increasing
interest rates reduce the value of debt securities generally,
even the values of debt securities issued by the U.S. government.
-- The values of individual securities held by the Fund may fall with
the decline in a borrower's real or apparent ability to meet its
financial obligations.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY
INVESTING IN THE FUND.
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
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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* .10%
Distribution (12b-1) Fees .25%
Other Expenses* .29%
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Total Annual Fund
Operating Expenses* .64%
Fee Waiver and/or
Expense Limitation(1) .04%
Net Expenses*(1) .60%
</TABLE>
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* Reflecting the expenses of both the Fund and the Master Portfolio in which
it invests.
(1) NET EXPENSES SHOW THE EFFECT OF AN EXPENSE LIMITATION IN EFFECT THROUGH
DECEMBER 31, 2001 ON TOTAL ANNUAL FUND OPERATING EXPENSES. THE EXPENSE
LIMITATION IS IMPOSED PURSUANT TO A WRITTEN AGREEMENT BETWEEN RS INVESTMENT
MANAGEMENT ("RSIM") AND THE TRUST AND EXPENSES BORNE BY RSIM UNDER THIS
AGREEMENT MAY BE REIMBURSED BY THE FUND IN SUBSEQUENT YEARS.
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:
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<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
RS MONEY MARKET Fund $61 $192
</TABLE>
PRINCIPAL INVESTMENTS
The Fund invests in fixed rate, floating rate, and variable rate debt securities
that meet the following requirements:
- They have remaining maturities of 397 days (about 13 months)
or less.
- They rank in the top two quality short-term categories,
according to credit rating agencies such as Moody's Investors
Services or Standard & Poor's Corp.
- If the securities are unrated, the investment adviser must
have determined that their credit compares with the credit of
the rated securities the Fund is permitted to buy.
- The principal and interest of all securities must be payable
in US dollars.
The Fund's investments may include:
- FLOATING RATE and VARIABLE RATE OBLIGATIONS, which are debt
instruments with interest rates that are adjusted either on a schedule
or when an index or benchmark changes.
- US AND FOREIGN GOVERNMENT DEBT, including the debt of agencies and
instrumentalities, such as Fannie Mae and the Student Loan Marketing
Association.
- US AND FOREIGN BANK OBLIGATIONS, which are obligations backed by
funds of a financial institution. In addition to domestic bank
obligations, the Fund may invest in obligations of foreign bank
branches located inside and outside the United States and US bank
branches located outside the United States.
- CORPORATE OBLIGATIONS, including unsecured debt instruments, such as
commercial paper and corporate notes, issued by financial institutions,
insurance companies, and industrial corporations.
- REPURCHASE AGREEMENTS, obligating a seller of US government or other
high-quality securities to buy them back from the Fund within a
specified period of time at an agreed-upon price.
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- ASSET-BACKED SECURITIES, which are financial instruments
collateralized by one or more types of assets, including loans and
receivables.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER. The Fund is a feeder fund that invests all of its
assets in The Money Market Master Portfolio (the "Master Portfolio"), a series
of Master Investment Portfolio which has substantially similar investment
objectives, strategies, and policies to those of the Fund. Barclays Global Fund
Advisors ("BGFA") provides investment guidance and policy direction for the
Master Portfolio. For its services to the Master Portfolio, BGFA is entitled to
receive an annual fee of 0.10% of the Master Portfolio's average daily net
assets.
BGFA is located at 45 Fremont Street, San Francisco, California
94105. It is a wholly owned subsidiary of Barclays Global Investors, N.A.
("BGI"), which in turn is an indirect subsidiary of Barclays Bank PLC. As of
June 30, 2000, BGI and its affiliates, including BGFA, provided investment
advisory services for assets worth in excess of $833 billion.
The Fund has entered into an Investment Advisory Agreement with RS
Investment Management, L.P. ("RS Investment Management"), 388 Market Street,
Suite 200, San Francisco, CA 94111, pursuant to which RSIM would manage the
Fund's assets directly in the event that the Fund were to cease investing
substantially all of its assets in the Master Portfolio. Under that Agreement,
the Fund would pay fees to RS Investment Management monthly at the annual rate
of 0.10% of the Fund's average daily net asset value. RS Investment Management
will not receive any fees under that agreement so long as the Fund continues to
invest substantially all of its assets in the Master Portfolio or in another
investment company. RS Investment Management is a California limited partnership
that was formed in 1993.
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 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 currently payable by the Fund
under the Agreement.
HOW THE FUND'S SHARES ARE PRICED
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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 the
close of regular trading (normally 4 p.m. Eastern Time) every day the New
York Stock Exchange is open. The Master Portfolio's shares are priced using
the amortized cost method to account for any premiums or discounts above or
below the face value of the securities it buys. The amortized cost method
marks down any premium, or marks up any discount, on short-term debt that the
Fund buys at a constant rate until maturity. It does not reflect daily
fluctuations in market value.
The Fund seeks to maintain a constant price of $1 per share, although it can
offer no assurance that it will do so.
The price at which a purchase or redemption is made is based on the next
calculation of net asset value after the order is placed.
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.
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), including amounts invested in other RS Funds. 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: National Financial Data
Services, P.O. Box 219717, Kansas City, MO 64121-9717.
BY OVERNIGHT MAIL: Send the information described above to: 330 West 9th
Street, First Floor, Kansas City, MO 64105-1514.
BY WIRE:
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(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
225 Franklin Street
Boston, MA 02110
Credit: RS MONEY MARKET Fund
For further credit:
---------------------------------
(Shareholder's name)
---------------------------------
(Shareholder's account #)
(3) At the same time, you MUST mail a completed and signed Application to:
National Financial Data Services, P.O. Box 219717, Kansas City, MO
64121-9717. 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 PFPC Distributors, Inc. (the "Distributor"), 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
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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.
OTHER INFORMATION ABOUT PURCHASING SHARES
An order will not be accepted until the Fund has received payment of
the purchase price in Federal funds. If you pay by check, please keep in mind
that it may take a number of days before your check clears and the Fund receives
Federal funds.
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
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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 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.
You may in the future be able to initiate many transactions
electronically. Neither the Fund nor the Transfer Agent will be responsible for
any losses resulting from unauthorized transactions if they follow reasonable
security procedures designed to verify the identity of the
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investor. The Transfer Agent may request personalized security codes or other
information. For transactions conducted through the Internet, RSIM recommends
the use of an Internet browser with 128-bit encryption. If you do not want
the ability to sell and exchange by Internet, call RSIM for instructions.
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 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
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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 1-800-766-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 is 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.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares dividends daily and pays them out on a monthly basis to
investors. It distributes capital gains, if any, to investors annually. It
automatically reinvests dividends and distributions, acquiring additional shares
at net asset value.
You begin earning dividends on your shares the day your purchase order takes
effect. You continue earning daily dividends on the shares up to but not
including the date you sell them.
PLEASE NOTE:
-- The Fund credits dividends earned on weekends and holidays to the
preceding business day.
-- If you sell shares before the monthly dividend payment date, the Fund
remits to the investor any dividends declared but not yet paid to the
investor on the next dividend payment date.
-- If you sell all shares before the monthly dividend payment date, the
Fund remits to the investor all dividends accrued with the sale
proceeds.
TAXES
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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 any
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
whether received in cash or in shares through the reinvestment of
distributions. The Fund does not expect to distribute gains taxable as
capital gains, which would be subject to different tax treatment as described
in the Statement of Additional Information. 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 tax at the regular or capital gains rate, 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.
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
PFPC Distributors, Inc. (the "Distributor") is the principal
underwriter of the Fund's shares. To compensate the Distributor 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 the Distributor under a
Distribution Plan adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940. Under the Plan, the Fund pays the Distributor compensation, accrued
daily and paid monthly, at the annual rate of 0.25% of the Fund's average daily
net assets. The Distributor 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
the Distributor in respect of the promotion of the shares of the Fund. In return
for those services, the Distributor pays to RS Investment Management or those
affiliates a portion of the payments received by the Distributor under the
Distribution Plan.
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RS Investment Management and its affiliates or the Distributor, 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.
MASTER/FEEDER MUTUAL FUND STRUCTURE
The Fund invests all of its assets in a separate mutual fund, called a Master
Portfolio, that has a substantially similar investment objective as the Fund.
Barclays Global Fund Advisors serves as investment adviser to the Master
Portfolio. The Master Portfolio may accept investments from other feeder funds.
FEEDER FUND EXPENSES. The feeders bear the Master Portfolio's expenses in
proportion to the amount of assets each invests in the Fund. Each feeder can set
its own transaction minimums, fund-specific expenses, and conditions.
FEEDER FUND RIGHTS. Under the master/feeder structure, the Fund's Board of
Trustees retains the right to withdraw the Fund's assets from the Master
Portfolio if it believes doing so is in the Fund's or the shareholders' best
interests. If the Fund's Board of Trustees were to withdraw the Fund's
assets, it would then consider whether to invest in another master portfolio,
implement the investment advisory agreement between the Trust and RS
Investment Management, or take other action.
ADDITIONAL INFORMATION
The Trust's Statement of Additional Information ("SAI") for the Fund
dated January ___, 2001 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.
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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
[LOGO]
RS MONEY MARKET FUND
----------------
RS INVESTMENT TRUST
----------------
PROSPECTUS
----------------
January ___, 2001
Investment Company Act File No. 811-05159
-15-
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
RS INVESTMENT TRUST
<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 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 JANUARY 9, 2001
STATEMENT OF ADDITIONAL INFORMATION
RS MONEY MARKET FUND
JANUARY __, 2001
RS Money Market 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 January __, 2001, 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
<TABLE>
<CAPTION>
CAPTION PAGE
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<S> <C>
TRUST INFORMATION.................................................2
INVESTMENTS AND RISKS.............................................3
THE FUND'S INVESTMENT LIMITATIONS.................................9
MANAGEMENT OF THE FUND...........................................12
DISTRIBUTION PLAN...............................................18
HOW NET ASSET VALUE IS DETERMINED................................18
TAXES............................................................19
HOW PERFORMANCE IS DETERMINED....................................22
APPENDIX A.......................................................25
</TABLE>
<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.
MASTER/FEEDER STRUCTURE
The Fund seeks to achieve its investment objective by investing all
of its assets in The Money Market Master Portfolio (the "Master Portfolio"),
a series of Master Investment Portfolio, a Delaware business trust. The Fund
and any other entity investing in the Master Portfolio are each liable for
all obligations of the Master Portfolio. However, the risk of a Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Master
Portfolio itself is unable to meet its obligations. Accordingly, it is
unlikely that the Fund or its shareholders will incur such liability by
investing Fund assets in the Master Portfolio. However, if a mutual fund or
other investor in the Master Portfolio withdraws its investment from the
Master Portfolio, the economic efficiencies (e.g., spreading fixed expenses
among a larger asset base) that may be available through investment in the
Master Portfolio may not be fully achieved.
The Fund may withdraw its investment in the Master Portfolio only if
the Trustees determine that such action is in the best interests of the Fund
or its shareholders. Upon any such withdrawal, the Trustees would consider
alternative investments, including investing all of the Fund's assets in
another investment company with the same or substantially the same investment
objective as the Fund or authorizing RSIM, L.P. to provide advisory services
to the Fund under the investment advisory agreement currently in place (but
not in effect).
The fundamental policies and restrictions of the Master Portfolio
cannot be changed without approval by the holders of a majority (as defined
in the 1940 Act) of the Master Portfolio's outstanding interests. Whenever
the Fund, as an interestholder in the Master Portfolio, is requested to vote
on any matter submitted to the interestholders of the Master Portfolio, the
Fund will hold a meeting of its shareholders to consider such matters, unless
such meeting is not required by applicable law. The Fund will cast its votes
in proportion to the votes received from its shareholders. Shares for which
the Fund receives no voting instructions will be voted in the same proportion
as the votes received from the other Fund shareholders. It is possible that
even where a majority of the Fund's shareholders vote in favor of (or
against) a particular proposal made to the interestholders of the Master
Portfolio, such a proposal may fail (or pass) due to the votes of other
interestholders.
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<PAGE>
Certain policies of the Master Portfolio are non-fundamental and may
therefore be changed by vote of a majority of the Master Portfolio's trustees
without interestholder approval. If the Master Portfolio's investment objective
or fundamental or non-fundamental policies are changed, the Fund may elect to
change its objective or policies to correspond to those of the Master Portfolio.
The Fund also may elect to redeem its interests in the Master Portfolio and
either seek a new investment company or retain its own objectives and policies.
The Fund's inability to find a substitute investment company could adversely
affect shareholders' investments in the Fund.
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
RS Investment Management, L.P. ("RSIM, L.P.") serves as investment
adviser to the Fund. Currently, the Fund seeks to achieve its investment
objective by investing substantially all of its assets in the Master Portfolio.
Barclays Global Fund Advisors ("BGFA") provides investment guidance and policy
direction for the Master Portfolio. In addition to the principal investment
strategies and the principal risks of the Fund and the Master Portfolio
described in the Prospectus, the Master Portfolio may employ other investment
practices and therefore the Fund and the Master Portfolio may be subject to
additional risks which are described below.
To the extent set forth in this SAI, the Fund through its investment
in the Master Portfolio may invest in the securities described below. To
avoid the need to refer to both the Fund and the Master Portfolio in every
instance, the following sections generally refer only to the Fund. The types
of investments discussed below, and the descriptions of those investments,
have been provided to the Fund by the Master Portfolio.
The assets of the Fund consist only of obligations maturing within
thirteen months from the date of acquisition (as determined in accordance with
the regulations of the SEC), and the dollar-weighted average maturity of the
Fund may not exceed 90 days. The securities in which the Fund may invest will
not yield as high a level of current income as may be achieved from securities
with less liquidity and less safety. There can be no assurance that the Fund's
investment objective will be realized as described in the Fund's Prospectus.
The Fund may invest in the following types of money market instruments:
3
<PAGE>
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in various types of
U.S. Government obligations. U.S. Government obligations include securities
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities. Payment of principal and interest on U.S.
Government obligations (i) may be backed by the full faith and credit of the
United States (as with U.S. Treasury obligations and GNMA certificates) or (ii)
may be backed solely by the issuing or guaranteeing agency or instrumentality
itself (as with FNMA notes). In the latter case, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, which agency or instrumentality may be
privately owned. There can be no assurance that the U.S. Government would
provide financial support to its agencies or instrumentalities where it is not
obligated to do so. As a general matter, the value of debt instruments,
including U.S. Government obligations, declines when market interest rates
increase and rises when market interest rates decrease. Certain types of U.S.
Government obligations are subject to fluctuations in yield or value due to
their structure or contract terms.
ASSET-BACKED SECURITIES. The Fund may purchase asset-backed securities,
which are securities backed by installment contracts, credit-card receivables or
other assets. Asset-backed securities represent interests in "pools" of assets
in which payments of both interest and principal on the securities are made
monthly, thus in effect "passing through" monthly payments made by the
individual borrowers on the assets that underlie the securities, net of any fees
paid to the issuer or guarantor of the securities. The average life of
asset-backed securities varies with the maturities of the underlying instruments
and is likely to be substantially less than the original maturity of the assets
underlying the securities as a result of prepayments. For this and other
reasons, an asset-backed security's stated maturity may be shortened, and the
security's total return may be difficult to predict precisely. The Fund may
invest in such securities up to the limits prescribed by Rule 2a-7 and other
provisions of the 1940 Act.
BANK OBLIGATIONS. The Fund may invest in bank obligations that include,
but are not limited to, negotiable certificates of deposit ("CDs"), bankers'
acceptances and fixed time deposits. The Fund also may invest in high- quality
short-term obligations of foreign branches of U.S. banks or U.S. branches of
foreign banks that are denominated in and pay interest in U.S. dollars. Fixed
time deposits are obligations of banks that are payable at a stated maturity
date and bear a fixed rate of interest. Generally fixed time deposits may be
withdrawn on demand by the investor, but they may be subject to early withdrawal
penalties that vary depending upon market conditions and the remaining maturity
of the obligation. Although fixed time deposits do not have an established
market, there are no contractual restrictions on the Fund's right to transfer a
beneficial interest in the deposit to a third party. It is the policy of the
Fund not to invest in fixed time deposits subject to withdrawal penalties, other
than overnight deposits, or in repurchase agreements with more than seven days
to maturity or other illiquid securities, if more than 10% of the value of its
net assets would be so invested. Obligations of foreign banks and foreign
branches of U.S. banks involve somewhat different investment risks from those
affecting domestic obligations, including the possibilities that liquidity could
be impaired because of future political and economic developments, that the
obligations may be less marketable than comparable obligations of U.S. banks,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that foreign deposits may be seized or
nationalized, that foreign governmental restrictions (such as foreign exchange
controls) may be adopted that might adversely affect the payment of principal
and interest on those obligations and that the selection of those obligations
may be more difficult because there may be less publicly available information
concerning foreign banks or the accounting, auditing and financial reporting
standards, practices and requirements applicable to foreign banks may differ
from those applicable to U.S. banks. In that connection, foreign banks are not
subject to examination by any U.S. Government agency or instrumentality.
COMMERCIAL PAPER AND SHORT-TERM CORPORATE DEBT INSTRUMENTS. The Fund
may invest in commercial paper (including variable amount master demand notes),
which consists of short-term, unsecured promissory notes issued by corporations
to finance short-term credit needs. Commercial paper is usually sold on a
discount basis and has a maturity at the time of issuance not exceeding nine
months. Variable amount master demand notes are demand obligations that permit
the investment of fluctuating amounts at varying market rates of interest
pursuant to
4
<PAGE>
arrangements between the issuer and a commercial bank acting as agent for the
payee of such notes whereby both parties have the right to vary the amount of
the outstanding indebtedness on the notes. BGFA monitors on an ongoing basis
the ability of an issuer of a demand instrument to pay principal and interest
on demand. The Fund also may invest in high quality non-convertible corporate
debt securities (e.g., bonds and debentures). Subsequent to its purchase by
the Fund, an issue of securities may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Fund. BGFA will
consider such an event in determining whether the Master Portfolio should
continue to hold the obligation. To the extent the Master Portfolio continues
to hold such obligations, it may be subject to additional risk of default.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
wherein the seller of a security to the Fund agrees to repurchase that security
from the Fund at a mutually-agreed upon time and price. The period of maturity
is usually quite short, often overnight or a few days, although it may extend
over a number of months. The Fund may engage in a repurchase agreement with
respect to any security in which it is authorized to invest, although the
underlying security may mature in more than thirteen months. The Fund may incur
a loss on a repurchase transaction if the seller defaults and the value of the
underlying collateral declines or is otherwise limited or if receipt of the
security or collateral is delayed. The Fund may participate in pooled repurchase
agreement transactions with other funds advised by BGFA.
The Fund may enter into repurchase agreements wherein the seller of a
security to the Fund agrees to repurchase that security from the Fund at a
mutually agreed-upon time and price that involves the acquisition by the Fund of
an underlying debt instrument, subject to the seller's obligation to repurchase,
and the Fund's obligation to resell, the instrument at a fixed price usually not
more than one week after its purchase. Securities acquired as collateral by the
Fund under a repurchase agreement will be held in a segregated account at a
bank. Repurchase agreements are considered by the staff of the SEC to be loans
by the Fund. The Fund requires that additional securities be deposited with the
custodian if the value of the securities purchased should decrease below resale
price. BGFA monitors on an ongoing basis the value of the collateral to assure
that it always equals or exceeds the repurchase price. Certain costs may be
incurred by the Fund in connection with the sale of the underlying securities if
the seller does not repurchase them in accordance with the repurchase agreement.
In addition, if bankruptcy proceedings are commenced with respect to the seller
of the securities, disposition of the securities by the Fund may be delayed or
limited. While it does not presently appear possible to eliminate all risks from
these transactions (particularly the possibility of a decline in the market
value of the underlying securities, as well as delay and costs to the Fund in
connection with insolvency proceedings), it is the policy of the Fund to limit
repurchase agreements to selected creditworthy securities dealers or domestic
banks or other recognized financial institutions. The Fund considers on an
ongoing basis the creditworthiness of the institutions with which it enters into
repurchase agreements.
LETTERS OF CREDIT. Certain of the debt obligations, certificates of
participation, commercial paper and other short-term obligations that the Fund
is permitted to purchase may be backed by an unconditional and irrevocable
letter of credit of a bank, savings and loan association or insurance company
that assumes the obligation for payment of principal and interest in the event
of default by the issuer. Letter of credit-backed investments must, in the
opinion of BGFA, as investment adviser, be of investment quality comparable to
other permitted investments of the Fund.
INVESTMENT COMPANY SECURITIES. The Fund may invest in securities issued
by other investment companies that principally invest in securities of the type
in which the Fund invests. Under the 1940 Act, the Fund's investment in such
securities currently is limited to, subject to certain exceptions, (i) 3% of the
total voting stock of any one investment company, (ii) 5% of the Fund's net
assets with respect to any one investment company and (iii) 10% of the Fund's
net assets in the aggregate. Investments in the securities of other investment
companies generally will involve duplication of advisory fees and certain other
expenses.
5
<PAGE>
MUNICIPAL OBLIGATIONS. The Fund may invest in municipal obligations.
Municipal bonds generally have a maturity at the time of issuance of up to 40
years. Medium-term municipal notes are generally issued in anticipation of the
receipt of tax funds, of the proceeds of bond placements, or of other revenues.
The ability of an issuer to make payments on notes is therefore especially
dependent on such tax receipts, proceeds from bond sales or other revenues, as
the case may be. Municipal commercial paper is a debt obligation with a stated
maturity of 270 days or less that is issued to finance seasonal working capital
needs or as short-term financing in anticipation of longer-term debt. The Fund
will invest in high-quality (as defined in Rule 2a-7 of the 1940 Act) long-term
municipal bonds, municipal notes and short-term municipal commercial paper, with
remaining maturities not exceeding 13 months.
FLOATING- AND VARIABLE-RATE OBLIGATIONS. The Fund may purchase debt
instruments with interest rates that are periodically adjusted at specified
intervals or whenever a benchmark rate or index changes. The floating- and
variable-rate instruments that the Fund may purchase include certificates of
participation in such instruments. These adjustments generally limit the
increase or decrease in the amount of interest received on the debt instruments.
Floating- and variable-rate instruments are subject to interest-rate risk and
credit risk.
The Fund may purchase floating- and variable-rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess of
thirteen months, but which permit the holder to demand payment of principal at
any time, or at specified intervals not exceeding thirteen months. Variable rate
demand notes include master demand notes that are obligations that permit the
Fund to invest fluctuating amounts, which may change daily without penalty,
pursuant to direct arrangements between the Fund, as lender, and the borrower.
The interest rates on these notes fluctuate from time to time. The issuer of
such obligations ordinarily has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal amount of the obligations
plus accrued interest upon a specified number of days' notice to the holders of
such obligations. The interest rate on a floating-rate demand obligation is
based on a known lending rate, such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The interest rate on a
variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there generally
is no established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and the Fund may invest in obligations that are not so rated only if BGFA
determines that at the time of investment the obligations are of comparable
quality to the other obligations in which the Fund may invest. BGFA, on behalf
of the Fund, considers on an ongoing basis the creditworthiness of the issuers
of the floating- and variable-rate demand obligations in the Fund's portfolio.
The Fund will not invest more than 10% of the value of its total net assets in
floating- or variable-rate demand obligations whose demand feature is not
exercisable within seven days. Such obligations may be treated as liquid,
provided that an active secondary market exists.
PARTICIPATION INTERESTS. The Fund may invest in participation interests
in any type of security in which the Fund may invest. A participation interest
gives the Fund an undivided interest in the underlying securities in the
proportion that the Fund's participation interest bears to the total principal
amount of the underlying securities.
ILLIQUID SECURITIES. The Fund may invest in securities not registered
under the Securities Act of 1933, as amended ("1933 Act") and other securities
subject to legal or other restrictions on resale. Because such securities may be
less liquid than other investments, they may be difficult to sell promptly at an
acceptable price. Delay or difficulty in selling securities may result in a loss
or be costly to the Fund.
UNRATED INVESTMENTS. The Fund may purchase instruments that are not
rated if, in the opinion of BGFA, as investment adviser, such obligations are of
investment quality comparable to other rated investments that are
6
<PAGE>
permitted for purchase by the Fund, if they are purchased in accordance with
the Fund's procedures adopted by the Company's Board of Trustees in
accordance with Rule 2a-7 under the 1940 Act. Such procedures require
approval or ratification by the Board of Trustees of the Master Portfolio of
the purchase of unrated securities. After purchase by the Fund, a security
may cease to be rated or its rating may be reduced below the minimum required
for purchase by the Fund. Neither event will require an immediate sale of
such security by the Fund provided that, when a security ceases to be rated,
the Master Portfolio's Board of Trustees determines that such security
presents minimal credit risks and, provided further that, when a security
rating is downgraded below the eligible quality for investment or no longer
presents minimal credit risks, the Master Portfolio's Board finds that the
sale of such security would not be in the Fund's shareholder's best interest.
To the extent the ratings given by a nationally recognized statistical
ratings organization ("NRSRO") may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectus and in this SAI. The ratings
of said NRSROs are more fully described in the SAI Appendix.
PASS-THROUGH OBLIGATIONS. Certain of the debt obligations in which the
Fund may invest may be pass-through obligations that represent an ownership
interest in a pool of mortgages and the resultant cash flow from those
mortgages. Payments by homeowners on the loans in the pool flow through to
certificate holders in amounts sufficient to repay principal and to pay interest
at the pass-through rate. The stated maturities of pass-through obligations may
be shortened by unscheduled prepayments of principal on the underlying
mortgages. Therefore, it is not possible to predict accurately the average
maturity of a particular pass-through obligation. Variations in the maturities
of pass-through obligations will affect the yield of any Fund investing in such
obligations. Furthermore, as with any debt obligation, fluctuations in interest
rates will inversely affect the market value of pass-through obligations.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend its securities to
brokers, dealers and financial institutions, provided (1) the loan is secured
continuously by collateral consisting of cash, U.S. Government securities or an
irrevocable letter of credit that is marked to market daily to ensure that each
loan is fully collateralized; (2) the Fund may at any time recall the loan and
obtain the return of the securities loaned within five business days; (3) the
Fund will receive any interest or dividends paid on the securities loaned; and
(4) the aggregate market value of securities loaned will not at any time exceed
one-third of the total assets of the Fund. The Fund may earn income in
connection with securities loans either through the reinvestment of the cash
collateral or the payment of fees by the borrower. The Fund does not currently
intend to lend its portfolio securities.
FORWARD COMMITMENTS, WHEN-ISSUED PURCHASES AND DELAYED-DELIVERY
TRANSACTIONS. The Fund may purchase securities on a when-issued or forward
commitment (sometimes called a delayed-delivery) basis, which means that the
price is fixed at the time of commitment, but delivery and payment ordinarily
take place a number of days after the date of the commitment to purchase. The
Fund will make commitments to purchase such securities only with the intention
of actually acquiring the securities, but the Fund may sell these securities
before the settlement date if it is deemed advisable. The Fund will not accrue
income in respect of a security purchased on a forward commitment basis prior to
its stated delivery date.
Securities purchased on a when-issued or forward commitment basis and
certain other securities held in the Fund's investment portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and changes,
real or anticipated, in the level of interest rates. Securities purchased on a
when-issued or forward commitment basis may expose the Fund to risk because they
may experience such fluctuations prior to their actual delivery. Purchasing
securities on a when-issued or forward commitment basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself. A
segregated account of the Fund consisting of cash or U.S.
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Government obligations or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued or forward commitments
will be established and maintained at the Fund's custodian bank. Purchasing
securities on a forward commitment basis when the Fund is fully or almost
fully invested may result in greater potential fluctuation in the value of
the Fund's total net assets and its net asset value per share. In addition,
because the Fund will set aside cash and other high quality liquid debt
securities as described above, the liquidity of the Fund's investment
portfolio may decrease as the proportion of securities in the Fund's
portfolio purchased on a when-issued or forward commitment basis increases.
The value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities, and any subsequent fluctuations in
their value, is taken into account when determining the Fund's net asset value
starting on the day the Fund agrees to purchase the securities. The Fund does
not earn interest on the securities it has committed to purchase until they are
paid for and delivered on the settlement date. When the Fund makes a forward
commitment to sell securities it owns, the proceeds to be received upon
settlement are included in the Fund's assets, and fluctuations in the value of
the underlying securities are not reflected in the Fund's net asset value as
long as the commitment remains in effect.
RULE 144A. It is possible that unregistered securities, purchased by
the Fund in reliance upon Rule 144A under the 1933 Act, could have the effect of
increasing the level of the Fund's illiquidity to the extent that qualified
institutional buyers become, for a period, uninterested in purchasing these
securities.
FOREIGN OBLIGATIONS. Investments in foreign obligations involve certain
considerations that are not typically associated with investing in domestic
obligations. There may be less publicly available information about a foreign
issuer than about a domestic issuer. Foreign issuers also are not generally
subject to uniform accounting, auditing and financial reporting standards or
governmental supervision comparable to those applicable to domestic issuers. In
addition, with respect to certain foreign countries, taxes may be withheld at
the source under foreign income tax laws, and there is a possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments that could adversely affect investments in, the
liquidity of, and the ability to enforce contractual obligations with respect
to, securities of issuers located in those countries.
LOAN PARTICIPATION AGREEMENTS. The Fund may purchase interests in loan
participations that typically represent direct participation in a loan to a
corporate borrower, and generally are offered by an intermediary bank or other
financial institution or lending syndicate. Under these loan participation
arrangements, the Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled from the bank selling the loan
participation upon receipt by the bank of the payments from the borrower. The
borrower in the underlying loan will be deemed to be the issuer of the
participation interest except to the extent the Fund derives its rights from the
intermediary bank that sold the loan participation. Such loans must be to
issuers in whose obligations the Fund may invest. Any participation purchased by
the Fund must be sold by an intermediary bank in the United States with assets
exceeding $1 billion.
Because the bank issuing the loan participation does not guarantee the
participation in any way, the participation is subject to the credit risks
associated with the underlying corporate borrower. In addition, it may be
necessary, under the terms of the loan participation, for the Fund to assert its
rights against the underlying corporate borrower, in the event that the
underlying corporate borrower should fail to pay principal and interest when
due. Thus, the Fund could be subject to delays, expenses, and risks that are
greater than those that would have been involved if the Fund had purchased a
direct obligation of the borrower. Moreover, under the terms of the loan
participation, the Fund may be regarded as a creditor of the issuing bank
(rather than of the underlying corporate borrower), so that the Fund also may be
subject to the risk that the issuing bank may become insolvent. Further, in
8
<PAGE>
the event of the bankruptcy or insolvency of the corporate borrower, the loan
participation might be subject to certain defenses that can be asserted by
the borrower as a result of improper conduct by the issuing bank.
The secondary market, if any, for these loan participation interests is
limited; thus, such participations purchased by the Fund may be treated as
illiquid. If a loan participation is determined to be illiquid, it will be
valued at its fair market value as determined by procedures approved by the
Board of Trustees. Valuation of illiquid indebtedness involves a greater degree
of judgment in determining the Fund's net asset value than if the value were
based on available market quotations
FUNDING AGREEMENTS. The Fund may invest in short-term funding
agreements. A funding agreement is a contract between an issuer and a purchaser
that obligates the issuer to pay a guaranteed rate of interest on a principal
sum deposited by the purchaser. Funding agreements will also guarantee the
return of principal and may guarantee a stream of payments over time. A funding
agreement has a fixed maturity and may have either a fixed, variable or floating
interest rate that is based on an index and guaranteed for a fixed time period.
The Fund will purchase short-term funding agreements only from banks and
insurance companies that, at the time of purchase, are rated in one of the three
highest rating categories and have assets of $1 billion or more.
The secondary market, if any, for these funding agreements is limited;
thus, such investments purchased by the Fund may be treated as illiquid. If a
funding agreement is determined to be illiquid it will be valued at its fair
market value as determined by procedures approved by the Board of Trustees.
Valuation of illiquid indebtedness involves a greater degree of judgment in
determining the Fund's net asset value than if the value were based on available
market quotations, and could result in significant variations in the Fund's
daily share price.
INVESTMENT LIMITATIONS
LIMITATIONS OF THE FUND
The Fund 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.
The Fund may not:
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 money except as permitted by applicable law,
regulation or order;
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. The purchase by the
Fund of securities of a diversified, open-end management
investment company, or a series thereof, with substantially
the same investment policies as the Fund's shall not
constitute an underwriting for purposes of this Restriction 4;
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5. (i) (as to 75% of the Fund's total assets) purchase any
security (other than (a) obligations of the U.S. Government,
its agencies or instrumentalities and (b) obligations of
banks to the extent that the Securities and Exchange
Commission, by rule or interpretation, permits funds to
reserve freedom to concentrate in such obligations) 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.
Notwithstanding this Restriction 5, the Fund may invest all
its assets in a diversified, open-end management investment
company, or a series thereof, with substantially the same
investment policies as the Fund's;
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
(i) 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, (ii) as required in connection
with otherwise permissible options, futures and commodities
activities as described elsewhere in the Prospectus or this
Statement at the time and (iii) the Fund may purchase
securities of an issuer that invests or deals in commodities
or commodity contracts.
8. purchase or sell real estate or interests in real estate,
including real estate mortgage loans, although 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 10% 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). Notwithstanding any other
fundamental or non-fundamental investment policy, limitation, or restriction of
the Fund, the Fund may invest all of its assets in the securities of a single
open-end management investment company with substantially the same investment
policies as the Fund's.
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
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<PAGE>
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.
LIMITATIONS OF THE MASTER PORTFOLIO
The investment restrictions of the Fund and the Master Portfolio are
not identical. The Master Portfolio's investment restrictions do not apply
directly to the Fund, but for so long as the Fund invests substantially all of
its assets in the Master Portfolio, the following restrictions (which have been
provided to the Fund by the Master Portfolio) will limit the manner in which the
assets of the Fund are invested by the Master Portfolio.
FUNDAMENTAL INVESTMENT RESTRICTIONS:
The Master Portfolio may not:
(1) purchase the securities of issuers conducting their principal business
activity in the same industry if, immediately after the purchase and as a result
thereof, the value of the Master Portfolio's investments in that industry would
be 25% or more of the current value of the Master Portfolio's total assets,
provided that there is no limitation with respect to investments in (i)
obligations of the U.S. Government, its agencies or instrumentalities; and (ii)
obligations of banks to the extent that the SEC, by rule or interpretation,
permits funds to reserve freedom to concentrate in such obligations;
(2) purchase or sell real estate or real estate limited partnerships (other
than securities secured by real estate or interests therein or securities issued
by companies that invest in real estate or interests therein);
(3) purchase commodities or commodity contracts (including futures contracts),
except that the Master Portfolio may purchase securities of an issuer that
invests or deals in commodities or commodity contracts;
(4) purchase interests, leases, or limited partnership interests in oil, gas,
or other mineral exploration or development programs;
(5) purchase securities on margin (except for short-term credits necessary for
the clearance of transactions) or make short sales of securities;
(6) underwrite securities of other issuers, except to the extent that the
purchase of permitted investments directly from the issuer thereof or from an
underwriter for an issuer and the later disposition of such securities in
accordance with the Master Portfolio investment program may be deemed to be an
underwriting;
(7) make investments for the purpose of exercising control or management;
(8) borrow money or issue senior securities as defined in the 1940 Act, except
that the Master Portfolio d may borrow from banks up to 10% of the current value
of its net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 10% of the current value
of its net assets (but investments may not be purchased while any such
outstanding borrowing in excess of 5% of its net assets exists);
(9) write, purchase or sell puts, calls, straddles, spreads, warrants, options
or any combination thereof, except that the Master Portfolio may purchase
securities with put rights in order to maintain liquidity;
11
<PAGE>
(10) purchase securities of any issuer (except securities issued or guaranteed
by the U.S. Government, its agencies and instrumentalities) if, as a result,
with respect to 75% of its total assets, more than 5% of the value of the Master
Portfolio's total assets would be invested in the securities of any one issuer
or, with respect to 100% of its total assets the Master Portfolio's ownership
would be more than 10% of the outstanding voting securities of such issuer; or
(11) make loans, except that the Master Portfolio may purchase or hold debt
instruments or lend its portfolio securities in accordance with its investment
policies, and may enter into repurchase agreements.
Non-Fundamental Investment Restrictions:
As a matter of non-fundamental policy:
(1) The Master Portfolio may invest in shares of other open-end management
investment companies, subject to the limitations of Section 12(d)(1) of the 1940
Act. Under the 1940 Act, the Master Portfolio's investments in such securities
currently is limited, subject to certain exceptions, to (i) 3% of the total
voting stock of any one investment company, (ii) 5% of the Master Portfolio's
net assets with respect to any one investment company, and (iii) 10% of the
Master Portfolio's net assets in the aggregate. Other investment companies in
which the Master Portfolio invests can be expected to charge fees for operating
expenses, such as investment advisory and administration fees, that would be in
addition to those charged by the Master Portfolio.
(2) The Master Portfolio may not invest more than 10% of its net assets in
illiquid securities. For this purpose, illiquid securities include, among
others, (i) securities that are illiquid by virtue of the absence of a readily
available market or legal or contractual restrictions on resale, (ii) fixed time
deposits that are subject to withdrawal penalties and that have maturities of
more than seven days, and (iii) repurchase agreements not terminable within
seven days.
(3) The Master Portfolio may lend securities from its portfolio to brokers,
dealers and financial institutions, in amounts not to exceed (in the aggregate)
one-third of the Master Portfolio's total assets. Any such loans of portfolio
securities will be fully collateralized based on values that are marked to
market daily. The Master Portfolio will not enter into any portfolio security
lending arrangement having a duration of longer than one year.
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, 53, is the President and Chief Executive Officer of
Centre Capital Group, Inc., a member company of American International
Group, Inc. 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 served until July 1997 as
President of Tuttle & Auerbach Securities, Inc., introducing broker
trading futures on behalf of institutional hedging clients and
individuals. He is also a Director of Roelof Mining, Inc. and until
March 1999 served as a director of Headlands Mortgage Corp. Mr.
Auerbach is President of APMT LLC, a manager of
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<PAGE>
mortgage assets. Mr. Auerbach is a limited partner in RS Residential
Fund, L.P., and RS Commercial Property Fund, L.P., of which RSRF
Company, L.L.C., and RS Investment Management Co., L.L.C.,
respectively, affiliates of RSIM, L.P., and RSIM, Inc., are the general
partners. Mr. Auerbach is also a member of RS Property Fund IV L.L.C.
of which RS Fund IV Manager L.P., an affiliate of RSIM, L.P. as the
Managing Member. Mr. Auerbach has been a Trustee of the Trust since
June 1987.
JOHN W. GLYNN, JR., TRUSTEE
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco, CA
94111
Mr. Glynn, 58, 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, 49, 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 and was most recently elected a
Trustee in May. 1999.
JAMES K. PETERSON, TRUSTEE
c/o RS Investment Management, 388 Market Street, Suite 200, San Francisco, CA
94111
Mr. Peterson, 58, 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. Since December 1, 1998 Mr. Peterson has served as
a director of Capital Research Management's Income Fund of America and
American Balanced Fund. Mr. Peterson is a limited partner of RS
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, 34, 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
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Prior to joining RS Investment Management, Ms. DuFrane, 32, 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 RS Investment Management. The Trust pays each unaffiliated Trustee
a quarterly fee of $15,000 and reimburses their actual out-of-pocket expenses
relating to attendance at meetings of the Board of Trustees.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Name of Aggregate Pension or Retirement Estimated Total Compensation
Person, Position Compensation Benefits Accrued As Annual From Fund Paid to
From Trust Part of Trust Expenses Benefits Upon Trustees in 1999
in 2000 Retirement
<S> <C> <C> <C> <C>
Leonard Auerbach, Trustee $60,000 -- -- $0
John W. Glynn, Jr., Trustee $60,000 -- -- $0
James K. Peterson, Trustee $60,000 -- -- $0
G. Randall Hecht*, Trustee -- -- -- --
--------------------
</TABLE>
* Denotes a Trustee who is an "interested person," as defined in the 1940 Act.
The Fund, RS Investment Management, and PFPC Distributors, Inc. have adopted
codes of ethics under rule 17j-1 of the Investment Company Act which permit
personnel subject to the codes to invest in securities, including securities
that may be purchased or held by a Fund.
CONTROL PERSONS AND SHARE OWNERSHIP
As of December 15, 2000, all outstanding shares of the Fund were owned
by RS Investment Management Co. LLC ("RSIM Co.").
On December 15, 2000 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.
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<PAGE>
RSIM, L.P.
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, and as a
Trustee, of the Trust.
The Fund and RSIM, L.P. have entered into an Investment Advisory
Agreement (the "Advisory Agreement") that shall not be effective unless the Fund
redeems its assets from the Master Portfolio and does not then invest those
assets in another diversified, open-end mutual fund with substantially the same
investment objective as the Fund. Should such an event occur, the Advisory
Agreement shall take effect and RSIM, L.P., at its expense, will furnish
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) will
furnish 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) will furnish the Trust and the Fund with reports,
statements, and other data on securities, economic conditions, and other
pertinent subjects, and (iii) in general will superintend and manage 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 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
2002, 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.
BGFA
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<PAGE>
BGFA provides investment advisory services to the Master Portfolio
pursuant to an Investment Advisory Contract (the "Advisory Contract"). Pursuant
to the Advisory Contract, BGFA furnishes to the Master Portfolio's trustees
periodic reports on the investment strategy and performance of the Master
Portfolio.
The Advisory Contract is subject to the annual approval by (i) the
Master Portfolio's Board of Trustees or (ii) the vote of a majority (as
defined in the 1940 Act) of the outstanding voting interests of the Master
Portfolio, provided that in either event the continuance also is approved by
a majority of Master Portfolio Board of Trustees who are not "interested
persons" (as defined in the 1940 Act) of Master Portfolio or BGFA, by vote
cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Contract is terminable without penalty, on 60 days'
written notice by the Master Portfolio's Board of Trustees or by vote of the
holders of a majority of the Master Portfolio's interests, or, after the
Reapproval Date, on not less than 60 days' written notice, by BGFA. The
Advisory Contract terminates automatically in the event of an assignment as
defined in the 1940 Act.
MANAGEMENT AND ADMINISTRATIVE FEES
MANAGEMENT FEES. The Fund currently does not pay any fees to RSIM,
L.P. under the Advisory Agreement, as no services are provided to the Fund by
RSIM under that agreement. Should RSIM, L.P. begin to provide services to
the Fund under the Advisory Agreement, the Fund will pay fees as compensation
for the services provided to it thereunder. The amount of these management
fees is calculated daily and payable monthly at the annual rate of 0.10% of
the average daily net assets of the Fund.
BGFA serves as investment adviser to the Master Portfolio. The
Master Portfolio pays a management fee calculated daily and payable monthly
at an annual rate of 0.10% of the average daily net assets of the Master
Portfolio.
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 2002, 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.
The Trust, on behalf of the Fund, has entered into a
Sub-Administration and Accounting Services Agreement with Investors Bank &
Trust Company ("IBT") pursuant to which IBT performs a variety of accounting,
bookkeeping and other administrative services for the Fund. For its services
under the Agreement, IBT has the right to receive fees, in addition to
reimbursement of out-of-pocket expenses, equal to [ ]%.
EXPENSES
The Fund will pay all expenses related to the operation of the Fund which are
not borne by an RSIM, L.P., including but not limited to taxes, interest,
brokerage fees and commissions, compensation paid to PFPC Distributors, Inc.,
3200 Horizon Drive, King of Prussia, Pennsylvania 19406 (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 the Distributor, 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,
16
<PAGE>
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
The Fund currently incurs no brokerage or transaction costs because it
invests all of its assets in the Master Portfolio. Set forth below is a
description of the Master Portfolio's policies governing portfolio securities
transactions (which has been provided to the Fund by the Master Portfolio).
Purchases and sales of debt securities generally are principal
transactions. Debt securities normally are purchased or sold from or to dealers
serving as market makers for the securities at a net price. Debt securities also
may be purchased in underwritten offerings and may be purchased directly from
the issuer. Generally, U.S. Government Obligations, municipal obligations and
taxable money market securities are traded on a net basis and do not involve
brokerage commissions. The cost of executing transactions in debt securities
consists primarily of dealer spreads and underwriting commissions. Under the
1940 Act, persons affiliated with the Master Portfolio are prohibited from
dealing with the Master Portfolio as a principal in the purchase and sale of
securities unless an exemptive order allowing such transactions is obtained from
the SEC or an exemption is otherwise available.
The Master Portfolio has no obligation to deal with any dealer or group
of dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Master Portfolio's Board of Trustees and BGFA, BGFA
is responsible for the Master Portfolio's investment decisions and the placing
of portfolio transactions. In placing orders, it is the policy of the Master
Portfolio to obtain the best overall terms taking into account the dealer's
general execution and operational facilities, the type of transaction involved
and other factors such as the dealer's risk in positioning the securities
involved. While BGFA generally seeks reasonably competitive spreads or
commissions, the Master Portfolio will not necessarily be paying the lowest
spread or commission available.
In assessing the best overall terms available for any transaction, BGFA
considers factors deemed relevant, including the breadth of the market in the
security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. BGFA may cause
the Master Portfolio to pay a broker/dealer that furnishes brokerage and
research services a higher commission than that which might be charged by
another broker/dealer for effecting the same transaction, provided that BGFA
determines in good faith that such commission is reasonable in relation to the
value of the brokerage and research services provided by such broker/dealer,
viewed in terms of either the particular transaction or the overall
responsibilities of BGFA.
Such brokerage and research services might consist of reports and
statistics relating to specific companies or industries, general summaries of
groups of stocks or bonds and their comparative earnings and yields, or broad
overviews of the stock, bond, and government securities markets and the economy.
Supplementary research information so received is in addition to, and
not in lieu of, services required to be performed by BGFA and does not reduce
the advisory fees payable by the Master Portfolio. The Board of Trustees of the
Master Portfolio will periodically review the commissions paid by the Master
Portfolio to consider whether the commissions paid over representative periods
of time appear to be reasonable in relation to the benefits inuring to the
Master Portfolio. It is possible that certain of the supplementary research or
other services received will primarily benefit one or more other investment
companies or other accounts for which BGFA exercises investment discretion.
Conversely, the Master Portfolio may be the primary beneficiary of the research
or services received as a result of portfolio transactions effected for such
other account or investment company. The price to the Master Portfolio in any
transaction may be less favorable than that available from another broker/dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
17
<PAGE>
Broker/dealers utilized by BGFA may furnish statistical, research and
other information or services that are deemed by BGFA to be beneficial to the
Master Portfolio's investment programs. Research services received from brokers
supplement BGFA's own research and may include the following types of
information: statistical and background information on industry groups and
individual companies; forecasts and interpretations with respect to U.S. and
foreign economies, securities, markets, specific industry groups and individual
companies; information on political developments; portfolio management
strategies; performance information on securities and information concerning
prices of securities; and information supplied by specialized services to BGFA
and to the Master Portfolio's Trustees with respect to the performance,
investment activities and fees and expenses of other mutual funds. Such
information may be communicated electronically, orally or in written form.
Research services may also include the providing of equipment used to
communicate research information, the arranging of meetings with management of
companies and the providing of access to consultants who supply research
information.
The outside research assistance is useful to BGFA since the brokers
utilized by BGFA as a group tend to follow a broader universe of securities and
other matters than the staff of BGFA can follow. In addition, this research
provides BGFA with a diverse perspective on financial markets. Research services
that are provided to BGFA by brokers are available for the benefit of all
accounts managed or advised by BGFA. It is the opinion of BGFA that this
material is beneficial in supplementing their research and analysis; and,
therefore, it may benefit the Master Portfolio by improving the quality of
BGFA's investment advice.
PORTFOLIO TURNOVER. Because the portfolio of the Master Portfolio consists of
securities with relatively short-term maturities, the Master Portfolio expects
to experience high portfolio turnover. A high portfolio turnover rate should not
adversely affect the Fund, however, because portfolio transactions ordinarily
will be made directly with principals on a net basis, and, consequently, the
Master Portfolio usually will not incur excessive transaction costs.
DISTRIBUTION PLAN
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
PFPC 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 up to 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 Master Portfolio uses the amortized cost method to determine the
value of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act,
as would the Fund if it were to make investments directly and not through the
Master Portfolio. The amortized cost method involves valuing a security at
its cost and amortizing any discount or premium over the period until
maturity, regardless of the impact of fluctuating interest rates on the
market value of the security. While this method provides certainty in
valuation, it may result in periods during which the value, as determined by
amortized cost, is higher or lower than the price that the Fund would receive
if the security were sold. During these periods the yield to a shareholder
may differ somewhat from that which could be obtained from a similar fund
that uses a method of valuation based upon market prices. Thus, during
periods of
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declining interest rates, if the use of the amortized cost method resulted in
a lower value of the Fund's portfolio on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher yield than
would result from investment in a fund using solely market values, and
existing Fund shareholders would receive correspondingly less income. The
converse would apply during periods of rising interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Fund must maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase securities having remaining
maturities (as defined in Rule 2a-7) of thirteen months or less and invest only
in those high-quality securities that are determined by the Trustees to present
minimal credit risks. The maturity of an instrument is generally deemed to be
the period remaining until the date when the principal amount thereof is due or
the date on which the instrument is to be redeemed. However, Rule 2a-7 provides
that the maturity of an instrument may be deemed shorter in the case of certain
instruments, including certain variable- and floating-rate instruments subject
to demand features. Pursuant to the Rule, the Trustees have established
procedures designed to stabilize, to the extent reasonably possible, the Fund's
price per share as computed for the purpose of sales and redemptions at $1.00.
Such procedures include review of the Fund's portfolio holdings by the
Trustees, at such intervals as it may deem appropriate, to determine whether the
Fund's net asset value calculated by using available market quotations deviates
from the $1.00 per share based on amortized cost. The extent of any deviation
will be examined by the Trustees. If such deviation exceeds 1/2 of 1%, the
Trustees will promptly consider what action, if any, will be initiated. In the
event the Trustees determine that a deviation exists that may result in material
dilution or other unfair results to shareholders, the Trustees will take such
corrective action as it regards as necessary and appropriate, including the sale
of portfolio instruments prior to maturity to realize capital gains or losses or
to shorten average portfolio maturity, withholding dividends or establishing a
net asset value per share by using available market quotations.
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,
securities of other regulated investment companies, 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 one issuer (other than U.S.
Government or other regulated investment company securities) or of two or
more issuers that the Fund controls and that are engaged in the same, similar
or related trades or businesses. 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 investment company income (that
is, generally, its ratable income exclusive of ("net capital gains") the
excess of net long-term capital gains over net short-term capital losses)
and its net tax-exempt income.
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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, if
any, 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.
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 taxable income (exclusive
of net capital gains), unless the tax is reduced or eliminated by an
applicable tax treaty. Distributions of the Fund's net capital gain, if any,
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.
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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, 2001 (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.
DISTRIBUTIONS
Distributions of investment income are taxable as ordinary income,
whether received in cash or in shares through the reinvestment of
distributions. Although distributions will be declared daily based on the
Fund's daily earnings, for federal income tax purposes, the Fund's "earnings
and profits" will be determined at the end of each taxable year and will be
allocated pro rata over the entire year.
Distributions, if any, that are designated by the Fund as capital gain
distributions will be taxed to shareholders as long-term capital gain (to the
extent such distributions do not exceed the Fund's actual net capital gain for
the taxable year), regardless of how long a shareholder has held Fund shares.
Such distributions will be designated as capital gain distributions in a written
notice mailed by the Fund to its shareholders not later than 60 days after the
close of the Fund's taxable year.
MASTER PORTFOLIO TAX ISSUES
REGULATED INVESTMENT COMPANY. The Fund seeks to qualify as a
regulated investment company by investing substantially all of its assets in
the Master Portfolio. Under the Code, the Master Portfolio will be treated as
a partnership rather than as a regulated investment company or a corporation.
As a partnership, any interest, dividends, gains and losses of the Master
Portfolio shall be deemed to have been "passed through" to the Fund (and the
Master Portfolio's other investors) in proportion to the Fund's ownership
interest in the Master Portfolio. Therefore, to the extent that the Master
Portfolio were to accrue but not distribute any interest, dividends or gains,
the Fund would recognize its proportionate share of such income without
receipt of any corresponding distribution. However, the Master Portfolio will
seek to minimize recognition by its investors (such as the Fund) of interest,
dividends and gains without a corresponding distribution.
TAXATION OF MASTER PORTFOLIO INVESTMENTS. Gains and losses realized by
the Master Portfolio on the sale of portfolio securities generally will be
capital gains and losses. Such gains and losses ordinarily will be long-term
capital gains and losses if the securities have been held by the Master
Portfolio for more than one year at the time of disposition of the securities.
Gains recognized on the disposition of a debt obligation purchased by
the Master Portfolio at a market discount (generally at a price less than its
principal amount) generally will be treated as ordinary income to the extent of
the portion of market discount that accrued, but was not previously recognized
pursuant to an available election, during the term the Master Portfolio held the
debt obligation.
Investments to be made by the Fund may involve sophisticated tax rules
that may result in income or gain recognition by the Fund without corresponding
current cash receipts. Although the Fund will seek to avoid
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significant non-cash income, such non-cash income could be recognized by the
Fund, in which case the Fund may distribute cash derived from other sources
in order to meet the minimum distribution requirements described above.
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
GENERALLY. The yield for the Fund fluctuates from time to time, unlike
bank deposits or other investments that pay a fixed yield for a stated period of
time, and does not provide a basis for determining future yields since it is
based on historical data. Yield is a function of portfolio quality, composition,
maturity and market conditions as well as the expenses allocated to the Fund.
The Fund's performance may be advertised in terms of current yield or
effective yield. These performance figures are based on historical results and
are not intended to indicate future performance. The Fund's current yield refers
to the income generated by an investment in the Fund over a seven- or thirty-day
period, expressed as an annual percentage rate. The effective field is
calculated similarly, but assumes that the income earned from an investment is
reinvested at net asset value. The Fund's effective yield is slightly higher
than the current yield because of the compounding effect of the assumed
reinvestment of income earned.
Performance may vary from time to time, and past results are not
necessarily representative of future results. Investors should remember that
performance is a function of the type and quality of investments held by the
Fund and is affected by operating expenses. Performance information, such as
that described above, may not provide a basis for comparison with other
investments or other investment companies using a different method of
calculating performance.
Current yield for the Fund is calculated based on the net changes,
exclusive of capital changes, over a seven day and/or thirty day period, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, subtracting a hypothetical charge reflecting
deductions from shareholder accounts, and dividing the difference by the value
of the account at the beginning of the base period to obtain the base period
return, and then multiplying the base period return by (365/7) with the
resulting yield figure carried to at least the nearest hundredth of one percent.
Effective yield for the Fund is calculated by determining the net
change exclusive of capital changes in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding one, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result.
In addition, investors should recognize that changes in the net asset
values of shares of the Fund affect the yield for any specified period, and such
changes should be considered together with the Fund's yield in ascertaining the
Fund's total return to shareholders for the period. Yield information may be
useful in reviewing the Fund's performance and for providing a basis for
comparison with investment alternatives. The yield of the Fund, however,
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may not be comparable to the yields from investment alternatives because of
differences in the foregoing variables and differences in the methods used to
value portfolio securities, compute expenses and calculate yield.
Additional information about the performance of the Fund will be
contained in the Annual Report for the Fund when completed. The Annual Report
may be obtained by calling the Company at 1-888-766-FUND.
PERFORMANCE COMPARISONS. From time to time and only to the extent the
comparison is appropriate for the Fund, the Trust may quote the performance of
the Fund in advertising and other types of literature and may compare the
performance of the Fund to the performance of various indices and investments
for which reliable performance data is available. The performance of the Fund
may be compared in advertising and other literature to averages, performance
rankings and other information prepared by recognized mutual fund statistical
services.
From time to time, the Company may quote the Fund's performance in
advertising and other types of literature as compared to the 91-Day Treasury
Bill Average (Federal Reserve), Lipper Money Market Fund Average,
iMoneyNet.Inc's Taxable Money Market Average, Salomon Three-Month Treasury Bill
Index, or Bank Averages, which are calculated from figures supplied by the U.S.
League of Savings Institutions based on effective annual rates of interest on
both passbook and certificate accounts. Savings accounts offer a guaranteed
return of principal and a fixed rate of interest. The Fund's performance also
may be compared to the Consumer Price Index, as published by the U.S. Bureau of
Labor Statistics, which is an established measure of change over time in the
prices of goods and services in major expenditure groups.
In addition, the Trust also may use, in advertisements and other types
of literature, information and statements: (1) showing that bank savings
accounts offer a guaranteed return of principal and a fixed rate of interest,
but no opportunity for capital growth; (2) describing the background and
professional experience of RSIM, L.P. or any portfolio manager; and (3)
describing BGFA, and its affiliates and predecessors, as one of the first
investment managers to advise investment accounts using asset allocation and
index strategies. The Company also may include in advertising and other types of
literature information and other data from reports and studies prepared by the
Tax Foundation, including information regarding federal and state tax levels and
the related "Tax Freedom Day." The Company also may disclose in advertising and
other types of sales literature the level and categories of assets under
management by the Fund's investment adviser or its affiliates.
The Fund's performance also may be compared to those of other mutual
funds having similar objectives. This comparative performance could be expressed
as a ranking prepared by Lipper Analytical Services, Inc., iMoneyNet.Inc's Money
Fund Report, including iMoneyNet.Inc's Taxable Money Market Fund Average or
Morningstar, Inc., independent services that monitor the performance of mutual
funds. The Fund's performance will be calculated by relating net asset value per
share at the beginning of a stated period to the net asset value of the
investment, assuming reinvestment of all gains distributions and dividends paid,
at the end of the period. Any such comparisons may be useful to investors who
wish to compare the Fund's past performance with that of its competitors. 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.
OTHER ADVERTISING ITEMS. The Fund also may discuss in advertising and
other types of literature that the Fund has been assigned a rating by an NRSRO,
such as Standard & Poor's Corporation. Such rating would assess the
creditworthiness of the investments held by the Fund. The assigned rating would
not be a recommendation to purchase, sell or hold the Fund's shares since the
rating would not comment on the market price of the Fund's shares or the
suitability of the Fund for a particular investor. In addition, the assigned
rating would be subject to change, suspension or withdrawal as a result of
changes in, or unavailability of, information relating to the Fund or its
investments. The Company may compare the Fund's performance with other
investments that are assigned ratings by NRSROs. Any such comparisons may be
useful to investors who wish to compare the Fund's past performance with other
rated investments.
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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.
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.
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"). Investors Bank &
Trust Company ("IBT"), 200 Clarendon Street Boston, MA 02116, serves as the
Fund's custodian ("Custodian"). As Custodian, IBT 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
KPMG LLP, Three Embarcadero Center, San Francisco, California 94111,
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.
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.
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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.
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.
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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.
S&P'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into several categories, ranging from
A for the highest quality obligations to D for the lowest. These categories
are as follows:
A-1: A short-term obligation rated 'A-1' is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is strong. Within this category, certain
obligations are designated with a plus sign (+). This indicates that the
obligor's capacity to meet its financial commitment on these obligations is
extremely strong.
A-2: A short-term obligation rated 'A-2' is somewhat more susceptible
to the adverse effects of changes in circumstances and economic conditions
than obligations in higher rating categories. However, the obligor's capacity
to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated 'A-3' exhibits adequate
protection parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
B: A short-term obligation rated 'B' is regarded as having
significant speculative characteristics. The obligor currently has the
capacity to meet its financial commitment on the obligation; however, it
faces major ongoing uncertainties which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
C: A short-term obligation rated 'C' is currently vulnerable to
nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated 'D' is in payment default. The 'D'
rating category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace period.
The 'D' rating also will be used upon the filing of a bankruptcy petition or
the taking of a similar action if payments on an obligation are jeopardized.
A commercial paper rating is not a recommendation to purchase, sell or
hold a security inasmuch as it does not comment as to market price or
suitability for a particular investor. The ratings are based on current
information furnished to Standard & Poor's by the issuer or obtained from
other sources it considers reliable. Standard & Poor's does not perform an
audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as
a result of changes in or unavailability of such information.
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.
26
<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.
MOODY'S CORPORATE SHORT-TERM DEBT RATINGS
Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations. These obligations have an
original maturity not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated
issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries;
high rates of return on funds employed; conservative capitalization structure
with moderate reliance on debt and ample asset protection; broad margins in
earnings coverage of fixed financial charges and high internal cash
generation; and well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level
of debt protection measurements and may require relatively high financial
leverage. Adequate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the
Prime rating categories.
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.
27
<PAGE>
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.
FITCH SHORT-TERM RATINGS
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and
investment notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the
existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
"F-1+"
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
"F-1"
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".
"F-2"
Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payments, but the margin of safety is not as great as
the "F-1+" and "F-1" categories.
28
<PAGE>
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS.
a(i). Amended and Restated Agreement and Declaration of Trust of Registrant.
(J)
a(ii). Amendment to Amended and Restated Agreement and Declaration of Trust
of Registrant.(J)
b. Copy of By-Laws of Registrant as amended through July 22, 1997.(G)
c(i). Specimen Share Certificate(A)
c(ii). Portions of Amended and Restated Agreement and Declaration of Trust
Relating to Shareholders' Rights.(J)
c(iii). Portions of By-laws Relating to Shareholders' Rights.(J)
d(i).(a) Investment Advisory Agreement between RS Investment Management,
L.P. and Registrant (on behalf of each of The Contrarian Fund-TM-,
RS Diversified Growth Fund, RS Global Value Fund, RS Global Natural
Resources Fund, RS Mid Cap Opportunities Fund (formerly, RS Growth
& Income Fund), The Information Age Fund-TM-, RS MicroCap Growth
Fund, RS Partners Fund, RS Value + Growth Fund RS Internet Age
Fund-TM-, RS Aggressive Growth Fund and RS Money Market Fund .(J)
(b) Form of Revised Schedule 1 to Investment Advisory Agreement.*
d(ii). Investment Advisory Agreement between RS Investment Management, Inc.
and Registrant (on behalf of RS Emerging Growth Fund).(J)
<PAGE>
d(iii). Sub-Advisory Agreement among RS Investment Management, L.P., Elijah
Asset Management, LLC and Registrant (on behalf of each of The
Information Age Fund-TM- and RS Value + Growth Fund).(J)
d(iv). Sub-Advisory Agreement among RS Investment Management, L.P.,
Eastbourne Management, L.L.C. and the Registrant (on behalf of The
Contrarian Fund-TM-).(J)
e. Form of Distribution Agreement with PFPC Distributors, Inc.*
f. Inapplicable.
g(i). Form of Custodian Agreement between Registrant and PFPC Trust
Company.(J)
g(ii). Form of Custodian Agreement between Registrant and Investors Bank &
Trust Company (on behalf of RS Money Market Fund)*
h(i). Administrative Services Agreement.(J)
h(ii). Form of Sub-Administration and Accounting Services Agreement between
Registrant and PFPC, Inc.(J)
h(iii). Form of Revised Schedule A to Administrative Services Agreement.(L)
h(iv). Form of Further Revised Schedule A to Administrative Services
Agreement.(M)
h(v). Form of Further Revised Schedule A to Administrative Services
Agreement.*
h(vi). Form of Third Party Feeder Fund Agreement among Registrant
PFPC Distributors Inc. and Master Investment Portfolio.*
h(vii). Form of Sub-Administration and Accounting Services Agreement
between Registrant and Investors Bank & Trust Company (on behalf of
RS Money Market Fund)*
<PAGE>
i. Opinion and Consent of Ropes & Gray.*
j. Consent of Independent Accountants.(O)
k. Inapplicable.
l. Letter of Understanding Relating to Initial Capital.(A,D)
m. Restated Distribution Plan pursuant to Rule 12b-1.*
n(i)-
(xx). Financial Data Schedules for Period ending December 31, 1998.(K)
o. 18f-3 Plan.(F)
p(i). Code of Ethics of RS Investment Trust, RS Investment Management,
L.P. and RS Investment Management, Inc.(O)
p(ii). Code of Ethics of Provident Distributors, Inc.(O)
p(iii). Code of Ethics of Eastbourne Capital Management, L.L.C.(O)
p(iv). Code of Ethics of Elijah Asset Management, L.L.C.(O)
q. Power of Attorney.(J)
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. 4 to
the Registration Statement on May 1, 1991.
<PAGE>
(C) Previously filed as part of the Post-Effective Amendment No. 6 to
the Registration Statement on March 12, 1992.
(D) Previously filed as part of the Post-Effective Amendment No. 19 to
the Registration Statement on July 5, 1994.
(E) Previously filed as part of the Post-Effective Amendment No. 21 to
the Registration Statement on April 28, 1995.
(F) Previously filed as part of the Post-Effective Amendment No. 28 to
the Registration Statement on March 24, 1997.
(G) Previously filed as part of the Post-Effective Amendment No. 30
to the Registration Statement on December 29, 1997.
(H) Previously filed as part of the Post-Effective Amendment No. 32
to the Registration Statement on March 12, 1998.
(I) Previously filed as part of the Post-Effective Amendment No. 33
to the Registration Statement on March 27, 1998.
(J) Previously filed as part of the Post-Effective Amendment No. 34
to the Registration Statement on March 4, 1999.
(K) Previously filed as part of the Post-Effective Amendment No. 35
to the Registration Statement on May 3, 1999.
(L) Previously filed as part of the Post-Effective Amendment No. 36
to the Registration Statement on October 8, 1999.
(M) Previously filed as part of the Post-Effective Amendment No. 37
to the Registration Statement on February 18, 2000.
(N) Previously filed as part of the Post-Effective Amendment No. 38
to the Registration Statement on March 22, 2000.
(O) Previously filed as part of the Post-Effective Amendment No. 39
to the Registration Statement on April 26, 2000.
* 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.
<PAGE>
Paul H. Stephens, a managing director of RSIM, L.P., was previously a
founding partner, managing director, and chief investment officer of
Robertson, Stephens & Company LLC (now FleetBoston Robertson Stephens).
Information concerning Elijah Asset Management, L.L.C. and Eastbourne Capital
Management, L.L.C. is included in Parts A and B herein.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) PFPC Distributors, Inc. (the "Distributor") acts as principal
underwriter for the following investment companies:
AFBA 5 Star Fund, Inc.
Hillview Investment Trust II
International Dollar Reserve Fund I, Ltd.
Provident Institutional Funds Trust
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.
Columbia National Municipal Bond Fund, Inc.
Columbia Strategic Value Fund, Inc.
Columbia Technology Fund, Inc.
GAMNA Series Funds, Inc.
WT Investment Trust
Kalmar Pooled Investment Trust
The RBB Fund, Inc.
Robertson Stephens Investment Trust
Harris Insight Funds Trust
Alleghany Funds
Deutsche Asset Management VIT Funds
First Choice Funds Trust
Forward Funds, Inc.
IBJ Funds Trust
LKCM Funds
Matthews International Funds
McM Funds
Metropolitan West Funds
New Covenant Funds, Inc.
Pictet Funds
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
The Stratton Funds, Inc.
The Galaxy Fund
The Galaxy VIP Fund
Galaxy Fund II
Trainer, Wortham First Mutual Funds
Undiscovered Managers Funds
Wilshire Target Funds, Inc.
Weiss, Peck & Greer Funds Trust
Weiss, Peck & Greer International Fund
WPG Growth and Income Fund
<PAGE>
WPG Tudor Fund
RWB/WPG U.S. Large Stock Fund
Tomorrow Funds Retirement Trust
The BlackRock Funds, Inc. (Distributed by BlackRock Distributors,
Inc., a wholly owned subsidiary of PFPC Distributors, Inc.)
Northern Funds Trust and Northern Institutional Funds Trust
(Distributed by Northern Funds Distributors, LLC., a wholly owned
subsidiary of PFPC Distributors, Inc.)
The Offit Investment Fund, Inc. (Distributed by Offit Funds
Distributor, Inc., a wholly owned subsidiary of PFPC Distributors,
Inc.)
The Offit Variable Insurance Fund, Inc. (Distributed by Offit Funds
Distributor, Inc., a wholly owned subsidiary of PFPC Distributors,
Inc.)
ABN AMRO Funds (Distributed by ABN AMRO Distribution Services (USA),
Inc., a wholly owned subsidiary of PFPC Distributors, Inc.)
PFPC Distributors, Inc. is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National Association of
Securities Dealers. PFPC Distributors, Inc. is located at 3200 Horizon
Drive, King of Prussia, Pennsylvania 19406.
(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. 8-45467), 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 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 9th of
January, 2001.
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 January 9, 2001, 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
<TABLE>
<CAPTION>
Exhibit No. Exhibit Title
<S> <C>
d(i)(b) Form of Revised Schedule 1 to Investment Advisory Agreement.
(e) Form of Distribution Agreement with PFPC Distributors, Inc.
g(ii). Form of Custodian Agreement between the Registrant and
Investors Bank & Trust Company (on behalf of the RS Money Market
Fund)
h(v). Form of Further Revised Schedule A to Administrative Services
Agreement.
h(vi). Form of Third Party Feeder Fund Agreement among Registrant,
PFPC Distributors, Inc. and Master Investment Portfolio
h(vii). Form of Sub-Administration and Accounting Services Agreement
between RS Investment Management, Inc. and Investors Bank &
Trust Company (on behalf of RS Money Market Fund).
i. Opinion and Consent of Ropes & Gray.
m. Restated Distribution Plan pursuant to Rule 12b-1.
</TABLE>
