-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HQE+CZh19kqtF+59TQxrgXVOHBo7pEMPCZ2oozVYRxAhFYmDIuW8e2gjz8QbcpyY 6AlgeCoYnxr+xABgw00l2w== 0001047469-99-008510.txt : 19990305 0001047469-99-008510.hdr.sgml : 19990305 ACCESSION NUMBER: 0001047469-99-008510 CONFORMED SUBMISSION TYPE: 485APOS PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19990304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROBERTSON STEPHENS INVESTMENT TRUST CENTRAL INDEX KEY: 0000814232 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 946649069 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 033-16439 FILM NUMBER: 99557370 FILING VALUES: FORM TYPE: 485APOS SEC ACT: SEC FILE NUMBER: 811-05159 FILM NUMBER: 99557371 BUSINESS ADDRESS: STREET 1: 555 CALIFORNIA ST STE 2600 CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: 8007663863 MAIL ADDRESS: STREET 1: 555 CALIFORNIA ST. STREET 2: SUITE 2600 CITY: SAN FRANCISCO STATE: CA ZIP: 94104 FORMER COMPANY: FORMER CONFORMED NAME: ROBERTSON STEPHENS EMERGING GROWTH FD DATE OF NAME CHANGE: 19920315 FORMER COMPANY: FORMER CONFORMED NAME: ROBERTSON STEPHENS EMERGING GROWTH FUND DATE OF NAME CHANGE: 19920312 FORMER COMPANY: FORMER CONFORMED NAME: RCS EMERGING GROWTH FUND DATE OF NAME CHANGE: 19910502 485APOS 1 485APOS As filed with the Securities and Exchange Commission on March 4, 1999 Registration No. 33-16439 811-5159 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/ PRE-EFFECTIVE AMENDMENT NO. / / POST-EFFECTIVE AMENDMENT NO. 34 /x/ and REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/ AMENDMENT NO. 36 /x/ RS INVESTMENT TRUST (formerly, Robertson Stephens Investment Trust) (Exact Name of Registrant as Specified in Charter) 555 California Street San Francisco, California 94104 (Address of Principal Executive Offices) Registrant's Telephone Number, including Area Code: (800) 766-3863 George R. Hecht c/o RS Investment Management 555 California Street San Francisco, California 94104 (Name and Address of Agent for Service) Copies to: TIMOTHY W. DIGGINS, ESQUIRE ROPES & GRAY One International Place Boston, MA 02110-2624 Approximate date of proposed public offering : As soon as practicable after this Amendment becomes effective. It is proposed that this filing will become effective: (check appropriate box) / / Immediately upon filing pursuant to paragraph (b); / / On (date) pursuant to paragraph (b) /x/ 60 days after filing pursuant to paragraph (a)(1); / / On (date) pursuant to paragraph (a)(1); / / 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 DOES NOT RELATE TO RS INTERNATIONAL FUND, RS ASIA FUND, RS INTERNATIONAL INVESTORS FUND, RS LARGE CAPITALIZATION EQUITY INCOME FUND, RS LARGE CAPITALIZATION VALUE FUND, AND RS 50/500 FUND. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RS FUNDS 555 California Street, Suite 2500 San Francisco, CA 94104 PROSPECTUS 800-766-FUND May 3, 1999 - -------------------------------------------------------------------------------- RS INVESTMENT TRUST This Prospectus describes ten mutual funds offered by RS Investment Trust. THE CONTRARIAN FUND-TM- RS DIVERSIFIED GROWTH FUND RS EMERGING GROWTH FUND RS GLOBAL NATURAL RESOURCES FUND RS GLOBAL VALUE FUND RS GROWTH & INCOME FUND THE INFORMATION AGE FUND-TM- RS MICROCAP GROWTH FUND RS PARTNERS FUND RS VALUE + GROWTH FUND You can call RS Funds at (800) 766-FUND to find out more about the Funds. The Prospectus explains what you should know about the Funds before you invest. Please read it carefully. NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. TABLE OF CONTENTS
PAGE ----- SUMMARY INFORMATION..................................................................................... 3 THE CONTRARIAN FUND-TM-............................................................................. 3 RS DIVERSIFIED GROWTH FUND.......................................................................... 5 RS EMERGING GROWTH FUND............................................................................. 7 RS GLOBAL NATURAL RESOURCES FUND.................................................................... 8 RS GLOBAL VALUE FUND................................................................................ 10 RS GROWTH & INCOME FUND............................................................................. 12 THE INFORMATION AGE FUND-TM-........................................................................ 13 RS MICROCAP GROWTH FUND............................................................................. 15 RS PARTNERS FUND.................................................................................... 16 RS VALUE GROWTH FUND................................................................................ 18 FEES AND EXPENSES....................................................................................... 20 RISKS AND OTHER INVESTMENT STRATEGIES................................................................... 22 MANAGEMENT OF THE FUNDS................................................................................. 27 PORTFOLIO MANAGERS...................................................................................... 28 HOW THE FUNDS' SHARES ARE PRICED........................................................................ 30 HOW TO PURCHASE SHARES.................................................................................. 30 HOW TO SELL SHARES...................................................................................... 32 EXCHANGES............................................................................................... 34 DIVIDENDS AND DISTRIBUTIONS............................................................................. 34 TAXES................................................................................................... 34 DISTRIBUTION ARRANGEMENTS AND 12b-1 FEES................................................................ 35 YEAR 2000 DISCLOSURE.................................................................................... 36 FINANCIAL HIGHLIGHTS.................................................................................... 37
2 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUMMARY INFORMATION The Funds offered by RS Investment Trust provide a broad range of investment choices. This summary identifies each Fund's investment objective, principal investment strategies, and principal risks. The Trustees of the Trust may change the investment objectives and policies of any Fund without a vote of the shareholders unless otherwise specifically stated. As a matter of policy, the Trustees would not materially change a Fund's investment objective without shareholder approval. RS Investment Management, L.P. ("RSIM, L.P.") manages all of the Funds, except the Emerging Growth Fund. RS Investment Management, Inc. ("RSIM, Inc.") manages the Emerging Growth Fund. RSIM, L.P. and RSIM, Inc. are sometimes referred to in this Prospectus collectively as "RS Investment Management." Elijah Asset Management, LLC ("Elijah Asset Management") serves as sub-adviser to The Information Age Fund-TM- and the Value + Growth Fund. Eastbourne Management, L.L.C. ("Eastbourne") serves as sub-adviser in respect of a portion of the assets of The Contrarian Fund-TM-. Each of RS Investment Management, Elijah Asset Management, and Eastbourne is sometimes referred to as an "Adviser." Each of the Funds may hold a portion of its assets in cash or money market investments. All percentage limitations on investments will apply at the time of investment and will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of the investment. After the narrative describing each Fund is a chart showing how the investment returns of that Fund's shares have varied from year to year. The chart shows returns for each full calendar year for each of the last 10 calendar years or since the Fund commenced operations (as applicable). The table following the chart indicates some of the risks of investing in the Fund by comparing that Fund's average annual returns for the last year, for the last five years and for the last ten years or for the life of the Fund (as applicable) to a broad-based securities market index. PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION OF FUTURE PERFORMANCE. It is possible to lose money on investments in the Funds. For a discussion of recent market and portfolio developments affecting each Fund's performance, see the Funds' most recent financial reports. You can call the Trust at (800) 766-FUND to request a free copy of the financial reports. THE CONTRARIAN FUND-TM- - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Maximum long-term growth. - - INVESTMENT STRATEGIES. The Fund invests worldwide in growth and value companies whose stocks are attractively priced. The Fund invests primarily in attractively priced businesses that have not yet been discovered or become popular, unpopular companies with growth potential due to changed circumstances, companies that have declined in value and no longer command an investor following, and previously popular companies temporarily out of favor due to short-term factors. The Fund is a nondiversified mutual fund. The Fund may also do the following: - - Sell stocks short. - - Take positions in options and futures contracts in anticipation of a market decline. - - Borrow money to purchase additional portfolio securities. 3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - - PRINCIPAL INVESTMENTS. The Fund invests primarily in equity securities of domestic, multinational, and foreign companies whose potential values generally have been overlooked by other investors. - - PRINCIPAL RISKS - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by an Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - FOREIGN SECURITIES. Investments in foreign securities entail risks not present in domestic investments including, among others, risks related to political or economic instability, currency exchange and taxation. - - NON-DIVERSIFIED FUND. The Fund is a "non-diversified" mutual fund, and may invest its assets in a more limited number of issuers than may diversified investment companies. To the extent the Fund focuses on fewer issuers, its risk of loss increases if the market value of a security declines or if an issuer is not able to meet its obligations. - - SMALL COMPANIES. The Fund may invest in smaller companies, which tend to be more vulnerable to adverse developments than larger companies. These companies have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may trade less frequently and in limited volume. As a result, the prices of these securities may fluctuate more than prices of securities of larger, widely traded companies. - - SHORT SALES AND OTHER SHORT POSITIONS. The Fund may sell securities short and may take short positions on broad securities market indexes, such as the Standard & Poor's 500 Index. The Fund may sell a security short and borrow the same security from a broker or other institution to complete the sale when the Adviser anticipates that the price of a security will decline. The Fund may sell futures contracts and related options on a broad market index if RS Investment Management expects a broad market decline. Short positions may result in a loss if the value of the security or index in question increases between the date when the Fund enters into the short position and the date on which the Fund closes the short position. The Fund may enter into short sales on securities with a value of up to 40% of the Fund's total assets. - - LEVERAGE. The Fund may borrow money to invest in additional securities. The use of borrowed money increases the Fund's market exposure and risk and may result in losses. The interest that the Fund must pay on borrowed money will reduce its net investment income, and may also either offset any potential capital gains or increase any losses. 4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1994 -5.52% 1995 30.86% 1996 21.68% 1997 -29.51% 1998 -32.69%
During the periods shown above, the highest quarterly return was 20.97 for the quarter ended March 1996, and the lowest was -30.17 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR PAST FIVE YEARS (6/30/93) The Contrarian Fund-TM- (32.69)% (6.52)% (4.01)% Morgan Stanley Capital International All Country World Index* 19.69% 12.28% 12.57%
* The Morgan Stanley Capital International All Country World Index is an unmanaged, market capitalization-weighted index composed of companies representative of the market structure of 47 developed and emerging market countries. RS DIVERSIFIED GROWTH FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. To seek long-term capital growth. - - INVESTMENT STRATEGIES. The Fund invests in small-capitalization value and growth companies across a broadly diversified mix of industry sectors and companies. The Fund invests primarily in stocks of companies with market capitalizations of up to $1.5 billion, but may invest in securities of larger companies. - - PRINCIPAL INVESTMENTS. The Fund invests principally in common and preferred stocks and warrants, but may invest in debt securities that its Adviser believes are consistent with the Fund's objective. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. 5 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - - SMALL COMPANIES. The Fund invests primarily in small companies, which tend to be more vulnerable to adverse developments than larger companies. These companies may have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may trade infrequently and in limited volumes. As a result, the prices of these securities may fluctuate more than the prices of securities of larger, more widely traded companies. Also, there may be less publicly available information about small companies or less market interest in their securities as compared to larger companies, and it may take longer for the prices of the securities to reflect the full value of their issuers' earnings potential or assets. PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1997 29.45% 1998 16.28%
During the periods shown above, the highest quarterly return was 29.77 for the quarter ended December 1998, and the lowest was -16.25 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (8/1/96) RS Diversified Growth Fund 16.28% 29.55% Russell 2000 Index* (2.55)% 13.71%
* The Russell 2000 Index is an unmanaged market capitalization-weighted index composed of 2,000 U.S. companies with an average market capitalization of $467 million. Investment results assume the reinvestment of dividends paid on the stocks constituting the index. 6 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RS EMERGING GROWTH FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Capital appreciation. - - INVESTMENT STRATEGIES. The Fund invests primarily in rapidly growing emerging companies. The Fund generally invests in industry segments that are experiencing rapid growth and in companies with proprietary advantages. The Adviser may consider a number of factors in evaluating potential investments, including, for example, the rate of earnings growth, the quality of management, the extent of proprietary operating advantage, the return on equity and/or the financial condition of the company. - - PRINCIPAL INVESTMENTS. The Fund invests in a diversified portfolio of equity securities (principally common stocks) in companies that the Fund's Adviser believes have the potential for more rapid growth than the overall economy. The Fund normally invests at least 65% of its assets in such emerging growth companies. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - OVERWEIGHTING. Overweighting investments in certain sectors or industries of the U.S. stock market increases risk that the Fund will suffer a loss because of general advances or declines on the prices of stocks in those sectors or industries. - - SMALL COMPANIES. The Fund invests in smaller companies, which tend to be more vulnerable to adverse developments than larger companies. These companies have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may trade less frequently and in limited volume. As a result, the prices of these securities may fluctuate more than prices of securities of larger, widely traded companies. PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1989 44.45% 1990 9.57% 1991 58.69% 1992 -2.55% 1993 7.22% 1994 7.96% 1995 20.31% 1996 21.53% 1997 18.54% 1998 28.02%
During the periods shown above, the highest quarterly return was 38.37 for the quarter ended December 1998, and the lowest was -23.37 for the quarter ended September 1998. 7 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR PAST FIVE YEARS PAST TEN YEARS RS Emerging Growth Fund 28.02% 19.09% 20.18% Russell 2000 Growth Index* 1.23% 10.22% 11.54%
* The Russell 2000 Growth Index is an unmanaged market capitalization-weighted index containing those securities in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. Investment results assume the reinvestment of dividends paid on the stocks constituting the index. RS GLOBAL NATURAL RESOURCES FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Long-term capital appreciation. - - INVESTMENT STRATEGIES. The Fund invests primarily in securities of issuers in the natural resources industries. The Fund may invest in securities of issuers located anywhere in the world and normally will invest in securities of companies located in at least three countries, which may include the United States. The Fund may also sell a security short if the Adviser expects its market price to decline. - - Companies in the natural resources industries include companies that the Adviser considers to be principally engaged in the discovery, development, production, or distribution of natural resources, the development of technologies for the production or efficient use of natural resources, or the furnishing of related supplies or services. Natural resources include, for example, energy sources, precious metals, forest products, real estate, nonferrous metals, and other basic commodities. - - Companies in the natural resources industries may include, for example: - - Companies that participate in the discovery and development of natural resources from new or conventional sources. - - Companies that own or produce natural resources such as oil, natural gas, precious metals, and other commodities. - - Companies that engage in the transportation, distribution, or processing of natural resources. - - Companies that contribute new technologies for the production or efficient use of natural resources, such as systems for energy conversion, conservation, and pollution control. - - Companies that provide related services such as mining, drilling, chemicals, and related parts and equipment. - - A particular company will be considered to be principally engaged in the natural resources industries if at the time of investment the Adviser determines that at least 50% of the company's assets, gross income, or net profits are committed to, or derived from, those industries. A company will also be considered to be principally engaged in the natural resources industries if the Adviser considers that the company has the potential for capital appreciation primarily as a result of particular products, technology, patents, or other market advantages in those industries. - - PRINCIPAL INVESTMENTS. The Fund invests primarily in common stocks, but may also invest in preferred stocks, securities convertible into stocks, and warrants to purchase stocks. The Fund normally invests at least 65% of its assets in securities of companies in the natural resources industries. The Fund may invest the remaining 35% of its assets in securities of companies in any industry. - - PRINCIPAL RISKS. 8 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - FOREIGN SECURITIES. Investments in foreign securities entail risks not present in domestic investments including, among others, risks related to political or economic instability, currency exchange and taxation. - - CONCENTRATION. The Fund's investments are concentrated in the natural resources industries and those investments will be especially affected by factors peculiar to those industries and may fluctuate more widely than the value of shares of a portfolio which invests in a broader range of industries. Also, changes in regulatory policies may have a material effect on the business of companies in these industries. - - GEOGRAPHIC CONCENTRATION. There is no limit on the amount of the Fund's assets that may be invested in securities of issuers domiciled in any one country. To the extent that the Fund invests a substantial amount of its assets in one country, it will be more susceptible to the political and economic developments and market fluctuations in that country than if it invested in a more geographically diversified portfolio. PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1996 41.21% 1997 -17.14% 1998 -34.45%
During the periods shown above, the highest quarterly return was 17.19 for the quarter ended March 1996, and the lowest was -22.47 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (11/15/95) RS Global Natural Resources Fund (34.45)% (7.78)% Lipper Natural Resources Index* (23.12)% 6.85%
* The Lipper Natural Resources Index is an equally weighted index of the largest mutual funds in the Lipper Natural Resources investment objective, adjusted for the reinvestment of capital gains distributions and income dividends. 9 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RS GLOBAL VALUE FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Long-term growth. - - INVESTMENT STRATEGIES The Fund employs a value methodology, combining Graham & Dodd balance sheet analysis and cash flow analysis (such as the Holt/Value Search cash-flow model), to invest in equity securities primarily of companies with market capitalizations of $1 billion or more. The Fund may invest in securities of issuers located anywhere in the world and normally will invest in securities of companies located in at least three countries, which may include the United States. The Fund considers an issuer to be located in a country if it is organized under the laws of that country and has a principal office in that country, if it derives 50% or more of its total revenues from business in that country or if its equity securities trade principally on a securities exchange in that country. The Fund is a non-diversified mutual fund. - - In selecting investments for the Fund, RS Investment Management will: - - Perform fundamental research focusing on business analysis; - - Observe how management allocates capital; - - Strive to understand the unit economics of the business of the company; - - Key on the cash flow rate of return on capital employed; - - Discern the sources and uses of cash; - - Consider how management is compensated; and - - Ask how the stock market is pricing the entire company. - - PRINCIPAL INVESTMENTS. Although the Fund invests primarily in common stocks, it may also invest in preferred stocks, warrants and debt securities. The Fund under normal circumstances invests at least 65% of its assets in equity securities selected through its value methodology. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - FOREIGN SECURITIES. Investments in foreign securities entail risks not present in domestic investments including, among others, risks related to political or economic instability, currency exchange and taxation. - - GEOGRAPHIC CONCENTRATION. There is no limit on the amount of the Fund's assets that may be invested in securities of issuers domiciled in any one country. To the extent that the Fund invests a substantial amount of its assets in one country, it will be more susceptible to the political and economic developments and market fluctuations in that country than if it invested in a more geographically diversified portfolio. - - OVERWEIGHTING. Overweighting investments in certain sectors or industries of the U.S. stock market increases risk that the Fund will suffer a loss because of general advances or declines on the prices of stocks in those sectors or industries. - - NON-DIVERSIFIED FUND. The Fund is a "non-diversified" mutual fund, and may invest its assets in a more limited number of issuers than may diversified investment companies. To the extent the Fund focuses on fewer issuers, its risk of loss increases if the market value of a security declines or if an issuer is not able to meet its obligations. 10 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1998 10.50%
During the periods shown above, the highest quarterly return was 12.47 for the quarter ended March 1998 and the lowest was -5.07 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (4/1/97) RS Global Value Fund 10.50% 17.47% Morgan Stanley Capital International World Value Index* 13.66% 16.37%
* The Morgan Stanley Capital International World Value Index is a market capitalization-weighted index composed of companies representative of the market structure of 22 developed market countries in North America, Europe, and the Pacific Basin. RS GROWTH & INCOME FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Long-term total return. - - INVESTMENT STRATEGIES. The Fund invests in equity and debt securities of mid-cap companies-- with market capitalizations from $1.5 billion up to $10 billion-- that offer the potential for capital appreciation and/or current income. - - PRINCIPAL INVESTMENTS. The Fund normally invests a majority of its assets in common and preferred stocks, convertible securities, bonds and notes. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - MID-CAP COMPANIES. The Fund invests in mid-cap companies, which tend to be more vulnerable to adverse developments than larger companies. Mid-cap companies may have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may 11 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- trade infrequently and in limited volumes. As a result, the prices of these securities may fluctuate more than the prices of securities of larger, more widely traded companies. Also, there may be less publicly available information about mid-cap companies or less market interest in their securities as compared to larger companies, and it may take longer for the prices of the securities to reflect the full value of their issuers' earnings potential or assets. PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1996 24.16% 1997 22.40% 1998 11.65%
During the periods shown above, the highest quarterly return was 19.89 for the quarter ended December 1998, and the lowest was -13.53 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (7/12/95) RS Growth & Income Fund 11.65% 20.42% Russell Midcap Growth Index* 17.86% 18.78%
* The Russell Midcap Growth Index is an unmanaged market capitalization-weighted index which measures the performance of those Russell Midcap companies (defined as the 800 smallest companies in the Russell 1000 Index) with a higher than average growth orientation as determined by price-to-book ratios and forecasted growth values. Investment results assume the reinvestment of dividends paid on the stocks constituting the index. THE INFORMATION AGE FUND-TM- - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Long-term capital appreciation. - - INVESTMENT STRATEGIES. The Fund primarily invests in the information technology industry sector. - - Companies in the information technology industries include companies that an Adviser considers to be principally engaged in the development, production, or distribution of products or services related to the processing, storage, transmission, or presentation of information or data. The following examples illustrate the wide range of products and services provided by these industries: 12 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - - Computer hardware and software of any kind, including, for example, semiconductors, minicomputers, and peripheral equipment. - - Telecommunications products and services. - - Multimedia products and services, including, for example, goods and services used in the broadcast and media industries. - - Data processing products and services. - - Financial services companies that collect or disseminate market, economic, and financial information. - - Internet companies and other companies engaged in, or providing products or services for, e-commerce. - - A particular company will be considered to be principally engaged in the information technology industries if at the time of investment an Adviser determines that at least 50% of the company's assets, gross income, or net profits are committed to, or derived from, those industries. A company will also be considered to be principally engaged in the information technology industries if an Adviser considers that the company has the potential for capital appreciation primarily as a result of particular products, technology, patents, or other market advantages in those industries. - - PRINCIPAL INVESTMENTS. The Fund invests principally in common stocks, but may also invest any portion of its assets in preferred stocks and warrants. The Fund normally invests at least 65% of its assets in the information technology sector. - - PRINCIPAL RISKS. 13 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by an Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - CONCENTRATION. Because the Fund's investments are concentrated in the information technology industries, the value of its shares will be especially affected by factors peculiar to those industries and may fluctuate more widely than the value of shares of a portfolio which invests in a broader range of industries. - - SMALL COMPANIES. The Fund may invest in small companies, which tend to be more vulnerable to adverse developments than larger companies. Small companies may have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may trade infrequently and in limited volumes. As a result, the prices of these securities may fluctuate more than the prices of securities of larger, more widely traded companies. Also, there may be less publicly available information about small companies or less market interest in their securities as compared to larger companies, and it may take longer for the prices of the securities to reflect the full value of their issuers' earnings potential or assets. PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1996 26.72% 1997 6.15% 1998 52.20%
During the periods shown above, the highest quarterly return was 41.86 for the quarter ended December 1998, and the lowest was -21.73 for the quarter ended December 1997. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (11/15/95) The Information Age Fund-TM- 52.20% 22.85% Pacific Stock Exchange Technology Index* 54.60% 28.40%
* The Pacific Stock Exchange Technology Index is an unmanaged, price-weighted index of the top 100 U.S. technology stocks. 14 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RS MICROCAP GROWTH FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Long-term capital appreciation. - - INVESTMENT STRATEGIES. The Fund primarily invests in "micro-cap" companies with market capitalizations of $500 million or less at the time of investment that, in the Adviser's opinion, have potential for long-term capital appreciation. The Fund may invest the remainder of its assets in securities of companies of any size. The Fund may also engage in short sales of securities it expects to decline in price. - - PRINCIPAL INVESTMENTS. The Fund invests primarily in equity securities, including common and preferred stocks, and warrants and securities convertible into common or preferred stocks. The Fund under normal circumstances invests at least 65% of its assets in such "micro-cap" companies. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - MICRO-CAP AND SMALL COMPANIES. The Fund invests primarily in micro-cap and small companies, which tend to be more vulnerable to adverse developments than larger companies. These companies may have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may trade infrequently and in limited volumes. As a result, the prices of these securities may fluctuate more than the prices of securities of larger, more widely traded companies and the Fund may experience difficulty in establishing or closing out positions in these securities at prevailing market prices. Also, there may be less publicly available information about small companies or less market interest in their securities as compared to larger companies, and it may take longer for the prices of the securities to reflect the full value of their issuers' earnings potential or assets. - - SHORT SALES. The Fund may sell securities short. The Fund may sell a security short and borrow the same security from a broker or other institution to complete the sale when the Adviser anticipates that the price of a security will decline. Short sales may result in a loss if the value of the security increases between the date when the Fund enters into the short sale and the date on which the Fund closes the short sale. - - OVERWEIGHTING. Overweighting investments in certain sectors or industries of the U.S. stock market increases risk that the Fund will suffer a loss because of general advances or declines on the prices of stocks in those sectors or industries. 15 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1997 30.45% 1998 -0.63%
During the periods shown above, the highest quarterly return was 27.11 for the quarter ended September 1997, and the lowest was -24.58 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (8/15/96) RS MicroCap Growth Fund (0.63)% 16.09% Russell 2000 Growth Index* 1.23% 9.37%
* The Russell 2000 Growth Index is an unmanaged market capitalization-weighted index containing those securities in the Russell 2000 Index with higher price-to-book ratios and higher forecasted growth values. Investment results assume the reinvestment of dividends paid on the stocks constituting the index. RS PARTNERS FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Long-term growth. - - INVESTMENT STRATEGIES. The Fund employs a value methodology, combining Graham & Dodd balance sheet analysis and cash flow analysis (such as the Holt/Value Search cash-flow model) to invest in equity securities primarily of companies with market capitalizations of up to $1 billion. The Fund may invest most or all of its assets in securities of U.S. companies, but may also invest any portion of its assets in foreign securities. The Fund is a non-diversified mutual fund. - - In selecting investments for the Fund, the Adviser will: - - Perform fundamental research focusing on business analysis; - - Observe how management allocates capital; - - Strive to understand the unit economics of the business of the company; - - Key on the cash flow rate of return on capital employed; - - Discern the sources and uses of cash; 16 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - - Consider how management is compensated; and - - Ask how the stock market is pricing the entire company. - - PRINCIPAL INVESTMENTS. Although the Fund invests principally in common stocks, it may also invest in preferred stocks, warrants and debt securities. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to factors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - FOREIGN SECURITIES. Investments in foreign securities entail risks not present in domestic investments including, among others, risks related to political or economic instability, currency exchange and taxation. - - GEOGRAPHIC CONCENTRATION. There is no limit on the amount of the Fund's assets that may be invested in securities of issuers domiciled in any one country. To the extent that the Fund invests a substantial amount of its assets in one country, it will be more susceptible to the political and economic developments and market fluctuations in that country than if it invested in a more geographically diversified portfolio. - - SMALL COMPANIES. The Fund may invest in small companies, which tend to be more vulnerable to adverse developments than larger companies. Small companies may have limited product lines, markets, or financial resources, or may depend on a limited management group. Their securities may trade infrequently and in limited volumes. As a result, the prices of these securities may fluctuate more than the prices of securities of larger, more widely traded companies. Also, there may be less publicly available information about small companies or less market interest in their securities as compared to larger companies, and it may take longer for the prices of the securities to reflect the full value of their issuers' earnings potential or assets. - - NON-DIVERSIFIED FUND. The Fund is a "non-diversified" mutual fund, and may invest its assets in a more limited number of issuers than may diversified investment companies. To the extent the Fund focuses on fewer issuers, its risk of loss increases if the market value of a security declines or if an issuer is not able to meet its obligations. PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1996 43.15% 1997 18.08% 1998 -27.23%
17 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- During the periods shown above, the highest quarterly return was 18.38 for the quarter ended March 1996, and the lowest was -23.21 for the quarter ended September 1998. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR (7/12/95) RS Partners Fund (27.23)% 7.31% Russell 2000 Value Index* (6.45)% 14.93%
* The Russell 2000 Value Index is an unmanaged market capitalization-weighted index composed of those securities in the Russell 2000 Index with lower price-to-book ratios and lower forecasted growth values. Investment results assume the reinvestment of dividends paid on the stocks constituting the index. RS VALUE + GROWTH FUND - -------------------------------------------------------------------------------- - - INVESTMENT OBJECTIVE. Capital appreciation. - - INVESTMENT STRATEGIES. The Fund invests primarily in equity securities of mid- and large-capitalization companies (with market capitalizations greater than $1.5 billion). In selecting investments for the Fund, its Adviser's primary emphasis is typically on evaluating a company's management, growth prospects, business operations, revenues, earnings, cash flows, and balance sheet in relationship to its share price. The Adviser may select stocks for purchase which it believes are undervalued relative to the current stock price. The Fund may invest in securities of larger and smaller companies. The Fund may also sell short stocks that the Adviser believes are relatively overvalued. - - PRINCIPAL INVESTMENTS. The Fund invests primarily in growth companies with favorable relationships between price/earnings ratios and growth rates in sectors offering the potential for above-average returns. - - PRINCIPAL RISKS. - - EQUITY SECURITIES. One risk of investing in the Fund is the risk that the value of the equity securities in the portfolio will fall, or will not appreciate as anticipated by the Adviser, due to sfactors that adversely affect particular companies in the portfolio and/or the U.S. equities market in general. - - SHORT SALES. The Fund may sell securities short. The Fund may sell a security short and borrow the same security from a broker or other institution to complete the sale when the Adviser anticipates that the price of a security will decline. Short sales may result in a loss if the value of the security increases between the date when the Fund enters into the short sale and the date on which the Fund closes the short sale. - - OVERWEIGHTING. Overweighting investments in certain sectors or industries of the U.S. stock market increases risk that the Fund will suffer a loss because of general advances or declines on the prices of stocks in those sectors or industries. 18 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PERFORMANCE CHART EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
ANNUAL RETURN (%) Calendar Year End 1993 21.57% 1994 23.11% 1995 42.70% 1996 14.12% 1997 13.81% 1998 27.44%
During the periods shown above, the highest quarterly return was 24.07 for the quarter ended December 1998, and the lowest was -14.65 for the quarter ended December 1995. PERFORMANCE TABLE
AVERAGE ANNUAL TOTAL RETURNS (FOR SINCE INCEPTION PERIODS ENDING DECEMBER 31, 1998) PAST ONE YEAR PAST FIVE YEARS (5/12/92) RS Value + Growth Fund 27.44% 23.80% 22.70% Russell 1000 Growth Index* 38.71% 25.69% 20.86%
* The Russell 1000 Growth Index is an unmanaged market capitalization-weighted index containing those securities in the Russell 1000 Index with higher price-to-book ratios and higher forecasted growth values. Investment results assume the reinvestment of dividends paid on the stocks constituting the index. 19 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FEES AND EXPENSES THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD SHARES OF THE FUNDS. SHAREHOLDER FEES (paid directly from your investment): Maximum Sales Charge (Load) Imposed on Purchases None Maximum Deferred Sales Charge (Load) None Maximum Sales Charge (Load) Imposed on Reinvested Dividends None Redemption Fee* None Exchange Fee None
- -------------------------- * A $9.00 FEE IS CHARGED FOR REDEMPTIONS MADE BY BANK WIRE.
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets): GLOBAL DIVERSIFIED EMERGING NATURAL GLOBAL CONTRARIAN GROWTH GROWTH RESOURCES VALUE -------- ---------- ----------- -------- --------- Management Fees 1.50% 1.00% 1.00% 1.00% 1.00% Distribution (12b-1) Fees 0.25%* 0.25% 0.25% 0.25% 0.25% Other Expenses* 1.08% 0.70% 0.22% 0.96% 1.74% -------- ---------- ----------- -------- --------- Total Annual Fund Operating Expenses* 2.83% 1.95% 1.47% 2.21% 2.99% Fee Waiver and/or Expense Limitations(1) -- 0.06% -- 0.26% 1.04% -------- ---------- ----------- -------- --------- Net Expenses(1) -- 1.89% -- 1.95% 1.95%
VALUE GROWTH & INFORMATION MICROCAP + INCOME AGE GROWTH PARTNERS GROWTH --------- -------- ----------- -------- ------ Management Fees 1.00% 1.00% 1.25% 1.25% 1.00% Distribution (12b-1) Fees 0.25% 0.25% 0.25% 0.25% 0.25% Other Expenses 0.39% 0.49% 0.51% 0.57% 0.21% --------- -------- ----------- -------- ------ Total Annual Fund Operating Expenses 1.64% 1.74% 2.01% 2.07% 1.46% Fee Waiver and/or Expense Limitations(1) -- -- 0.10% 0.19% -- --------- -------- ----------- -------- ------ Net Expenses(1) -- -- 1.91% 1.88% --
- -------------------------- (1) THE NET EXPENSES SHOWN ABOVE FOR THE CONTRARIAN FUND-TM-, GLOBAL VALUE FUND, AND MICROCAP GROWTH FUND SHOW THE EFFECT OF CONTRACTUALLY IMPOSED EXPENSE LIMITATIONS AND/OR FEE WAIVERS IN EFFECT THROUGH DECEMBER 31, 1999 ON THE TOTAL ANNUAL OPERATING EXPENSES OF THE FUNDS. * Rule 12b-1 Expenses for The Contrarian Fund-TM- reflect the rate to which the Trustees have limited payments under the Fund's Distribution Plan; in the absence of that limitation, the Fund's Rule 12b-1 Expenses would be 0.75%, and Total Fund Operating Expenses would be 3.33%. Until May 26, 1998, each of the Diversified Growth, Growth & Income, Global Natural Resources, Global Value, Information Age-TM-, and MicroCap Growth Funds paid fees under an administrative services agreement with Robertson Stephens Investment Management an annual rate of 0.25% of a Fund's average daily net assets; the agreement was amended on that date to provide that no fee would be payable by those Funds for services under the agreement. The Management Fees paid by the Funds are higher than those paid by most other mutual funds. Because of Rule 12b-1 fees paid by the Funds, long-term shareholders may pay more than the economic equivalent of the maximum front-end sales load permitted under applicable broker-dealer sales rules. 20 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXAMPLE This Example is intended to help you compare the cost of investing in a Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in a 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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------- ----------- --------- ----------- The Contrarian Fund-TM- $ 287 $ 876 $ 1,491 $ 3,142 RS Diversified Growth Fund* $ 192 $ 594 $ 1,020 $ 2,203 RS Emerging Growth Fund $ 150 $ 465 $ 802 $ 1,752 RS Global Natural Resources Fund* $ 198 $ 612 $ 1,051 $ 2,266 RS Global Value Fund* $ 198 $ 612 $ 1,051 $ 2,266 RS Growth & Income Fund $ 133 $ 412 $ 712 $ 1,563 The Information Age Fund-TM- $ 177 $ 548 $ 943 $ 2,045 RS MicroCap Growth Fund* $ 194 $ 600 $ 1,030 $ 2,224 RS Partners Fund* $ 191 $ 591 $ 1,015 $ 2,193 RS Value + Growth Fund $ 149 $ 462 $ 797 $ 1,741
- -------------------------- * ASSUMING THAT EACH OF THESE FUND'S OPERATING EXPENSES REMAIN THE SAME AS THE NET EXPENSES SHOWN ABOVE, BASED ON THE OTHER ASSUMPTIONS ABOVE, YOUR COSTS OF INVESTING IN THE FUND WOULD BE AS FOLLOWS FOR 1 YEAR, 3 YEARS, 5 YEARS, AND 10 YEARS, RESPECTIVELY: RS Diversified Growth Fund -- $198, $612, $1,051, $2,266 RS Global Natural Resources Fund -- $225, $691, $1,183, $2,534 RS Global Value Fund -- $303, $924, $1,569, $3,292 RS MicroCap Growth Fund -- $204, $630, $1,081, $2,329 RS Partners Fund -- $211, $649, $1,112, $2,391 21 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- RISKS AND OTHER INVESTMENT STRATEGIES A Fund may not achieve its objective in all circumstances and you could lose money by investing. The following provides more detail about the Funds' principal risks and the circumstances which could adversely affect the value of a Fund's shares or its total return or yield. The Funds' investment strategies and portfolio investments of many of the Funds differ from those of most other mutual funds. Each Adviser seeks aggressively to identify favorable securities, economic and market sectors, and investment opportunities that other investors and investment advisers may not have identified. An Adviser may devote more of a Fund's assets to pursuing an investment opportunity than many other mutual funds might; it may buy or sell an investment at times different from when most other mutual funds might do so; and it may select investments for the Fund that would be inappropriate for less aggressive mutual funds. In addition, unlike most other mutual funds, some of the Funds may engage in short sales of securities which involve special risks. RISKS OF INVESTING IN THE FUNDS - ------------------------------------- INVESTMENTS IN SMALLER COMPANIES. Each of the Funds may invest a substantial portion of its assets in securities issued by small companies. Such companies may offer greater opportunities for capital appreciation than larger companies, but investments in such companies may involve certain special risks. Such companies may have limited product lines, markets, or financial resources and may be dependent on a limited management group. While the markets in securities of such companies have grown rapidly in recent years, such securities may trade less frequently and in smaller volume than more widely held securities. The values of these securities may fluctuate more sharply than those of other securities, and a Fund may experience some difficulty in establishing or closing out positions in these securities at prevailing market prices. There may be less publicly available information about the issuers of these securities or less market interest in such securities than in the case of larger companies, and it may take a longer period of time for the prices of such securities to reflect the full value of their issuers' underlying earnings potential or assets. Some securities of smaller issuers may be restricted as to resale or may otherwise be highly illiquid. The ability of a Fund to dispose of such securities may be greatly limited, and a Fund may have to continue to hold such securities during periods when an Adviser would otherwise have sold the security. It is possible that an Adviser or its affiliates or clients may hold securities issued by the same issuers, and may in some cases have acquired the securities at different times, on more favorable terms, or at more favorable prices, than a Fund. FOREIGN SECURITIES. The Funds may invest in securities principally traded in foreign markets. Because foreign securities are normally denominated and traded in foreign currencies, the value of a Fund's assets may be affected favorably or unfavorably by currency exchange rates, exchange control regulations, foreign withholding taxes, and restrictions or prohibitions on the repatriation of foreign currencies. There may be less information publicly available about a foreign company than about a U.S. company, and foreign companies are not generally subject to accounting, auditing, and financial reporting standards and practices comparable to those in the United States. The securities of some foreign companies are less liquid and at times more volatile than securities of comparable U.S. companies. Foreign brokerage commissions and other fees are also generally higher than in the United States. Foreign settlement procedures and trade regulations may involve certain risks (such as delay in payment or delivery of securities or in the recovery of a Fund's assets held abroad) and expenses not present in the settlement of domestic investments. In addition, there may be a possibility of nationalization or expropriation of assets, imposition of currency exchange controls, confiscatory taxation, political or financial instability, and diplomatic developments that could affect the 22 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- value of a Fund's investments in certain foreign countries. Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. In the case of securities issued by a foreign governmental entity, the issuer may in certain circumstances be unable or unwilling to meet its obligations on the securities in accordance with their terms, and a Fund may have limited recourse available to it in the event of default. The laws of some foreign countries may limit a Fund's ability to invest in securities of certain issuers located in those foreign countries. Special tax considerations apply to foreign securities. A Fund may buy or sell foreign currencies and options and futures contracts on foreign currencies for hedging purposes in connection with its foreign investments. Except as otherwise provided in this Prospectus, there is no limit on the amount of a Fund's assets that may be invested in foreign securities. Each of the Funds may invest in securities of issuers in developing countries. Certain Funds may at times invest a substantial portion of their assets in such securities. Investments in developing countries are subject to the same risks applicable to foreign investments generally, although those risks may be increased due to conditions in such countries. For example, the securities markets and legal systems in developing countries may only be in a developmental stage and may provide few, or none, of the advantages or protections of markets or legal systems available in more developed countries. Although many of the securities in which the Funds may invest are traded on securities exchanges, they may trade in limited volume, and the exchanges may not provide all of the conveniences or protections provided by securities exchanges in more developed markets. The Funds may also invest a substantial portion of their assets in securities traded in the over-the-counter markets in such countries and not on any exchange, which may affect the liquidity of the investment and expose the Funds to the credit risk of their counter parties in trading those investments. The prices of securities of issuers in developing countries are subject to greater volatility than those of issuers in many more developed countries. DEBT SECURITIES. Each of the Funds may invest in debt securities from time to time, if its Adviser believes investing in such securities might help achieve the Fund's objective. The Growth & Income, Global Value, and Partners Funds may invest without limit in debt securities and other fixed-income securities. Each of the other Funds may invest in debt securities to the extent consistent with its investment policies, although the Fund's Adviser expects that under normal circumstances those Funds would not likely invest a substantial portion of their assets in debt securities. The CONTRARIAN FUND-TM-, the DIVERSIFIED GROWTH FUND, and the GROWTH & INCOME FUND may invest in lower-quality, high-yielding debt securities. Lower-rated debt securities (commonly called "junk bonds") are considered to be of poor standing and predominantly speculative. Securities in the lowest rating categories may have extremely poor prospects of attaining any real investment standing, and some of those securities in which a Fund may invest may be in default. The rating services' descriptions of securities in the lower rating categories, including their speculative characteristics, are set forth in the Statement of Additional Information. Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. In addition, the lower ratings of such securities reflect a greater possibility that adverse changes in the financial condition of the issuer, or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. Changes by recognized rating services in their ratings of any fixed-income security and in the ability or perceived inability of an issuer to make payments of interest and principal may also affect the value of these investments. See the Statement of Additional Information. Each of the other Funds will invest only in securities rated "investment grade" or considered by its Adviser to be of comparable quality. Investment grade securities are rated Baa or higher by Moody's Investors Service, Inc. or BBB or higher by Standard & Poor's. Securities rated 23 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Baa or BBB lack outstanding investment characteristics, have speculative characteristics, and are subject to greater credit and market risks than higher-rated securities. Descriptions of the securities ratings assigned by Moody's and Standard & Poor's are described in the Statement of Additional Information. A Fund will not necessarily dispose of a security when its debt rating is reduced below its rating at the time of purchase, although the Fund's Adviser will monitor the investment to determine whether continued investment in the security will assist in meeting the Fund's investment objective. If a security's rating is reduced below investment grade, an investment in that security may entail the risks of lower-rated securities described below. BORROWING AND LEVERAGE. The CONTRARIAN FUND-TM- may borrow money to invest in additional portfolio securities. This practice, known as "leverage," increases the Fund's market exposure and its risk. In addition, use of short sales by the Fund may provide the economic equivalent of the Fund's borrowing money. When the Fund has borrowed money for leverage and its investments increase or decrease in value, the Fund's net asset value will normally increase or decrease more than if it had not borrowed money. The interest the Fund must pay on borrowed money will reduce the amount of any potential gains or increase any losses. The extent to which the Fund will borrow money, and the amount it may borrow, depend on market conditions and interest rates. Successful use of leverage depends on the Fund's Advisers' ability to predict market movements correctly. The Fund may at times borrow money by means of reverse repurchase agreements. Reverse repurchase agreements generally involve the sale by the Fund of securities held by it and an agreement to repurchase the securities at an agreed-upon price, date, and interest payment. Reverse repurchase agreements will increase the Fund's overall investment exposure and may result in losses. The amount of money borrowed by the Fund for leverage may generally not exceed one-third of the Fund's assets (including the amount borrowed). OTHER INVESTMENT STRATEGIES AND TECHNIQUES - ------------------------------------- In addition to the principal investment strategies described in the Summary Information Section above, the Funds may at times use the strategies and techniques described below, which involve certain special risks. This Prospectus does not attempt to disclose all of the various investment techniques and types of securities that an Adviser might use in managing the Funds. As in any mutual fund, investors must rely on the professional investment judgment and skill of the Adviser. SHORT SALES (THE CONTRARIAN FUND-TM-, GLOBAL NATURAL RESOURCES FUND, MICROCAP GROWTH FUND, AND VALUE + GROWTH FUND ONLY). When an Adviser anticipates that the price of a security will decline, it may sell the security short and borrow the same security from a broker or other institution to complete the sale. A Fund may make a profit or incur a loss depending upon whether the market price of the security decreases or increases between the date of the short sale and the date on which the Fund must replace the borrowed security. An increase in the value of a security sold short by a Fund over the price at which it was sold short will result in a loss to the Fund, and there can be no assurance that a Fund will be able to close out the position at any particular time or at an acceptable price. The Contrarian Fund-TM- may enter into short sales on securities with a value of up to 40% of the Fund's total assets. Use of short sales by The Contrarian Fund-TM- may have the effect of providing the Fund with investment leverage. For a description of the effects and the risks of investment leverage, see "Borrowing and leverage" in this Prospectus. Each of the Funds other than The Contrarian Fund-TM- may enter into short sales on securities with a value of up to 25% of the Fund's total assets. ZERO COUPON BONDS. Any of the Funds may at times invest in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from face value and pay interest only at maturity 24 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- rather than at intervals during the life of the security. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. The values of zero-coupon bonds and payment-in-kind bonds are subject to greater fluctuation in response to changes in market interest rates than bonds which pay interest currently, and may involve greater credit risk than such bonds. OPTIONS AND FUTURES. A Fund may buy and sell call and put options to hedge against changes in net asset value or to attempt to realize a greater current return. In addition, through the purchase and sale of futures contracts and related options, a Fund may at times seek to hedge against fluctuations in net asset value and to attempt to increase its investment return. A Fund's ability to engage in options and futures strategies will depend on the availability of liquid markets in such instruments. It is impossible to predict the amount of trading interest that may exist in various types of options or futures contracts. Therefore, there is no assurance that a Fund will be able to utilize these instruments effectively for the purposes stated above. Options and futures transactions involve certain risks which are described below and in the Statement of Additional Information. Transactions in options and futures contracts involve brokerage costs and may require a Fund to segregate assets to cover its outstanding positions. For more information, see the Statement of Additional Information. INDEX FUTURES AND OPTIONS. A Fund may buy and sell index futures contracts ("index futures") and options on index futures and on indices (or may purchase investments whose values are based on the value from time to time of one or more securities indices) for hedging purposes. An index future is a contract to buy or sell units of a particular bond or stock index at an agreed price on a specified future date. Depending on the change in value of the index between the time when the Fund enters into and terminates an index futures or option transaction, the Fund realizes a gain or loss. A Fund may also buy and sell index futures and options to increase its investment return. LEAPS AND BOUNDS. The VALUE + GROWTH FUND may purchase long-term exchange-traded equity options called Long-Term Equity Anticipation Securities ("LEAPs") and Buy-Write Options Unitary Derivatives ("BOUNDs"). LEAPs provide a holder the opportunity to participate in the underlying securities' appreciation in excess of a fixed dollar amount, and BOUNDs provide a holder the opportunity to retain dividends on the underlying securities while potentially participating in the underlying securities' capital appreciation up to a fixed dollar amount. The VALUE + GROWTH FUND will not purchase these options with respect to more than 25% of the value of its net assets. For more information, see the Statement of Additional Information. RISKS RELATED TO OPTIONS AND FUTURES STRATEGIES. Options and futures transactions involve costs and may result in losses. Certain risks arise because of the possibility of imperfect correlations between movements in the prices of futures and options and movements in the prices of the underlying security or index of the securities held by a Fund that are the subject of a hedge. The successful use by a Fund of the strategies described above further depends on the ability of its Adviser to forecast market movements correctly. Other risks arise from a Fund's potential inability to close out futures or options positions. Although a Fund will enter into an options or futures transactions only if its Adviser believes that a liquid secondary market exists for such option or futures contract, there can be no assurance that a Fund will be able to effect closing transactions at any particular time or at an acceptable price. Each Fund expects that its options and futures transactions generally will be conducted on recognized exchanges. A Fund may in certain instances purchase and sell options in the over-the-counter markets. A Fund's ability to terminate options in the over-the-counter markets may be more limited than for exchange-traded options, and such transactions also involve the risk that securities dealers participating in such transactions would be unable to meet their obligations to the Fund. A Fund will, however, 25 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- engage in over-the-counter transactions only when appropriate exchange-traded transactions are unavailable and when, in the opinion of its Adviser, the pricing mechanism and liquidity of the over-the-counter markets are satisfactory and the participants are responsible parties likely to meet their obligations. A Fund will not purchase futures or options on futures or sell futures if, as a result, the sum of the initial margin deposits on the Fund's existing futures positions and premiums paid for outstanding options on futures contracts would exceed 5% of the Fund's net assets. (For options that are "in-the-money" at the time of purchase, the amount by which the option is "in-the-money" is excluded from this calculation.) NON-DIVERSIFICATION AND SECTOR CONCENTRATION. The CONTRARIAN FUND-TM-, the GLOBAL VALUE FUND, and the PARTNERS FUND are "non-diversified" investment companies, and may invest their assets in a more limited number of issuers than may other investment companies. Under the Internal Revenue Code, an investment company, including a non-diversified investment company, generally may not invest more than 25% of its assets in the securities of any one issuer other than U.S. Government securities and other securities of certain other investment companies and, with respect to 50% of its total assets, a Fund may not invest more than 5% of its total assets in the securities of any one issuer (except U.S. Government securities and securities of certain other investment companies). Thus, each of those Funds may invest up to 25% of its total assets in the securities of each of any two issuers. This practice involves an increased risk of loss to a Fund if the market value of a security should decline or its issuer were otherwise not to meet its obligations. At times a Fund may invest more than 25% of its assets in securities of issuers in one or more market sectors such as, for example, the technology sector. A market sector may be made up of companies in a number of related industries. A Fund would only concentrate its investments in a particular market sector if its Adviser were to believe the investment return available from concentration in that sector justifies any additional risk associated with concentration in that sector. When a Fund concentrates its investments in a market sector, financial, economic, business, and other developments affecting issuers in that sector will have a greater effect on the Fund than if it had not concentrated its assets in that sector. Currently, The CONTRARIAN FUND-TM- has invested a significant portion of its assets in companies within a number of industries involving base metals, precious metals, and oil/energy. In addition, a number of the Funds have invested, and may continue to invest, a significant portion of their assets in companies within the technology and telecommunications sectors. Accordingly, the performance of these Funds may be subject to a greater risk of market fluctuation than that of a fund invested in a wider spectrum of market or industrial sectors. SECURITIES LOANS AND REPURCHASE AGREEMENTS. Each of the Funds may lend portfolio securities to broker-dealers and may enter into repurchase agreements. These transactions must be fully collateralized at all times, but involve some risk to a Fund if the other party should default on its obligations and the Fund is delayed or prevented from recovering the collateral. DEFENSIVE STRATEGIES. At times, a Fund's Adviser may judge that market conditions make pursuing a Fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times, the Adviser may temporarily use alternative strategies, primarily designed to reduce fluctuations in the values of the Fund's assets. In implementing these "defensive" strategies, a Fund may invest in U.S. Government securities, other high-quality debt instruments, and other securities its Adviser believes to be consistent with the Fund's best interests. If such a temporary "defensive" strategy is implemented, a Fund may not achieve its investment objective. PORTFOLIO TURNOVER. The length of time a Fund has held a particular security is not generally a consideration in investment decisions. The investment policies of a Fund may lead to frequent changes in the Fund's investments, particularly in periods of volatile market movements. A change in the securities held by a Fund is known 26 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- as "portfolio turnover." Portfolio turnover generally involves some expense to a Fund, including brokerage commissions or dealer mark-ups and other transaction costs on the sale of securities and reinvestment in other securities. Such sales may result in realization of taxable capital gains including short-term capital gains which are generally taxed to shareholders at ordinary income tax rates. The Portfolio turnover rates for the Funds are set forth under "Financial Highlights." MANAGEMENT OF THE FUNDS INVESTMENT ADVISERS - ------------------------------------- RS Investment Management, L.P., 555 California Street, San Francisco, CA 94104, is the investment adviser for each of the Funds other than the Emerging Growth Fund. RSIM, L.P., a California partnership, was formed in 1993. RS Investment Management, Inc., 40 Tower Lane, Avon Park South, Avon, Connecticut 06001 is the investment advisor for the Emerging Growth Fund. RS Investment Management, Inc. commenced operations in March 1986. Subject to such policies as the Trustees may determine, RS Investment Management (or a Sub-Adviser to the Fund in question, as the case may be) furnishes a continuing investment program for the Funds and makes investment decisions on their behalf. The Trust pays all expenses not assumed by RS Investment Management including, among other things, Trustees' fees, auditing, accounting, legal, custodial, investor servicing, and shareholder reporting expenses, and payments under the Funds' Distribution Plans. The Advisers place all orders for purchases and sales of the Funds' investments. In selecting broker-dealers, an Adviser may consider research and brokerage services furnished to it and its affiliates. Subject to seeking the most favorable price and execution available, an Adviser may consider sales of shares of the Funds as a factor in the selection of broker-dealers. RS Investment Management may at times bear certain expenses of the Funds. The Investment Advisory Agreements between the Funds and RS Investment Management permit RS Investment Management to seek reimbursement for those expenses. ADMINISTRATIVE SERVICES. Each of the DIVERSIFIED GROWTH, GROWTH & INCOME, GLOBAL NATURAL RESOURCES, GLOBAL VALUE, INFORMATION AGE and MICROCAP GROWTH FUNDS has entered into an agreement with RSIM, L.P. pursuant to which RSIM, L.P. provides administrative services to the Fund. No fees are payable by the Funds under the agreement. SUB-ADVISERS - ------------------------------------- Elijah Asset Management, LLC, 555 California St., San Francisco, California 94104, a newly formed Delaware limited liability company, serves as sub-adviser to The Information Age Fund-TM- and the Value + Growth Fund in respect of all of the assets of those Funds. Eastbourne Management, L.L.C. 555 California St., San Francisco, California 94104, serves as a sub-adviser in respect of a portion of the assets of The Contrarian Fund-TM-. (Each of Elijah Asset Management and Eastbourne is sometimes referred to as a "Sub-Adviser.") Subject to such policies as the Trustees or RSIM, L.P. may determine, each Sub-Adviser manages such of the Fund's assets as are allocated to it in accordance with the Fund's investment objective, policies, and limitations. Each Sub-Adviser also makes investment decisions for the Fund as to those assets and places orders to purchase and sell securities and other investments for such Fund in respect of those assets. ELIJAH ASSET MANAGEMENT, LLC. RSIM, L.P. pays a fee to Elijah Asset Management with respect to each of The Information Age Fund and the Value + Growth Fund equal to 50% of the 27 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- fees paid to RSIM, L.P. by such Fund pursuant to its Investment Advisory Agreement. Pursuant to an agreement with RSIM, L.P., Elijah Asset Management has agreed to employ Mr. Ronald Elijah as the full-time principal portfolio manager of The Information Age Fund-TM- and the Value + Growth Fund. Previously, Mr. Elijah managed these Funds as an employee of RSIM, L.P. EASTBOURNE MANAGEMENT, L.L.C. RSIM, L.P. allocates a portion of The Contrarian Fund's assets for management by Eastbourne in circumstances where RSIM, L.P. believes that management of those assets by Eastbourne would be in the best interests of the Fund, such as where RSIM, L.P. believes that an increase in, or change to, the Fund's short positions might be desirable, or where it believes that long investments by the Fund might be desirable in sectors or companies where Eastbourne might offer a successful investment program. RSIM, L.P. pays a fee to Eastbourne in an amount equal to 40% of the fees received by RSIM, L.P. under its Investment Advisory Agreement with the Fund, in respect of assets allocated to Eastbourne. For 1998, the Funds paid, in total, the following advisory fees (as a percentage of each Fund's average net assets):
CONTRACTUAL FEES PAID* RATE ------------- ------------- The Contrarian Fund-TM- 1.50% 1.50% RS Diversified Growth Fund 0.94% 1.00% RS Emerging Growth Fund 1.00% 1.00% RS Global Natural Resources Fund 0.74% 1.00% RS Global Value Fund 0.00% 1.00% RS Growth & Income Fund 0.66% 1.00% The Information Age Fund-TM- 1.00% 1.00% RS MicroCap Growth Fund 1.15% 1.25% RS Partners Fund 1.06% 1.25% RS Value + Growth Fund 1.00% 1.00%
* The fees paid reflect expense limitations in effect during the period. PORTFOLIO MANAGERS Roderick R. Berry, formerly an employee of RSIM, L.P. and now a member of Elijah Asset Management, serves as a co-portfolio manager of The Information Age Fund-TM-. Prior to joining Elijah Asset Management, Mr. Berry was a member of the Robertson Stephens Investment Management research team. He has served on the management team of that Fund since its inception. Prior to joining RS Investment Management, Mr. Berry worked for USL Capital for six years as both an investment officer and a financial manager. Prior to joining USL Capital, he was the assistant product manager for interest-bearing checking at Wells Fargo Bank. From 1987-1989, Mr. Berry was president and founder of the Bay Area Optical Laboratory, Inc., a wholesale optical laboratory. He holds a B.A. in economics from Stanford University and an M.B.A. from the J.L. Kellogg School at Northwestern University. James L. Callinan is responsible for managing the Emerging Growth Fund's portfolio. From 1986 until June 1996, Mr. Callinan was employed by Putnam Investments, where, beginning in June 1994, he served as portfolio manager of the Putnam OTC Emerging Growth Fund. Mr. Callinan received an A.B. in economics from Harvard College, an M.S. in accounting from New York University, and an M.B.A. from Harvard Business School, and is a Charter Financial Analyst. Ronald E. Elijah, formerly an employee of RSIM, L.P. and now a managing member of Elijah Asset Management, has managed the Value + Growth Fund's portfolio since that Fund's inception in April 1992. Mr. Elijah is also the portfolio manager for The Information Age Fund-TM-. From August 1985 to January 1990, Mr. Elijah was a securities analyst for Robertson, Stephens & Company LLC. From January 1990 to January 1992, Mr. Elijah was an analyst and portfolio manager for Water Street Capital, which managed short selling investment funds. He holds a 28 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- master's degree in economics from Humboldt State University and an M.B.A. with an emphasis in finance from Golden Gate University. David J. Evans is responsible for managing the portfolio of the MicroCap Growth Fund. Mr. Evans has more than fifteen years of investment research and management experience, and has been a part of the management team at RS Investment Management since 1989. Mr. Evans was an analyst and portfolio manager at CIGNA before joining RS Investment Management. He holds a B.A. from Muskingum College and an M.B.A. from the Wharton School of the University of Pennsylvania. Andrew P. Pilara, Jr. has been responsible for managing the Partners Fund since the Fund's inception in July 1995 and is responsible for managing the Global Natural Resources and Global Value Funds. Mr. Pilara is the President and a Trustee of the Trust. Since August 1993 he has been a member of The Contrarian Fund-TM- management team. Mr. Pilara has been involved in the securities business for over 25 years, with experience in portfolio management, research, trading, and sales. Prior to joining RS Investment Management, he was president of Pilara Associates, an investment management firm he established in 1974. He holds a B.A. in economics from St. Mary's College. Mr. Pilara has been a Trustee of the Trust since September 1997. Rainerio Reyes joined RS Investment Management in February 1994 and serves as a co-portfolio manager of the MicroCap Growth Fund. Prior to joining RS Investment Management, he was a manager in Ernst & Young's management consulting division and served clients in the retail, hotel, financial services, real estate, and business services industries. During the Aquino Administration, Mr. Reyes served as Executive Assistant to the Secretary of Transportation and Communications, Republic of the Philippines. While with the Hilton Hotels Corporation, Mr. Reyes held various management positions with the food and beverage and rooms divisions. Mr. Reyes holds a B.S. in hotel and restaurant administration from Cornell University and an M.B.A. with a major in finance from the Wharton School of the University of Pennsylvania. John H. Seabern serves as a co-portfolio manager of the Diversified Growth Fund. He has served on the management team of that Fund since its inception. Mr. Seabern is also a research analyst for the Growth & Income Fund. Prior to joining the Growth & Income Fund, Mr. Seabern was a research analyst for The Contrarian Fund-TM-. He has been with RS Investment Management since September 1993. Prior to that time, Mr. Seabern worked at Duncan-Hurst Capital Management as a performance analyst for two years. He holds a B.S. degree in finance from the University of Colorado. John L. Wallace has been responsible for managing the Growth & Income Fund since its inception in July 1995 and is responsible for managing the Diversified Growth Fund. Prior to joining RS Investment Management, Mr. Wallace was Vice President of Oppenheimer Management Corp., where he was portfolio manager of the Oppenheimer Main Street Income and Growth Fund. He holds a B.A. from the University of Idaho and an M.B.A. from Pace University. The Contrarian Fund-TM- is managed by a team of investment professionals at RS Investment Management and Eastbourne Management, L.L.C. Mr. Paul Stephens and Mr. Andrew P. Pilara, Jr. serve as senior members of the RS Investment Management team for the Fund and Mr. Rick Barry serves as a senior member of the Eastbourne team for the Fund. 29 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HOW THE FUNDS' SHARES ARE PRICED CALCULATION OF NET ASSET VALUE - ------------------------------------- Each Fund calculates the net asset value of its shares by dividing the total value of its assets, less its liabilities, by the number of shares outstanding. Shares are valued as of 4:30 p.m. eastern time on each day the New York Stock Exchange is open. The Funds value their portfolio securities for which market quotations are readily available at market value. Short-term investments that will mature in 60 days or less are stated at amortized cost, which approximates market value. The Funds value all other securities and assets at their fair values as determined in accordance with the guidelines and procedures adopted by the Trust's Board of Trustees. Securities quoted in foreign currencies are translated into U.S. dollars at the current exchange rates or at such other rates as may be used in accordance with procedures approved by the Trustees. As a result, fluctuations in the values of such currencies in relation to the U.S. dollar will affect the net asset value of a Fund's shares even though there has not been any change in the values of such securities as quoted in such foreign currencies. All assets and liabilities of a Fund denominated in foreign currencies are valued in U.S. dollars based on the exchange rate last quoted by a major bank prior to the time when the net asset value of a Fund's shares is calculated. Because certain of the securities in which a Fund may invest may trade on days when such Fund does not price its shares, the net asset value of a Fund's shares may change on days when shareholders will not be able to purchase or redeem their shares. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of a particular class of shares are computed as of such times. Also because of the amount of time required to collect and process trading information as to large number of securities issues, the values of certain securities (such as convertible bonds) are determined based on market quotations collected earlier in the day at the latest practicable time prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange which will not be reflected in the computation of net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. The Funds expect that the days, other than weekend days, that the New York Stock Exchange will not be open 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. During any 90-day period, the Trust is committed to pay in cash all requests to redeem shares by any one shareholder, up to the lesser of $250,000 and 1% of the value of a Fund's net assets at the beginning of the period. Should redemptions by any shareholder of a Fund exceed this limitation, the Trust reserves the right to redeem the excess amount in whole or in part in securities or other assets. If shares are redeemed in this manner, the redeeming shareholder typically will incur brokerage and other costs in converting the securities to cash. HOW TO PURCHASE SHARES Currently, your minimum initial investment is $5,000 ($1,000 for IRA and for gift/transfer-to-minor accounts), and your subsequent investments must be at least $100 ($1 for IRA). You may obtain an Application by calling the Funds at 30 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1-800-766-FUND, or by writing to the Funds at 555 California Street, Suite 2500, San Francisco, CA 94104. For more information on RS Funds 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 in which you intend to invest (or, if you are investing in more than one Fund, make your check payable to RS Investment Trust), to the Funds' Transfer Agent: State Street Bank and Trust Company, c/o National Financial Data Services, P.O. Box 419717, Kansas City, MO 64141-6717. BY OVERNIGHT MAIL: Send the information described above to: 330 West 9th Street, First Floor, Kansas City, MO 64105. BY WIRE: (1) Telephone National Financial Data Services at 1-800-624-8025. Indicate the name(s) to be used on the account registration, the mailing address, your social security or tax ID number, the amount being wired, the name of your wiring bank, and the name and telephone number of a contact person at the wiring bank. (2) Then instruct your bank to wire the specified amount, along with your account name and number to: State Street Bank and Trust Company ABA# 011 000028 Attn.: Custody DDA# 99047177 225 Franklin Street Boston, MA 02110 Credit: [Name of Fund] For further credit: --------------------------------- (Shareholder's name) --------------------------------- (Shareholder's account #) (3) At the same time, you MUST mail a completed and signed Application to: State Street Bank and Trust Company, c/o National Financial Data Services, P.O. Box 419717, Kansas City, MO 64141-6717. Please include your account number on the Application. Failure to supply a signed Application may result in backup withholding. You also may purchase and sell shares 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 Funds. The Funds, an Adviser or its affiliates, or Provident Distributors, Inc. ("Provident"), the Funds' 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 a RS fund. If you have established the Autobuy option, you may purchase additional shares in an existing account in any amount that does not exceed the cumulative dollar value held in the account, by calling the Transfer Agent at 1-800-624-8025 and instructing the Transfer Agent as to the dollar amount you wish to invest. The investment will automatically be processed through the Automatic Clearing House (ACH) system. Shares will be issued at the net asset value per share after the Fund accepts your order, which will typically be on the date when you provide proper instructions to the Transfer Agent (assuming you do so prior to the close of the New York Stock Exchange). There is no fee for this option. If you did not establish this option at the time you opened your account, send a 31 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- letter of instruction, along with a voided check, to the Transfer Agent. OTHER INFORMATION ABOUT PURCHASING SHARES - ------------------------------------- All purchases of the Funds' shares are subject to acceptance by a 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 a 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 Net Asset Value Is Determined." Please initiate any wire transfer early in the morning to ensure that the wire is received by a 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 Funds or the Transfer Agent. Each Fund can redeem shares to reimburse it or the Transfer Agent for any such loss. Each 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, except that certificates for shares of the Emerging Growth Fund will be issued upon written request to the Transfer Agent. HOW TO SELL SHARES You may redeem your shares, or sell your shares back to the appropriate Fund, on any business day by following one of the procedures explained below. REDEMPTIONS BY MAIL - ------------------------------------- You may redeem your shares of a 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 you do not wish to establish telephone redemption privileges 32 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (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. Each Fund employs reasonable procedures in an effort to confirm the authenticity of telephone instructions. If procedures established by the Trust are not followed, the Funds 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. Each Fund may change, modify, or terminate its telephone redemption services at any time upon 30 days' notice. WIRE TRANSFER OF REDEMPTIONS - ------------------------------------- If your financial institution receives Federal Reserve wires, you may instruct that your redemption proceeds be forwarded to you by a wire transfer. Please indicate your financial institution's complete wiring instructions. The Funds 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, 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 each Fund will make payment for redeemed shares within seven days thereafter. Under unusual circumstances, a 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 a 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 a 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. 33 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXCHANGES Shares of one Fund may be exchanged for shares of another Fund. 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 Fund are qualified for sale. However, you may not exchange your investment in shares of any Fund more than four times in any twelve-month period (including the initial exchange of your investment from that Fund during the period, and subsequent exchanges of that investment from other Funds during the same twelve-month period). Investors should note that an exchange will result in a taxable event and will generally result in a taxable gain or loss. Exchange privileges may be terminated, modified, or suspended by a 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 Funds for details), you may make exchanges by telephone. DIVIDENDS AND DISTRIBUTIONS Each Fund distributes substantially all of its net investment income and net capital gains to shareholders at least annually (more often, if necessary to avoid certain excise or income taxes on the Fund). YOU MAY CHOOSE EITHER OF THE FOLLOWING DISTRIBUTION OPTIONS: - - Reinvest your distributions in additional shares of your Fund; or - - Receive your distributions in cash. All distributions will be automatically reinvested in Fund shares unless the shareholder requests cash payment on at least 10 days' prior written notice to the Transfer Agent. TAXES QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each 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. A Fund will distribute substantially all of its net investment income and net capital gain income on a current basis. TAXES ON DIVIDENDS AND DISTRIBUTIONS. For federal income tax purposes, distributions of investment income are taxable as ordinary income. Taxes on distributions of capital gains are determined by how long the Fund owned the investments that generated them, rather than how long shareholders have held Fund shares. Distributions are taxable to shareholders even if they are paid from income or gains earned by the Fund before an investment in a Fund (and thus were included in the price paid for the Fund shares). Distributions of gains from investments that the Fund owned for more than one year will be taxable as capital gains. Distributions of gains from investments that the Fund owned for one year or less will be taxable as ordinary income. Distributions will be taxable as described above, whether received in cash or in shares through the reinvestment of distributions. Early in each year, 34 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- the Trust will notify you of the amount and tax status of distributions paid to you by each of the Funds 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 Funds will also generally be subject to federal income or capital gains tax, depending on your holding period. A 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, a Fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. A Fund's investments in foreign securities may be subject to foreign withholding taxes. In that case, the Fund's yield on those securities would be decreased. In addition, a Fund's investments in foreign securities or foreign currencies may increase or accelerate the Fund's recognition of ordinary income and may affect the timing or amount of the Fund's distributions. Shareholders in a Fund that invests more than 50% of its assets in foreign securities may be entitled to claim a credit or deduction with respect to foreign taxes. CONSULT YOUR TAX ADVISOR ABOUT OTHER POSSIBLE TAX CONSEQUENCES. This is a summary of certain federal tax consequences of investing in a Fund. You should consult your tax advisor for more information on your own tax situation, including possible foreign state and local taxes. DISTRIBUTION ARRANGEMENTS AND RULE 12B-1 FEES Provident Distributors, Inc. is the principal underwriter of the Funds' shares. To compensate Provident for the services it provides and for the expenses it bears in connection with the distribution of a Fund's Class A shares, each Fund makes payments to Provident under a Distribution Plan adopted pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the Plan, each of the Funds pays Provident compensation, accrued daily and paid monthly, at the annual rate of 0.25% of the Fund's average daily net assets attributable to its Class A shares. (The Distribution Plan contemplates that The Contrarian Fund-TM- may make payments at the annual rate of up to 0.75% of the Fund's average daily net assets attributable to its Class A shares, although the Trustees have currently limited such payments to the annual rate of 0.25% of the Fund's average daily net assets attributable to its Class A shares). Provident may pay brokers a commission expressed as a percentage of the purchase price of shares of the Funds. Affiliates of RS Investment Management provide certain services to Provident in respect of the promotion of the shares of the Funds. In return for these services, Provident pays to these affiliates substantially all of the payments received by Provident under the Distribution Plan. RS Investment Management and its affiliates, at their own expense and out of their own assets, may also provide other compensation to financial institutions in connection with sales of the Funds' 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 Funds' 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 Funds pay distribution and other fees for the sale of their shares and for services provided to shareholders out of the Funds' assets on 35 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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. YEAR 2000 DISCLOSURE Each of the Funds receives services from its Adviser, administrator, sub-administrator, distributor, transfer agent, custodian and other providers which rely on the smooth functioning of their respective systems and the systems of others to perform those services. It is generally recognized that certain systems in use today may not perform their intended functions adequately after the Year 1999 because of the inability of the software to distinguish the Year 2000 from the Year 1900. Each Adviser is taking steps that it believes is reasonably designed to address this potential "Year 2000" problem and to obtain satisfactory assurances that comparable steps are being taken by each of the Funds' other major service providers. There can be no assurance, however, that these steps will be sufficient to avoid any adverse impact on the Funds from this problem. 36 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS THE CONTRARIAN FUND-TM- The financial highlights table is intended to help you understand the financial performance of the Fund for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions).
The Contrarian Fund-TM- - -------------------------------------------------------------------------------------------------- NINE YEAR YEAR YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED 12/31/98 12/31/97 12/31/96 12/31/95 3/31/95 - -------------------------------------------------------------------------------------------------- Net asset value, beginning of period $11.61 $16.57 $13.78 $10.70 $12.34 Income From Investment Operations: Net investment income/(loss) (0.08) 0.00 0.00 (0.01) (0.04) Net realized gain/(loss) and unrealized appreciation/(depreciation) on investments (3.72) (4.88) 2.99 3.09 (1.35) - -------------------------------------------------------------------------------------------------- Total from investment operations (3.80) (4.88) 2.99 3.08 (1.39) Distributions: Dividends from net investment income -- -- -- -- -- Distribution from net realized capital gain (0.58) (0.08) (0.20) -- (0.25) - -------------------------------------------------------------------------------------------------- Total Distributions (0.58) (0.08) (0.20) -- (0.25) Net asset value, end of period $7.23 $11.61 $16.57 $13.78 $10.70 Total Return (32.69)% (29.51)% 21.68% 28.79% (11.23)% Ratios/Supplemental Data: Net assets, end of period (thousands) $124,666 $398,242 $1,063,438 $507,477 $397,646 Ratio of net operating expenses to average net assets 2.83% 2.48% 2.46% 2.54%* 2.46%(1) Ratio of net investment income/(loss) to average net assets (0.80)% 0.01% (0.02)% (0.20)%* (0.27)%(1) Portfolio turnover rate 39% 36% 44% 29% 79% - --------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. (1) IF THE CONTRARIAN FUND-TM- HAD PAID ALL OF ITS EXPENSES AND THERE HAD BEEN NO REIMBURSEMENT BY THE ADVISER, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED MARCH 31, 1995, WOULD HAVE BEEN 2.58%, AND THE RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS WOULD HAVE BEEN (0.39)%. 37 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) DIVERSIFIED GROWTH FUND The financial highlights table is intended to help you understand the financial performance of the Fund since the Fund commenced operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions).
Diversified Growth Fund - --------------------------------------------------------------------------------------------------- FOR THE YEAR YEAR PERIOD ENDED ENDED ENDED 12/31/98 12/31/97 12/31/96(1) - --------------------------------------------------------------------------------------------------- Net asset value, beginning of period $14.04 $12.42 $10.00 Income From Investment Operations: Net investment income/(loss) (0.19) (0.17) (0.05) Net realized gain/(loss) and unrealized appreciation/(depreciation) on investments 2.43 3.72 2.47 - --------------------------------------------------------------------------------------------------- Total from investment operations 2.24 3.55 2.42 Distributions: Dividends from net investment income -- -- -- Distribution from net realized capital gain (0.39) (1.93) -- - --------------------------------------------------------------------------------------------------- Total Distributions (0.39) (1.93) -- Net asset value, end of period $15.89 $14.04 $12.42 Total Return 16.28% 29.45% 24.20% Ratios/Supplemental Data: Net assets, end of period (thousands) $69,031 $80,278 $59,588 Ratio of net operating expenses to average net assets 1.89%(2) 1.94%(2) 2.28%(2)* Ratio of net investment income/(loss) to average net assets (1.29)%(2) (1.20)%(2) (1.05)%(2)* Portfolio turnover rate 403% 370% 69% - ---------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. (1) THE DIVERSIFIED GROWTH FUND COMMENCED OPERATIONS ON AUGUST 1, 1996. (2) IF THE DIVERSIFIED GROWTH FUND HAD PAID ALL OF ITS EXPENSES AND HAD RECEIVED NO REIMBURSEMENT FROM THE ADVISER, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1998, FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD ENDED DECEMBER 31, 1996, WOULD HAVE BEEN 1.95, 2.14% AND 2.44%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS WOULD HAVE BEEN (1.35%), (1.40)% AND (1.21)%, RESPECTIVELY. 38 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) EMERGING GROWTH FUND The financial highlights table is intended to help you understand the financial performance of the Fund for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions).
Emerging Growth Fund - --------------------------------------------------------------------------------------------------- NINE YEAR YEAR YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED 12/31/98 12/31/97 12/31/96 12/31/95 3/31/95 - --------------------------------------------------------------------------------------------------- Net asset value, beginning of period $18.71 $20.07 $19.21 $18.36 $18.37 Income From Investment Operations: Net investment income/(loss) (0.20) (0.14) (0.17) (0.15) (0.17) Net realized and unrealized appreciation/ (depreciation) on investments 5.32 3.80 4.23 2.58 2.26 - --------------------------------------------------------------------------------------------------- Total from investment operations 5.12 3.66 4.06 2.43 2.09 Distributions: Dividends from net investment income -- -- -- -- -- Distribution from net realized capital gain (0.88) (5.02) (3.20) (1.58) (2.10) - --------------------------------------------------------------------------------------------------- Total Distributions (0.88) (5.02) (3.20) (1.58) (2.10) Net asset value, end of period $22.95 $18.71 $20.07 $19.21 $18.36 Total Return 28.02% 18.54% 21.53% 13.50% 12.01% Ratios/Supplemental Data: Net assets, end of period (thousands) $403,330 $248,730 $210,404 $167,728 $182,275 Ratio of net operating expenses to average net assets 1.47% 1.50% 1.60% 1.64%* 1.56% Ratio of net investment income/(loss) to average net assets (1.03)% (0.68)% (0.83)% (0.99)%* (0.96)% Portfolio turnover rate 291% 462% 270% 147% 280% - ---------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. 39 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) GLOBAL NATURAL RESOURCES FUND The financial highlights table is intended to help you understand the financial performance of the Fund since the Fund commenced operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions).
Global Natural Resources Fund - ----------------------------------------------------------------------------------------------------- PERIOD YEAR YEAR YEAR 11/15/95 ENDED ENDED ENDED THROUGH 12/31/98 12/31/97 12/31/96 12/31/95 - ----------------------------------------------------------------------------------------------------- Net asset value, beginning of period $11.67 $14.29 $10.12 $10.00 Income From Investment Operations: Net investment income/(loss) (0.07) (0.05) (0.06) 0.02 Net realized gain/(loss) and unrealized appreciation/ (depreciation) on investments (3.95) (2.39) 4.24 0.10 - ----------------------------------------------------------------------------------------------------- Total from investment operations (4.02) (2.44) 4.18 0.12 Distributions: Dividends from net investment income -- -- (0.01) -- Distribution from net realized capital gain (0.19) (0.18) -- -- - ----------------------------------------------------------------------------------------------------- Total Distributions (0.19) (0.18) (0.01) -- Net asset value, end of period $7.46 $11.67 $14.29 $10.12 Total Return (34.45)% (17.14)% 41.21% 1.20% Ratios/Supplemental Data: Net assets, end of period (thousands) $23,476 $78,371 $120,521 $792 Ratio of net operating expenses to average net assets 1.95%(1) 1.81%(1) 1.94%(1) 2.60%(1)* Ratio of net investment income/(loss) to average net assets (0.69)%(1) (0.38)%(1) (0.45)%(1) 1.84%(1)* Portfolio turnover rate 63% 97% 82% 0% - -----------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. (1) IF THE GLOBAL NATURAL RESOURCES FUND HAD PAID ALL OF ITS EXPENSES AND HAD RECEIVED NO REIMBURSEMENT FROM THE ADVISER, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1998, FOR THE YEAR ENDED DECEMBER 31, 1997, FOR THE YEAR ENDED DECEMBER 31, 1996, AND THE PERIOD FROM NOVEMBER 15, 1995 (COMMENCEMENT OF OPERATIONS), THROUGH DECEMBER 31, 1995, WOULD HAVE BEEN 2.21%, 1.82%, 2.16% AND 14.25%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS WOULD HAVE BEEN (0.96)%, (0.38)%, (0.67)% AND (9.81)%, RESPECTIVELY. 40 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) GLOBAL VALUE FUND AND GROWTH & INCOME FUND The financial highlights table is intended to help you understand the financial performance of these Funds since the Funds commenced operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in such Fund (assuming reinvestment of all dividends and distributions).
Global Value Fund Growth & Income Fund - -------------------------------------------------------------------------------------------------- PERIOD PERIOD YEAR 4/1/97 YEAR YEAR YEAR 7/12/95 ENDED THROUGH ENDED ENDED ENDED THROUGH 12/31/98 12/31/97 12/31/98 12/31/97 12/31/96 12/31/95 - -------------------------------------------------------------------------------------------------- Net asset value, beginning of period $11.15 $10.00 $13.52 $13.62 $11.24 $10.00 Income From Investment Operations: Net Investment income/(loss) 0.16 0.28 0.14 0.07 0.02 -- Net realized gain/(loss) and unrealized appreciation/ (depreciation) on investments 1.03 1.69 1.34 2.90 2.70 1.24 - -------------------------------------------------------------------------------------------------- Total from investment operations 1.19 1.97 1.48 2.97 2.72 1.24 Distributions: Dividends from net investment income (0.08) (0.22) (0.19) (.04) (0.02) -- Distribution from net realized capital gain (3.23) (0.60) (0.77) (3.03) (0.32) -- - -------------------------------------------------------------------------------------------------- Total Distributions (3.31) (0.82) (0.96) (3.07) (0.34) -- Net asset value, end of period $9.03 $11.15 $14.04 $13.52 $13.62 $11.24 Total Return 11.11% 19.97% 11.65% 22.40% 24.16% 12.40% Ratios/Supplemental Data: Net assets, end of period (thousands) $8,251 $21,019 $183,910 $298,669 $309,775 $136,902 Ratio of net operating expenses to average net assets 1.95%(1) 1.95%(1) 1.30%(1) 1.30%(1) 1.71%(1) 1.94%* Ratio of net investment income/ (loss) to average net assets 1.37%(1) 3.50%(1) 1.00%(1) 0.45%(1) 0.18%(1) (0.01)%* Portfolio turnover rate 279% 234% 212% 236% 212% 97% - --------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. (1) IF THE GLOBAL VALUE FUND HAD PAID ALL OF ITS EXPENSES AND HAD RECEIVED NO REIMBURSEMENT FROM THE ADVISERS, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1998, AND FOR THE YEAR ENDED DECEMBER 31, 1997 WOULD HAVE BEEN 2.99% AND 3.21%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 0.33% AND 2.24%, RESPECTIVELY. IF THE GROWTH & INCOME FUND HAD PAID ALL OF ITS EXPENSES AND HAD RECEIVED NO WAIVER FROM THE ADVISER, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1998, FOR THE YEAR ENDED DECEMBER 31, 1997, AND FOR THE YEAR ENDED DECEMBER 31, 1996, WOULD HAVE BEEN 1.64%, 1.72% AND 1.76%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT INCOME TO AVERAGE NET ASSETS WOULD HAVE BEEN 0.65%, 0.03% AND 0.13%, RESPECTIVELY. 41 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) THE INFORMATION AGE FUND-TM- AND MICROCAP GROWTH FUND The financial highlights table is intended to help you understand the financial performance of these Funds since the Funds commenced operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in such Fund (assuming reinvestment of all dividends and distributions).
The Information Age Fund-TM- MicroCap Growth Fund - ------------------------------------------------------------------------------------------------------------------------- PERIOD PERIOD YEAR YEAR YEAR 11/15/95 YEAR YEAR 8/15/96 ENDED ENDED ENDED THROUGH ENDED ENDED THROUGH 12/31/98 12/31/97 12/31/96 12/31/95 12/31/98 12/31/97 12/31/96 - ------------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $11.80 $11.51 $9.30 $10.00 $14.35 $11.00 $10.00 Income From Investment Operations: Net investment income/(loss) (0.20) (0.22) (0.20) (0.01) (0.21) (0.19) (0.08) Net realized gain/(loss) and unrealized appreciation/ (depreciation) on investments 6.36 0.95 2.68 (0.69) 0.12 3.54 1.08 - ------------------------------------------------------------------------------------------------------------------------- Total from investment operations 6.16 0.73 2.48 (0.70) (0.09) 3.35 1.00 Distributions: Dividends from net investment income -- -- -- -- -- -- -- Distribution from net realized capital gain -- (0.44) (0.27) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------- Total Distributions -- (0.44) (0.27) -- -- -- -- Net asset value, end of period $17.96 $11.80 $11.51 $9.30 $14.26 $14.35 $11.00 Total Return 52.20% 6.15% 26.72% (7.00)% (0.63)% 30.45% 10.00% Ratios/Supplemental Data: Net assets, end of period (thousands) $159,604 $118,832 $106,264 $32,826 $94,723 $104,858 $9,464 Ratio of net operating expenses to average net assets 1.74% 1.82% 2.03% 2.13%* 1.91%(1) 1.95%(1) 3.08%(1)* Ratio of net investment income/(loss) to average net assets (1.55)% (1.71)% (1.85)% (0.89)%* (1.46)%(1) (1.35)%(1) (2.13)%(1)* Portfolio turnover rate 224% 369% 452% 89% 108% 170% 22% - -------------------------------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. (1) IF THE MICROCAP GROWTH FUND HAD PAID ALL OF ITS EXPENSES AND HAD RECEIVED NO REIMBURSEMENT FROM THE ADVISERS, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1998, AND FOR THE YEAR ENDED DECEMBER 31 1997, AND FOR THE PERIOD ENDED DECEMBER 31, 1996, WOULD HAVE BEEN 2.01%, 2.60% AND 6.40%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS WOULD HAVE BEEN (1.56)%, (2.00)% AND (5.45)%, RESPECTIVELY. 42 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) PARTNERS FUND The financial highlights table is intended to help you understand the financial performance of the Fund since the Fund commenced operations. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions).
Partners Fund - -------------------------------------------------------------------------------------------------------- PERIOD YEAR YEAR YEAR 7/12/95 ENDED ENDED ENDED THROUGH 12/31/98 12/31/97 12/31/96 12/31/95 - -------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $16.49 $14.60 $10.39 $10.00 Income From Investment Operations: Net investment income/(loss) (0.04) 0.13 0.13 0.06 Net realized gain/(loss) and unrealized appreciation/(depreciation) on investments (4.31) 2.52 4.36 0.33 - -------------------------------------------------------------------------------------------------------- Total from investment operations (4.35) 2.65 4.49 0.39 Distributions: Dividends from net investment income (0.38) (0.12) (0.06) -- Distribution from net realized capital gain (0.23) (0.64) (0.22) -- - -------------------------------------------------------------------------------------------------------- Total Distributions (0.61) (0.76) (0.28) -- Net asset value, end of period $11.53 $16.49 $14.60 $10.39 Total Return (27.38)% 18.08% 43.15% 3.90% Ratios/Supplemental Data: Net assets, end of period (thousands) $47,936 $194,133 $127,268 $7,480 Ratio of net operating expenses to average net assets 1.88%(1) 1.78% 1.93%(1) 2.41%(1)* Ratio of net investment income/(loss) to average net assets (0.26)%(1) 0.82% 0.95%(1) 1.34%(1)* Portfolio turnover rate 73% 78% 101% 71% - --------------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. (1) IF THE PARTNERS FUND HAD PAID ALL OF ITS EXPENSES AND THERE HAD BEEN NO REIMBURSEMENT BY THE ADVISER, THE RATIO OF EXPENSES TO AVERAGE NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 1998, AND FOR THE YEAR ENDED DECEMBER 31, 1996, AND FOR THE PERIOD ENDED DECEMBER 31, 1995, WOULD HAVE BEEN 2.07%, 2.15% AND 5.12%, RESPECTIVELY, AND THE RATIO OF NET INVESTMENT INCOME/(LOSS) TO AVERAGE NET ASSETS WOULD HAVE BEEN (0.46)%, 0.73% AND (1.37)%, RESPECTIVELY. 43 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) VALUE + GROWTH FUND The financial highlights table is intended to help you understand the financial performance of the Fund for the past 5 years. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions).
Value + Growth Fund - --------------------------------------------------------------------------------------------------------- NINE YEAR YEAR YEAR MONTHS YEAR ENDED ENDED ENDED ENDED ENDED 12/31/98 12/31/97 12/31/96 12/31/95 12/31/95 - --------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $23.18 $24.16 $22.66 $18.25 $13.56 Income From Investment Operations: Net investment income/(loss) (0.25) (0.26) (0.24) (0.16) (0.18) Net realized gain/(loss) and unrealized appreciation/(depreciation) on investments 6.33 3.71 3.47 4.57 5.07 - --------------------------------------------------------------------------------------------------------- Total from investment operations 6.08 3.45 3.23 4.41 4.89 Distributions: Dividends from net investment income -- -- -- -- -- Distribution from net realized capital gain (3.34) (4.43) (1.73) -- (0.20) - --------------------------------------------------------------------------------------------------------- Total Distributions (3.34) (4.43) (1.73) -- (0.20) Net asset value, end of period $25.92 $23.18 $24.16 $22.66 $18.25 Total Return 27.44% 13.81% 14.12% 24.16% 36.27% Ratios/Supplemental Data: Net assets, end of period (thousands) $677,505 $752,994 $643,157 $1,140,151 $428,903 Ratio of net operating expenses to average net assets 1.46% 1.44% 1.51% 1.45%* 1.68% Ratio of net investment income/(loss) to average net assets (0.96)% (0.96)% (1.06)% (1.04)%* (1.09)% Portfolio turnover rate 190% 228% 221% 104% 232% - ---------------------------------------------------------------------------------------------------------
Per share data has been determined by using the average number of shares outstanding throughout the period. * ANNUALIZED. 44 The Trust's Statement of Additional Information ("SAI") dated May 3, 1999 and annual and semi-annual reports to shareholders contains additional information about the Funds. The SAI and the financial statements included in the Trust's most recent annual report to shareholders are incorporated by reference into this prospectus, which means that it is part of this prospectus for legal purposes. The Trust's annual report discusses the market conditions and investment strategies that significantly affected each Fund's performance during its last fiscal year. You may obtain free copies of these materials, request other information about the Funds, or make shareholder inquiries by writing to the Trust at the address below or by telephoning 1-800-766-FUND. You may review and copy information about the Trust, including the SAI, at the Securities and Exchange Commissions Public Reference Room in Washington, D.C. You may call the Commission at 800-SEC-0330 for information about the operation of the public reference room. The Commission maintains a World Wide Web site at http://www.sec.gov, which contains reports and other information about the Funds. 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 Funds 555 California Street, Suite 2500 San Francisco, CA 94104 World Wide Web Address: http://www.rsfunds.com Shareholder Services 1-800-766-FUND Investment Company Act File No. 811-05159 STATEMENT OF ADDITIONAL INFORMATION RS INVESTMENT TRUST THE CONTRARIAN FUND-TM- RS DIVERSIFIED GROWTH FUND RS EMERGING GROWTH FUND RS GLOBAL NATURAL RESOURCES FUND RS GLOBAL VALUE FUND RS GROWTH & INCOME FUND THE INFORMATION AGE FUND-TM- RS MICROCAP GROWTH FUND RS PARTNERS FUND RS VALUE + GROWTH FUND MAY 3, 1999 This Statement of Additional Information ("SAI" or "Statement") is not a prospectus and should be read in conjunction with a Prospectus of RS Investment Trust (the "Trust") dated May 3, 1999, as it may be revised from time to time. This Statement relates to the Funds' Class A Shares. A copy of a Prospectus of the Trust for its Class A Shares can be obtained upon request made to RS Funds, 555 California Street, Suite 2500, San Francisco, CA 94104, telephone 1-800-766-FUND. Certain disclosure has been incorporated by reference into this SAI from the Funds' annual report. For a free copy of the annual report, please call 1-800-766-FUND.
TABLE OF CONTENTS CAPTION PAGE - ------- ---- TRUST INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-2 INVESTMENTS AND RISKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-3 THE FUNDS' INVESTMENT LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . B-15 MANAGEMENT OF THE FUNDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-18 THE FUNDS' DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-36 HOW NET ASSET VALUE IS DETERMINED. . . . . . . . . . . . . . . . . . . . . . . . . . B-39 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-40 HOW PERFORMANCE IS DETERMINED. . . . . . . . . . . . . . . . . . . . . . . . . . . . B-42 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-45 APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-46 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-49
TRUST INFORMATION TRUST HISTORY RS Investment Trust (formerly, Robertson Stephens Investment Trust until approximately February 26, 1999), 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. FUND CLASSIFICATION The Trust currently offers shares of beneficial interest of ten series (the "Funds") with separate investment objectives and policies. Each Fund is an open-end, management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). Each of the Diversified Growth Fund, Emerging Growth Fund, Global Natural Resources Fund, Growth & Income Fund, The Information Age Fund-TM-, MicroCap Growth Fund, and Value + Growth Fund is also a"diversified" investment company under the 1940 Act. This means that with respect to 75% of a 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 of U.S. Government securities). A Fund is not subject to this limitation with respect to the remaining 25% of its total assets. CAPITALIZATION The Trust has an unlimited number of shares of beneficial interest that may, without shareholder approval, be divided into an unlimited number of series of such shares, which, in turn, may be divided into an unlimited number of classes of such shares. Each Fund currently offers Class A shares. Class A shares are offered through a prospectus. Any reference to the "Prospectus" in this Statement is a reference to such prospectus unless the context requires otherwise or unless otherwise specified. Each 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 (currently, a $5,000 minimum initial investment and $100 subsequent investments). Under unusual circumstances, a Fund may suspend repurchases, or postpone payment of redemption proceeds for more than seven days, as permitted by law. If shares of a Fund are purchased by check (including a certified check) and are redeemed shortly thereafter, the Fund will delay payment of the redemption proceeds for up to fifteen days after the Fund's receipt of the check until the check has cleared, whichever occurs first. The proceeds received by each 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 such Fund, and constitute the underlying assets of that Fund. The underlying assets of each Fund will be segregated on the Trust's books of account, and will be charged with the liabilities in respect of such Fund and with a share of the general liabilities of the Trust. Expenses with respect to any two or more Funds may be allocated in proportion to the net asset values of the respective Funds except where allocations of direct expenses can otherwise be fairly made. Class A shares of one Fund may be exchanged for Class A shares of another Fund. 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 (as indicated above) and the shareholder is a resident of a state where shares of the appropriate Fund are qualified for sale. However, shareholders may not exchange their investment in shares of any Fund more than four times in any twelve-month period (including the initial exchange of your investment from the Fund during the period, and subsequent exchanges of that investment from other Funds during the same twelve-month period). Shareholder of each series will have one vote for each full share owned and proportionate, fractional votes for fractional shares held. Generally, shares of each series vote separately as a single series except when required by law or determined by the Board of Trustees. Although the Trust is not required to hold annual meetings of B-2 its shareholders, shareholders have the right to call a meeting to elect or remove Trustees or to take other actions as provided in the Declaration of Trust. INVESTMENTS AND RISKS In addition to the principal investment strategies and the principal risks of the Funds described in the Prospectus, each Fund may employ other investment practices and may be subject to additional risks which are described below. Because the following is a combined description of investment strategies and risks for all the Funds, certain strategies and/or risks described below may not apply to your Fund. Unless a strategy or policy described below is specifically prohibited by the investment restrictions listed in the Prospectus, under "The Funds' Investment Limitations" in this SAI, or by applicable law, a Fund may engage in each of the practices described below. All of the Funds, except for the Emerging Growth Fund, are managed by RS Investment Management, L.P. ("RSIM, L.P."). The Emerging Growth Fund is managed by RS Investment Management, Inc. ("RSIM, Inc."). RSIM, L.P. and RSIM, Inc. are sometimes referred to in this Statement collectively as "RS Investment Management." Elijah Asset Management, LLC ("Elijah Asset Management") serves as sub-adviser to The Information Age Fund-TM- and the Value + Growth Fund. Eastbourne Management, L.L.C. ("Eastbourne") serves as sub-adviser in respect of a portion of the assets of The Contrarian Fund.-TM- (Each of Elijah Asset Management and Eastbourne is sometimes referred to in this Statement as a "Sub-Adviser".) Each of RS Investment Management, Elijah Asset Management, and Eastbourne is sometimes referred to in this Statement as an "Adviser". LOWER-RATED DEBT SECURITIES Certain of the Funds may purchase lower-rated debt securities, sometimes referred to as "junk bonds" (those rated BB or lower by Standard & Poor's ("S&P") or Ba or lower by Moody's Investor Service, Inc. ("Moody's")). See APPENDIX A for a description of these ratings. None of the Funds intends, under current circumstances, to purchase such securities if, as a result, more than 35% of the Fund's assets would be invested in securities rated below BB or Ba. The lower ratings of certain securities held by a Fund reflect a greater possibility that adverse changes in the financial condition of the issuer, or in general economic conditions, or both, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of interest and principal. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of securities held by the Fund more volatile and could limit the Fund's ability to sell its securities at prices approximating the values a Fund had placed on such securities. It is possible that legislation may be adopted in the future limiting the ability of certain financial institutions to purchase lower rated securities; such legislation may adversely affect the liquidity of such securities. In the absence of a liquid trading market for securities held by it, the Fund may be unable at times to establish the fair market value of such securities. The rating assigned to a security by Moody's or S&P does not reflect an assessment of the volatility of the security's market value or of the liquidity of an investment in the security. Like those of other fixed-income securities, the values of lower-rated securities fluctuate in response to changes in interest rates. Thus, a decrease in interest rates generally will result in an increase in the value of a Fund's fixed-income securities. Conversely, during periods of rising interest rates, the value of a Fund's fixed-income securities generally will decline. In addition, the values of such securities are also affected by changes in general economic conditions and business conditions affecting the specific industries of their issuers. Changes by recognized rating services in their ratings of any fixed-income security and in the ability of an issuer to make payments of interest and principal may also affect the value of these investments. Changes in the value of portfolio securities generally will not affect cash income derived from such securities, but will affect the Fund's net asset value. A Fund will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase, although the Fund's Adviser will monitor the investment to determine whether continued investment in the security will assist in meeting the Fund's investment objective. B-3 Issuers of lower-rated securities are often highly leveraged, so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. In addition, such issuers may not have more traditional methods of financing available to them, and may be unable to repay debt at maturity by refinancing. The risk of loss due to default in payment of interest or principal by such issuers is significantly greater because such securities frequently are unsecured and subordinated to the prior payment of senior indebtedness. Certain of the lower-rated securities in which the Funds may invest are issued to raise funds in connection with the acquisition of a company, in so-called "leveraged buy-out" transactions. The highly leveraged capital structure of such issuers may make them especially vulnerable to adverse changes in economic conditions. Under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, a Fund could find it more difficult to sell lower-rated securities when an Adviser believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. In many cases, such securities may be purchased in private placements and, accordingly, will be subject to restrictions on resale as a matter of contract or under securities laws. Under such circumstances, it may also be more difficult to determine the fair value of such securities for purposes of computing a Fund's net asset value. In order to enforce its rights in the event of a default under such securities, a Fund may be required to take possession of and manage assets securing the issuer's obligations on such securities, which may increase the Fund's operating expenses and adversely affect the Fund's net asset value. A Fund may also be limited in its ability to enforce its rights and may incur greater costs in enforcing its rights in the event an issuer becomes the subject of bankruptcy proceedings. Certain securities held by a Fund may permit the issuer at its option to "call," or redeem, its securities. If an issuer were to redeem securities held by a Fund during a time of declining interest rates, the Fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. OPTIONS The Funds may purchase and sell put and call options on their portfolio securities to enhance investment performance and to protect against changes in market prices. There is no assurance that a Fund's use of put and call options will achieve its desired objective, and a Fund's use of options may result in losses to the Fund. COVERED CALL OPTIONS. A Fund may write covered call options on its securities to realize a greater current return through the receipt of premiums than it would realize on its securities alone. Such option transactions may also be used as a limited form of hedging against a decline in the price of securities owned by the Fund. A call option gives the holder the right to purchase, and obligates the writer to sell, a security at the exercise price at any time before the expiration date. A call option is "covered" if the writer, at all times while obligated as a writer, either owns the underlying securities (or comparable securities satisfying the cover requirements of the securities exchanges), or has the right to acquire such securities through immediate conversion of securities. In return for the premium received when it writes a covered call option, a Fund gives up some or all of the opportunity to profit from an increase in the market price of the securities covering the call option during the life of the option. The Fund retains the risk of loss should the price of such securities decline. If the option expires unexercised, the Fund realizes a gain equal to the premium, which may be offset by a decline in price of the underlying security. If the option is exercised, the Fund realizes a gain or loss equal to the difference between the Fund's cost for the underlying security and the proceeds of sale (exercise price minus commissions) plus the amount of the premium. A Fund may terminate a call option that it has written before it expires by entering into a closing purchase transaction. A Fund may enter into closing purchase transactions in order to free itself to sell the underlying security or to write another call on the security, realize a profit on a previously written call option, or protect a security from being called in an unexpected market rise. Any profits from a closing purchase transaction may be offset by a decline in the value of the underlying security. Conversely, because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from a closing purchase transaction is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund. B-4 COVERED PUT OPTIONS. A Fund may write covered put options in order to enhance its current return. Such options transactions may also be used as a limited form of hedging against an increase in the price of securities that the Fund plans to purchase. A put option gives the holder the right to sell, and obligates the writer to buy, a security at the exercise price at any time before the expiration date. A put option is "covered" if the writer segregates cash and high-grade short-term debt obligations or other permissible collateral equal to the price to be paid if the option is exercised. In addition to the receipt of premiums and the potential gains from terminating such options in closing purchase transactions, a Fund also receives interest on the cash and debt securities maintained to cover the exercise price of the option. By writing a put option, the Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss unless the security later appreciates in value. A Fund may terminate a put option that it has written before it expires by a closing purchase transaction. Any loss from this transaction may be partially or entirely offset by the premium received on the terminated option. PURCHASING PUT AND CALL OPTIONS. A Fund may also purchase put options to protect portfolio holdings against a decline in market value. This protection lasts for the life of the put option because the Fund, as a holder of the option, may sell the underlying security at the exercise price regardless of any decline in its market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs that the Fund must pay. These costs will reduce any profit the Fund might have realized had it sold the underlying security instead of buying the put option. A Fund may purchase call options to hedge against an increase in the price of securities that the Fund wants ultimately to buy. Such hedge protection is provided during the life of the call option since the Fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. These costs will reduce any profit the Fund might have realized had it bought the underlying security at the time it purchased the call option. A Fund may also purchase put and call options to attempt to enhance its current return. OPTIONS ON FOREIGN SECURITIES. A Fund may purchase and sell options on foreign securities if its Adviser believes that the investment characteristics of such options, including the risks of investing in such options, are consistent with the Fund's investment objective. It is expected that risks related to such options will not differ materially from risks related to options on U.S. securities. However, position limits and other rules of foreign exchanges may differ from those in the U.S. In addition, options markets in some countries, many of which are relatively new, may be less liquid than comparable markets in the U.S. RISKS INVOLVED IN THE SALE OF OPTIONS. Options transactions involve certain risks, including the risks that an Adviser will not forecast interest rate or market movements correctly, that a Fund may be unable at times to close out such positions, or that hedging transactions may not accomplish their purpose because of imperfect market correlations. The successful use of these strategies depends on the ability of an Adviser to forecast market and interest rate movements correctly. An exchange-listed option may be closed out only on an exchange which provides a secondary market for an option of the same series. There is no assurance that a liquid secondary market on an exchange will exist for any particular option or at any particular time. If no secondary market were to exist, it would be impossible to enter into a closing transaction to close out an option position. As a result, a Fund may be forced to continue to hold, or to purchase at a fixed price, a security on which it has sold an option at a time when an Adviser believes it is inadvisable to do so. Higher than anticipated trading activity or order flow or other unforeseen events might cause The Options Clearing Corporation or an exchange to institute special trading procedures or restrictions that might restrict a Fund's use of options. The exchanges have established limitations on the maximum number of calls and puts of B-5 each class that may be held or written by an investor or group of investors acting in concert. It is possible that the Trust and other clients of an Adviser may be considered such a group. These position limits may restrict the Funds' ability to purchase or sell options on particular securities. Options which are not traded on national securities exchanges may be closed out only with the other party to the option transaction. For that reason, it may be more difficult to close out unlisted options than listed options. Furthermore, unlisted options are not subject to the protection afforded purchasers of listed options by The Options Clearing Corporation. Government regulations may also restrict the Funds' use of options. SPECIAL EXPIRATION PRICE OPTIONS Certain of the Funds may purchase over-the-counter ("OTC") puts and calls with respect to specified securities ("special expiration price options") pursuant to which the Funds in effect may create a custom index relating to a particular industry or sector that an Adviser believes will increase or decrease in value generally as a group. In exchange for a premium, the counterparty, whose performance is guaranteed by a broker-dealer, agrees to purchase (or sell) a specified number of shares of a particular stock at a specified price and further agrees to cancel the option at a specified price that decreases straight line over the term of the option. Thus, the value of the special expiration price option is comprised of the market value of the applicable underlying security relative to the option exercise price and the value of the remaining premium. However, if the value of the underlying security increases (or decreases) by a prenegotiated amount, the special expiration price option is canceled and becomes worthless. A portion of the dividends during the term of the option are applied to reduce the exercise price if the options are exercised. Brokerage commissions and other transaction costs will reduce these Funds' profits if the special expiration price options are exercised. A Fund will not purchase special expiration price options with respect to more than 25% of the value of its net assets, and will limit premiums paid for such options in accordance with state securities laws. LEAPS AND BOUNDS The Value + Growth Fund may purchase certain long-term exchange-traded equity options called Long-Term Equity Anticipation Securities ("LEAPs") and Buy-Right Options Unitary Derivatives ("BOUNDs"). LEAPs provide a holder the opportunity to participate in the underlying securities' appreciation in excess of a fixed dollar amount. BOUNDs provide a holder the opportunity to retain dividends on the underlying security while potentially participating in the underlying securities' capital appreciation up to a fixed dollar amount. The Value + Growth Fund will not purchase these options with respect to more than 25% of the value of its net assets. LEAPs are long-term call options that allow holders the opportunity to participate in the underlying securities' appreciation in excess of a specified strike price, without receiving payments equivalent to any cash dividends declared on the underlying securities. A LEAP holder will be entitled to receive a specified number of shares of the underlying stock upon payment of the exercise price, and therefore the LEAP will be exercisable at any time the price of the underlying stock is above the strike price. However, if at expiration the price of the underlying stock is at or below the strike price, the LEAP will expire worthless. BOUNDs are long-term options which are expected to have the same economic characteristics as covered call options, with the added benefits that BOUNDs can be traded in a single transaction and are not subject to early exercise. Covered call writing is a strategy by which an investor sells a call option while simultaneously owning the number of shares of the stock underlying the call. BOUND holders are able to participate in a stock's price appreciation up to but not exceeding a specified strike price while receiving payments equivalent to any cash dividends declared on the underlying stock. At expiration, a BOUND holder will receive a specified number of shares of the underlying stock for each BOUND held if, on the last day of trading, the underlying stock closes at or below the strike price. However, if at expiration the underlying stock closes above the strike price, the BOUND holder will receive a payment equal to a multiple of the BOUND's strike price for each BOUND held. The terms of a BOUND are not adjusted because of cash distributions to the shareholders of the underlying security. BOUNDs are subject to the position limits for equity options imposed by the exchanges on which they are traded. B-6 The settlement mechanism for BOUNDs operates in conjunction with that of the corresponding LEAPs. For example, if at expiration the underlying stock closes at or below the strike price, the LEAP will expire worthless, and the holder of a corresponding BOUND will receive a specified number of shares of stock from the writer of the BOUND. If, on the other hand, the LEAP is "in the money" at expiration, the holder of the LEAP is entitled to receive a specified number of shares of the underlying stock from the LEAP writer upon payment of the strike price, and the holder of a BOUND on such stock is entitled to the cash equivalent of a multiple of the strike price from the writer of the BOUND. An investor holding both a LEAP and a corresponding BOUND, where the underlying stock closes above the strike price at expiration, would be entitled to receive a multiple of the strike price from the writer of the BOUND and, upon exercise of the LEAP, would be obligated to pay the same amount to receive shares of the underlying stock. LEAPs are American-style options (exercisable at any time prior to expiration), whereas BOUNDs are European-style options (exercisable only on the expiration date). FUTURES CONTRACTS INDEX FUTURES CONTRACTS AND OPTIONS. A Fund may buy and sell stock index futures contracts and related options for hedging purposes or to attempt to increase investment return. A stock index futures contract is a contract to buy or sell units of a stock index at a specified future date at a price agreed upon when the contract is made. A unit is the current value of the stock index. The following example illustrates generally the manner in which index futures contracts operate. The Standard & Poor's 100 Stock Index (the "S&P 100 Index") is composed of 100 selected common stocks, most of which are listed on the New York Stock Exchange. The S&P 100 Index assigns relative weightings to the common stocks included in the Index, and the Index fluctuates with changes in the market values of those common stocks. In the case of the S&P 100 Index, contracts are to buy or sell 100 units. Thus, if the value of the S&P 100 Index were $180, one contract would be worth $18,000 (100 units x $180). The stock index futures contract specifies that no delivery of the actual stocks making up the index will take place. Instead, settlement in cash must occur upon the termination of the contract, with the settlement being the difference between the contract price and the actual level of the stock index at the expiration of the contract. For example, if a Fund enters into a futures contract to buy 100 units of the S&P 100 Index at a specified future date at a contract price of $180 and the S&P 100 Index is at $184 on that future date, the Fund will gain $400 (100 units x gain of $4). If the Fund enters into a futures contract to sell 100 units of the stock index at a specified future date at a contract price of $180 and the S&P 100 Index is at $182 on that future date, the Fund will lose $200 (100 units x loss of $2). Positions in index futures may be closed out only on an exchange or board of trade which provides a secondary market for such futures. In order to hedge its investments successfully using futures contracts and related options, a Fund must invest in futures contracts with respect to indexes or sub-indexes the movements of which will, in its judgment, have a significant correlation with movements in the prices of the Fund's securities. Options on index futures contracts give the purchaser the right, in return for the premium paid, to assume a position in an index futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the holder would assume the underlying futures position and would receive a variation margin payment of cash or securities approximating the increase in the value of the holder's option position. If an option is exercised on the last trading day prior to the expiration date of the option, the settlement will be made entirely in cash based on the difference between the exercise price of the option and the closing level of the index on which the futures contract is based on the expiration date. Purchasers of options who fail to exercise their options prior to the exercise date suffer a loss of the premium paid. As an alternative to purchasing and selling call and put options on index futures contracts, each of the Funds which may purchase and sell index futures contracts may purchase and sell call and put options on the underlying indexes themselves to the extent that such options are traded on national securities exchanges. Index options are similar to options on individual securities in that the purchaser of an index option acquires the right to buy (in the case of a call) or sell (in the case of a put), and the writer undertakes the obligation to sell or buy (as the case may be), units of an index at a stated exercise price during the term of the option. Instead of giving the right to take B-7 or make actual delivery of securities, the holder of an index option has the right to receive a cash "exercise settlement amount." This amount is equal to the amount by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of the exercise, multiplied by a fixed "index multiplier." A Fund may purchase or sell options on stock indices in order to close out its outstanding positions in options on stock indices which it has purchased. A Fund may also allow such options to expire unexercised. Compared to the purchase or sale of futures contracts, the purchase of call or put options on an index involves less potential risk to a Fund because the maximum amount at risk is the premium paid for the options plus transactions costs. The writing of a put or call option on an index involves risks similar to those risks relating to the purchase or sale of index futures contracts. MARGIN PAYMENTS. When a Fund purchases or sells a futures contract, it is required to deposit with its custodian an amount of cash, U.S. Treasury bills, or other permissible collateral equal to a small percentage of the amount of the futures contract. This amount is known as "initial margin." The nature of initial margin is different from that of margin in security transactions in that it does not involve borrowing money to finance transactions. Rather, initial margin is similar to a performance bond or good faith deposit that is returned to a Fund upon termination of the contract, assuming the Fund satisfies its contractual obligations. Subsequent payments to and from the broker occur on a daily basis in a process known as "marking to market." These payments are called "variation margin" and are made as the value of the underlying futures contract fluctuates. For example, when a Fund sells a futures contract and the price of the underlying index rises above the delivery price, the Fund's position declines in value. The Fund then pays the broker a variation margin payment equal to the difference between the delivery price of the futures contract and the value of the index underlying the futures contract. Conversely, if the price of the underlying index falls below the delivery price of the contract, the Fund's futures position increases in value. The broker then must make a variation margin payment equal to the difference between the delivery price of the futures contract and the value of the index underlying the futures contract. When a Fund terminates a position in a futures contract, a final determination of variation margin is made, additional cash is paid by or to the Fund, and the Fund realizes a loss or a gain. Such closing transactions involve additional commission costs. SPECIAL RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS LIQUIDITY RISKS. Positions in futures contracts may be closed out only on an exchange or board of trade which provides a secondary market for such futures. Although the Funds intend to purchase or sell futures only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange or board of trade will exist for any particular contract or at any particular time. If there is not a liquid secondary market at a particular time, it may not be possible to close a futures position at such time and, in the event of adverse price movements, a Fund would continue to be required to make daily cash payments of variation margin. However, in the event financial futures are used to hedge portfolio securities, such securities will not generally be sold until the financial futures can be terminated. In such circumstances, an increase in the price of the portfolio securities, if any, may partially or completely offset losses on the financial futures. The ability to establish and close out positions in options on futures contracts will be subject to the development and maintenance of a liquid secondary market. It is not certain that such a market will develop. Although a Fund generally will purchase only those options for which there appears to be an active secondary market, there is no assurance that a liquid secondary market on an exchange will exist for any particular option or at any particular time. In the event no such market exists for particular options, it might not be possible to effect closing transactions in such options, with the result that a Fund would have to exercise the options in order to realize any profit. HEDGING RISKS. There are several risks in connection with the use by a Fund of futures contracts and related options as a hedging device. One risk arises because of the imperfect correlation between movements in the B-8 prices of the futures contracts and options and movements in the underlying securities or index or movements in the prices of a Fund's securities which are the subject of a hedge. An Adviser will, however, attempt to reduce this risk by purchasing and selling, to the extent possible, futures contracts and related options on securities and indexes the movements of which will, in its judgment, correlate closely with movements in the prices of the underlying securities or index and the Fund's portfolio securities sought to be hedged. Successful use of futures contracts and options by a Fund for hedging purposes is also subject to an Adviser's ability to predict correctly movements in the direction of the market. It is possible that, where a Fund has purchased puts on futures contracts to hedge its portfolio against a decline in the market, the securities or index on which the puts are purchased may increase in value and the value of securities held in the portfolio may decline. If this occurred, the Fund would lose money on the puts and also experience a decline in value in its portfolio securities. In addition, the prices of futures, for a number of reasons, may not correlate perfectly with movements in the underlying securities or index due to certain market distortions. First, all participants in the futures market are subject to margin deposit requirements. Such requirements may cause investors to close futures contracts through offsetting transactions which could distort the normal relationship between the underlying security or index and futures markets. Second, the margin requirements in the futures markets are less onerous than margin requirements in the securities markets in general, and as a result the futures markets may attract more speculators than the securities markets do. Increased participation by speculators in the futures markets may also cause temporary price distortions. Due to the possibility of price distortion, even a correct forecast of general market trends by an Adviser still may not result in a successful hedging transaction over a very short time period. OTHER RISKS. Funds will incur brokerage fees in connection with their futures and options transactions. In addition, while futures contracts and options on futures will be purchased and sold to reduce certain risks, those transactions themselves entail certain other risks. Thus, while a Fund may benefit from the use of futures and related options, unanticipated changes in interest rates or stock price movements may result in a poorer overall performance for the Fund than if it had not entered into any futures contracts or options transactions. Moreover, in the event of an imperfect correlation between the futures position and the portfolio position which is intended to be protected, the desired protection may not be obtained and the Fund may be exposed to risk of loss. INDEXED SECURITIES Certain of the Funds may purchase securities whose prices are indexed to the prices of other securities, securities indices, currencies, precious metals, or other commodities, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic. Gold-indexed securities, for example, typically provide for a maturity value that depends on the price of gold, resulting in a security whose price tends to rise and fall together with gold prices. Currency-indexed securities typically are short-term to intermediate-term debt securities whose maturity values or interest rates are determined by reference to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar-denominated securities of equivalent issuers. Currency-indexed securities may be positively or negatively indexed; that is, their maturity value may increase when the specified currency value increases, resulting in a security whose price characteristics are similar to a put option on the underlying currency. Currency-indexed securities also may have prices that depend on the values of a number of different foreign currencies relative to each other. The performance of indexed securities depends to a great extent on the performance of the security, currency, commodity or other instrument to which they are indexed, and also may be influenced by interest rate changes in the U.S. and abroad. At the same time, indexed securities are subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer's creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. Government agencies. REPURCHASE AGREEMENTS A Fund may enter into repurchase agreements. A repurchase agreement is a contract under which the Fund acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller to repurchase and the Fund to resell such security at a fixed time and price (representing the Fund's cost plus interest). It is the Trust's present intention to enter into repurchase agreements only with member banks of B-9 the Federal Reserve System and securities dealers meeting certain criteria as to creditworthiness and financial condition established by the Trustees of the Trust and only with respect to obligations of the U.S. Government or its agencies or instrumentalities or other high-quality, short-term debt obligations. Repurchase agreements may also be viewed as loans made by a Fund which are collateralized by the securities subject to repurchase. An Adviser will monitor such transactions to ensure that the value of the underlying securities will be at least equal at all times to the total amount of the repurchase obligation, including the interest factor. If the seller defaults, a Fund could realize a loss on the sale of the underlying security to the extent that the proceeds of sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, a Fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the Fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. LEVERAGE Leveraging a Fund creates an opportunity for increased net income but, at the same time, creates special risk considerations. For example, leveraging may exaggerate changes in the net asset value of a Fund's shares and in the yield on a Fund's portfolio. Although the principal of such borrowings will be fixed, a Fund's assets may change in value during the time the borrowing is outstanding. Since any decline in value of a Fund's investments will be borne entirely by the Fund's shareholders (and not by those persons providing the leverage to the Fund), the effect of leverage in a declining market would be a greater decrease in net asset value than if the Fund were not so leveraged. Leveraging will create interest expenses for a Fund, which can exceed the investment return from the borrowed funds. To the extent the investment return derived from securities purchased with borrowed funds exceeds the interest a Fund will have to pay, the Fund's investment return will be greater than if leveraging were not used. Conversely, if the investment return from the assets retained with borrowed funds is not sufficient to cover the cost of leveraging, the investment return of the Fund will be less than if leveraging were not used. REVERSE REPURCHASE AGREEMENTS In connection with its leveraging activities, a Fund may enter into reverse repurchase agreements, in which the Fund sells securities and agrees to repurchase them at a mutually agreed date and price. A reverse repurchase agreement may be viewed as a borrowing by the Fund, secured by the security which is the subject of the agreement. In addition to the general risks involved in leveraging, reverse repurchase agreements involve the risk that, in the event of the bankruptcy or insolvency of the Fund's counterparty, the Fund would be unable to recover the security which is the subject of the agreement, that the amount of cash or other property transferred by the counterparty to the Fund under the agreement prior to such insolvency or bankruptcy is less than the value of the security subject to the agreement, or that the Fund may be delayed or prevented, due to such insolvency or bankruptcy, from using such cash or property or may be required to return it to the counterparty or its trustee or receiver. SECURITIES LENDING A Fund may lend its portfolio securities, provided: (1) the loan is secured continuously by collateral consisting of U.S. Government securities, cash, or cash equivalents adjusted daily to have market value at least equal to the current market value of the securities loaned; (2) the Fund may at any time call the loan and regain the securities loaned; (3) a Fund will receive any interest or dividends paid on the loaned securities; and (4) the aggregate market value of securities of any Fund loaned will not at any time exceed one-third (or such other limit as the Trustees may establish) of the total assets of the Fund. In addition, it is anticipated that a Fund may share with the borrower some of the income received on the collateral for the loan or that it will be paid a premium for the loan. Before a Fund enters into a loan, an Adviser considers all relevant facts and circumstances, including the creditworthiness of the borrower. The risks in lending portfolio securities, as with other extensions of credit, consist of possible delay in recovery of the securities or possible loss of rights in the collateral should the borrower fail financially. Although voting rights or rights to consent with respect to the loaned securities pass to the borrower, a Fund retains the right to call the loans at any time on reasonable notice, and it will do so in order that the securities may be voted by a Fund if the holders of such securities are asked to vote upon or consent B-10 to matters materially affecting the investment. A Fund will not lend portfolio securities to borrowers affiliated with the Fund. SHORT SALES Certain of the Funds may seek to hedge investments or realize additional gains through short sales. Short sales are transactions in which a Fund sells a security it does not own, in anticipation of a decline in the market value of that security. To complete such a transaction, a Fund must borrow the security to make delivery to the buyer. A Fund then is obligated to replace the security borrowed by purchasing it at the market price at or prior to the time of replacement. The price at such time may be more or less than the price at which the security was sold by a Fund. Until the security is replaced, a Fund is required to repay the lender any dividends or interest that accrue during the period of the loan. To borrow the security, a Fund also may be required to pay a premium, which would increase the cost of the security sold. The net proceeds of the short sale will be retained by the broker (or by the Fund's custodian in a special custody account), to the extent necessary to meet margin requirements, until the short position is closed out. A Fund also will incur transaction costs in effecting short sales. A Fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which a Fund replaces the borrowed security. A Fund will realize a gain if the security declines in price between those dates. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of the premium, dividends, interest or expenses a Fund may be required to pay in connection with a short sale. An increase in the value of a security sold short by a Fund over the price at which it was sold short will result in a loss to the Fund, and there can be no assurance that a Fund will be able to close out the position at any particular time or at an acceptable price. FOREIGN INVESTMENTS Investments in foreign securities may involve considerations different from investments in domestic securities due to limited publicly available information, non-uniform accounting standards, lower trading volume and possible consequent illiquidity, greater volatility in price, the possible imposition of withholding or confiscatory taxes, the possible adoption of foreign governmental restrictions affecting the payment of principal and interest, expropriation of assets, nationalization, or other adverse political or economic developments. Foreign companies may not be subject to auditing and financial reporting standards and requirements comparable to those which apply to U.S. companies. Foreign brokerage commissions and other fees are generally higher than in the United States. It may be more difficult to obtain and enforce a judgment against a foreign issuer. In addition, to the extent that a Fund's foreign investments are not U.S. dollar-denominated, the Fund may be affected favorably or unfavorably by changes in currency exchange rates or exchange control regulations and may incur costs in connection with conversion between currencies. DEVELOPING COUNTRIES. The considerations noted above for foreign investments generally are intensified for investments in developing countries. These risks include (i) volatile social, political and economic conditions; (ii) the small current size of the markets for such securities and the currently low or nonexistent volume of trading, which result in a lack of liquidity and in greater price volatility; (iii) the existence of national policies which may restrict a Fund's investment opportunities, including restrictions on investment in issuers or industries deemed sensitive to national interests; (iv) foreign taxation; (v) the absence of developed structures governing private or foreign investment or allowing for judicial redress for injury to private property; (vi) the absence, until recently in certain developing countries, of a capital market structure or market-oriented economy; (vii) economies based on only a few industries; and (viii) the possibility that recent favorable economic developments in certain developing countries may be slowed or reversed by unanticipated political or social events in such countries. FOREIGN CURRENCY TRANSACTIONS A Fund may engage in currency exchange transactions to protect against uncertainty in the level of future foreign currency exchange rates and to increase current return. A Fund may engage in both "transaction hedging" and "position hedging." B-11 There can be no assurance that appropriate foreign currency transactions will be available for a Fund at any time; or that a Fund will enter into such transactions at any time or under any circumstances even if appropriate transactions are available to it. When it engages in transaction hedging, a Fund enters into foreign currency transactions with respect to specific receivables or payables of the Fund generally arising in connection with the purchase or sale of its portfolio securities. A Fund will engage in transaction hedging when it desires to "lock in" the U.S. dollar price of a security it has agreed to purchase or sell, or the U.S. dollar equivalent of a dividend or interest payment in a foreign currency. By transaction hedging, a Fund will attempt to protect against a possible loss resulting from an adverse change in the relationship between the U.S. dollar and the applicable foreign currency during the period between the date on which the security is purchased or sold or on which the dividend or interest payment is declared, and the date on which such payments are made or received. A Fund may purchase or sell a foreign currency on a spot (I.E., cash) basis at the prevailing spot rate in connection with transaction hedging. A Fund may also enter into contracts to purchase or sell foreign currencies at a future date ("forward contracts") and purchase and sell foreign currency futures contracts. For transaction hedging purposes, a Fund may also purchase exchange-listed and over-the-counter call and put options on foreign currency futures contracts and on foreign currencies. A put option on a futures contract gives a Fund the right to assume a short position in the futures contract until expiration of the option. A put option on currency gives a Fund the right to sell a currency at a specified exercise price until the expiration of the option. A call option on a futures contract gives a Fund the right to assume a long position in the futures contract until the expiration of the option. A call option on currency gives a Fund the right to purchase a currency at the exercise price until the expiration of the option. A Fund will engage in over-the-counter transactions only when appropriate exchange-traded transactions are unavailable and when, in the opinion of an Adviser, the pricing mechanism and liquidity are satisfactory and the participants are responsible parties likely to meet their contractual obligations. When it engages in position hedging, a Fund enters into foreign currency exchange transactions to protect against a decline in the values of the foreign currencies in which securities held by the Fund are denominated or are quoted in their principle trading markets or an increase in the value of currency for securities which the Fund expects to purchase. In connection with position hedging, a Fund may purchase put or call options on foreign currency and foreign currency futures contracts and buy or sell forward contracts and foreign currency futures contracts. A Fund may also purchase or sell foreign currency on a spot basis. The precise matching of the amounts of foreign currency exchange transactions and the value of the portfolio securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movements in the values of those securities between the dates the currency exchange transactions are entered into and the dates they mature. It is impossible to forecast with precision the market value of a Fund's portfolio securities at the expiration or maturity of a forward or futures contract. Accordingly, it may be necessary for a Fund to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security or securities being hedged is less than the amount of foreign currency a Fund is obligated to deliver and if a decision is made to sell the security or securities and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security or securities of a Fund if the market value of such security or securities exceeds the amount of foreign currency the Fund is obligated to deliver. To offset some of the costs to a Fund of hedging against fluctuations in currency exchange rates, the Fund may write covered call options on those currencies. Transaction and position hedging do not eliminate fluctuations in the underlying prices of the securities which a Fund owns or intends to purchase or sell. They simply establish a rate of exchange which one can achieve at some future point in time. Additionally, although these techniques tend to minimize the risk of loss due to a decline in the value of the hedged currency, they tend to limit any potential gain which might result from the increase in the value of such currency. B-12 A Fund may also seek to increase its current return by purchasing and selling foreign currency on a spot basis, by purchasing and selling options on foreign currencies and on foreign currency futures contracts, and by purchasing and selling foreign currency forward contracts. CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract as agreed by the parties, at a price set at the time of the contract. In the case of a cancelable forward contract, the holder has the unilateral right to cancel the contract at maturity by paying a specified fee. The contracts are traded in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. A foreign currency futures contract is a standardized contract for the future delivery of a specified amount of a foreign currency at a future date at a price set at the time of the contract. Foreign currency futures contracts traded in the United States are designed by and traded on exchanges regulated by the Commodity Futures Trading Commission (the "CFTC"), such as the New York Mercantile Exchange. Forward foreign currency exchange contracts differ from foreign currency futures contracts in certain respects. For example, the maturity date of a forward contract may be any fixed number of days from the date of the contract agreed upon by the parties, rather than a predetermined date in a given month. Forward contracts may be in any amounts agreed upon by the parties rather than predetermined amounts. Also, forward foreign exchange contracts are traded directly between currency traders so that no intermediary is required. A forward contract generally requires no margin or other deposit. At the maturity of a forward or futures contract, a Fund may either accept or make delivery of the currency specified in the contract, or at or prior to maturity enter into a closing transaction involving the purchase or sale of an offsetting contract. Closing transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract. Closing transactions with respect to futures contracts are effected on a commodities exchange; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts. Positions in foreign currency futures contracts and related options may be closed out only on an exchange or board of trade which provides a secondary market in such contracts or options. Although a Fund will normally purchase or sell foreign currency futures contracts and related options only on exchanges or boards of trade where there appears to be an active secondary market, there is no assurance that a secondary market on an exchange or board of trade will exist for any particular contract or option or at any particular time. In such event, it may not be possible to close a futures or related option position and, in the event of adverse price movements, a Fund would continue to be required to make daily cash payments of variation margin on its futures positions. FOREIGN CURRENCY OPTIONS. Options on foreign currencies operate similarly to options on securities, and are traded primarily in the over-the-counter market, although options on foreign currencies have recently been listed on several exchanges. Such options will be purchased or written only when an Adviser believes that a liquid secondary market exists for such options. There can be no assurance that a liquid secondary market will exist for a particular option at any specific time. Options on foreign currencies are affected by all of those factors which influence exchange rates and investments generally. The value of a foreign currency option is dependent upon the value of the foreign currency and the U.S. dollar, and may have no relationship to the investment merits of a foreign security. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be involved in the use of foreign currency options, investors may be disadvantaged by having to deal in an odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less favorable than for round lots. There is no systematic reporting of last-sale information for foreign currencies and there is no regulatory requirement that quotations available through dealers or other market sources be firm or revised on a timely basis. Available quotation information is generally representative of very large transactions in the interbank market and thus may not reflect relatively smaller transactions (less than $1 million) where rates may be less favorable. The interbank market in foreign currencies is a global, around-the-clock market. To the extent that the U.S. options B-13 markets are closed while the markets for the underlying currencies remain open, significant price and rate movements may take place in the underlying markets that cannot be reflected in the U.S. options markets. FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers do not charge a fee for currency conversion, they do realize a profit based on the difference (the "spread") between prices at which they buy and sell various currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one rate, while offering a lesser rate of exchange should a Fund desire to resell that currency to the dealer. PRECIOUS METALS The value of the investments of certain Funds may be affected by changes in the price of gold and other precious metals. Gold has been subject to substantial price fluctuations over short periods of time and may be affected by unpredictable international monetary and other governmental policies, such as currency devaluations or revaluations; economic and social conditions within a country; trade imbalances; or trade or currency restrictions between countries. Because much of the world's known gold reserves are located in South Africa, political and social conditions there may pose special risks to investments in gold. For instance, social upheaval and related economic difficulties in South Africa could cause a decrease in the share values of South African issuers. Many institutions have rescinded policies that preclude investments in companies doing business in South Africa. In July 1991, the United States lifted the prohibition on new U.S. investment in South Africa, including the purchase of newly-issued securities of South African companies. In addition to its investments in securities, a Fund may, as described from time to time in the Prospectus, invest a portion of its assets in precious metals, such as gold, silver, platinum, and palladium, and precious metal options and futures. The prices of precious metals are affected by broad economic and political conditions, but are less subject to local and company-specific factors than securities of individual companies. As a result, precious metals and precious metal options and futures may be more or less volatile in price than securities of companies engaged in precious metals-related businesses. Precious metals may be purchased in any form, including bullion and coins, provided that an Adviser intends to purchase only those forms of precious metals that are readily marketable and that can be stored in accordance with custody regulations applicable to mutual funds. A Fund may incur higher custody and transaction costs for precious metals than for securities. Also, precious metals investments do not pay income. Under current federal income tax law, gains from selling precious metals (and certain other assets) may not exceed 10% of a Fund's annual gross income. This tax requirement could cause a Fund to hold or sell precious metals, securities, options, or futures when it would not otherwise do so. ZERO-COUPON DEBT SECURITIES AND PAY-IN-KIND SECURITIES Zero-coupon securities in which a Fund may invest are debt obligations which are generally issued at a discount and payable in full at maturity, and which do not provide for current payments of interest prior to maturity. Zero-coupon securities usually trade at a deep discount from their face or par value and are subject to greater market value fluctuations from changing interest rates than debt obligations of comparable maturities which make current distributions of interest. As a result, the net asset value of shares of a Fund investing in zero-coupon securities may fluctuate over a greater range than shares of other mutual funds investing in securities making current distributions of interest and having similar maturities. When debt obligations have been stripped of their unmatured interest coupons by the holder, the stripped coupons are sold separately. The principal or corpus is sold at a deep discount because the buyer receives only the right to receive a future fixed payment on the security and does not receive any rights to periodic cash interest payments. Once stripped or separated, the corpus and coupons may be sold separately. Typically, the coupons are sold separately or grouped with other coupons with like maturity dates and sold in such bundled form. Purchasers of stripped obligations acquire, in effect, discount obligations that are economically identical to the zero-coupon securities issued directly by the obligor. Zero-coupon securities allow an issuer to avoid the need to generate cash to meet current interest payments. Even though zero-coupon securities do not pay current interest in cash, a Fund is nonetheless required to accrue B-14 interest income on them and to distribute the amount of that interest at least annually to shareholders. Thus, a Fund could be required at times to liquidate other investments in order to satisfy its distribution requirement. A Fund also may purchase pay-in-kind securities. Pay-in-kind securities pay all or a portion of their interest or dividends in the form of additional securities. TEMPORARY DEFENSIVE STRATEGIES At times, a Fund's Adviser may judge that market conditions make pursuing the Fund's basic investment strategy inconsistent with the best interests of its shareholders. At such times, the Adviser may temporarily use alternative strategies, primarily designed to reduce fluctuations in the values of the Fund's assets. In implementing these "defensive strategies", a Fund may invest in U.S. Government securities, other high-quality debt instruments, and other securities its Adviser believes to be consistent with the Fund's best interests. THE FUNDS' INVESTMENT LIMITATIONS The Trust has adopted the following fundamental investment restrictions which (except to the extent they are designated as nonfundamental as to any Fund) may not be changed without the affirmative vote of a majority of the outstanding voting securities of the affected Fund. THE CONTRARIAN FUND-TM-, THE EMERGING GROWTH FUND AND THE VALUE + GROWTH FUND. A Fund may not: 1. purchase or sell commodities or commodity contracts, or interests in oil, gas, or other mineral leases, or other mineral exploration or development programs, although it may invest in companies that engage in such businesses to the extent otherwise permitted by a Fund's investment policies and restrictions and by applicable law, except as required in connection with otherwise permissible options, futures and commodity activities as described elsewhere in the Prospectus and this Statement; 2. purchase or sell real estate, although it may invest in securities secured by real estate or real estate interests, or issued by companies, including real estate investment trusts, that invest in real estate or real estate interests; 3. make short sales or purchases on margin, although it may obtain short-term credit necessary for the clearance of purchases and sales of its portfolio securities and except as required in connection with permissible options, futures, short selling and leverage activities as described elsewhere in the Prospectus and this Statement; 4. (a) for The Contrarian Fund-TM- only: with respect to 50% of its total assets, invest in the securities of any one issuer (other than the U.S. Government and its agencies and instrumentalities), if immediately after and as a result of such investment more than 5% of the total assets of the Fund would be invested in such issuer (the remaining 50% of its total assets may be invested without restriction except to the extent other investment restrictions may be applicable); (b) for the Emerging Growth Fund and Value + Growth Fund only: with respect to 75% of its total assets, invest in the securities of any one issuer (other than the U.S. Government and its agencies and instrumentalities), if immediately after and as a result of such investment more than 5% of the total assets of the Fund would be invested in such issuer (the remaining 25% of its total assets may be invested without restriction except to the extent other investment restrictions may be applicable); 5. mortgage, hypothecate, or pledge any of its assets as security for any of its obligations, except as required for otherwise permissible borrowings (including reverse repurchase agreements), short sales, financial options and other hedging activities; B-15 6. make loans of the Fund's assets, including loans of securities (although it may, subject to the other restrictions or policies stated herein, purchase debt securities or enter into repurchase agreements with banks or other institutions to the extent a repurchase agreement is deemed to be a loan), except that The Contrarian Fund-TM- may lend up to one-third of its total assets to other parties; 7. borrow money, except from banks for temporary or emergency purposes or in connection with otherwise permissible leverage activities, and then only in an amount not in excess of (a) one-third of the value of The Contrarian Fund's-TM- total assets, or (b) 5% of the Emerging Growth Fund's or Value + Growth Fund's total assets (in any case as determined at the lesser of acquisition cost or current market value and excluding collateralized reverse repurchase agreements); 8. underwrite securities of any other company, although it may invest in companies that engage in such businesses if it does so in accordance with policies established by the Trust's Board of Trustees (the Board's current policy permits a Fund to invest in companies that directly or through subsidiaries execute portfolio transactions for a Fund or have entered into selling agreements with the Distributor to sell Fund shares, to the extent permitted by applicable law), and except to the extent that the Fund may be considered an underwriter within the meaning of the Securities Act of 1933, as amended, in the disposition of restricted securities; 9. invest more than 25% of the value of the Fund's total assets in the securities of companies engaged in any one industry (except securities issued by the U.S. Government, its agencies and instrumentalities); 10. issue senior securities, as defined in the 1940 Act, except that this restriction shall not be deemed to prohibit the Fund from making any otherwise permissible borrowings, mortgages or pledges, or entering into permissible reverse repurchase agreements, and options and futures transactions; 11. purchase the securities of any company for the purpose of exercising management or control (Emerging Growth Fund only); 12. purchase more than 10% of the outstanding voting securities of any one issuer (Emerging Growth Fund only); 13. (a) purchase the securities of any registered investment company, except as part of a merger or similar reorganization transaction (Emerging Growth Fund only); (b) purchase the securities of other investment companies, except as permitted by the 1940 Act or as part of a merger, consolidation, acquisition of assets or similar reorganization transaction (Value + Growth Fund only); 14. invest more than 5% of the value of its total assets in securities of any issuer which has not had a record, together with its predecessors, of at least three years of continuous operations (Emerging Growth Fund only); 15. invest more than 10% of the value of its total assets in securities that are not readily marketable or that would require registration under the Securities Act of 1933, as amended, upon disposition (as a matter of operating policy, the Fund interprets this restriction as including venture capital investments such as venture capital partnerships whose securities are not registered under the Securities Act of 1933 and unregistered securities of companies which are not yet publicly held; furthermore, and as an additional matter of operating policy, the Board of Trustees has adopted a further restriction that no more than 5% of the Fund's total assets may be held in such restricted securities) (Emerging Growth Fund only). ALL OTHER FUNDS. As fundamental investment restrictions, which may not be changed with respect to a Fund without approval by the holders of a majority of the outstanding shares of that Fund, a Fund may not: B-16 1. issue any class of securities which is senior to the Fund's shares of beneficial interest, except that each of the Funds may borrow money to the extent contemplated by Restriction 3 below; 2. purchase securities on margin (but a Fund may obtain such short-term credits as may be necessary for the clearance of transactions) (Margin payments or other arrangements in connection with transactions in short sales, futures contracts, options, and other financial instruments are not considered to constitute the purchase of securities on margin for this purpose.); 3. borrow more than one-third of the value of its total assets less all liabilities and indebtedness (other than such borrowings) not represented by senior securities; 4. act as underwriter of securities of other issuers except to the extent that, in connection with the disposition of portfolio securities, it may be deemed to be an underwriter under certain federal securities laws; 5. (i) (as to 75% of the Diversified Growth Fund's, the Global Natural Resources Fund's, the Growth & Income Fund's, the Information Age Fund's-TM-, and the MicroCap Growth Fund's total assets and 50% of the Global Value Fund's and the Partners Fund's total assets) purchase any security (other than obligations of the U.S. Government, its agencies or instrumentalities) if as a result more than 5% of the Fund's total assets (taken at current value) would then be invested in securities of a single issuer, or (ii) purchase any security if as a result 25% or more of the Fund's total assets (taken at current value) would be invested in a single industry, except that the Information Age Fund-TM- will invest without limit in any one or more information technology industries and the Global Natural Resources Fund will invest without limit in any one or more natural resources industries, as described in the Trust's Prospectus at the time; 6. (all Funds other than the Global Value Fund) invest in securities of any issuer if any officer or Trustee of the Trust or any officer or director of RSIM, L.P. or RSIM, Inc., as the case may be, owns more than 1/2 of 1% of the outstanding securities of such issuer, and such officers, Trustees and directors who own more than 1/2 of 1% own in the aggregate more than 5% of the outstanding securities of such issuer (This policy is non-fundamental as to the MicroCap Growth Fund); 7. 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; 8. purchase or sell commodities or commodity contracts, except that a Fund may purchase or sell financial futures contracts, options on financial futures contracts, and futures contracts, forward contracts, and options with respect to foreign currencies, and may enter into swap transactions or other financial transactions, and except as required in connection with otherwise permissible options, futures, and commodity activities as described elsewhere in the Prospectus or this Statement at the time; 9. purchase or sell real estate or interests in real estate, including real estate mortgage loans, although (i) it may purchase and sell securities which are secured by real estate and securities of companies, including limited partnership interests, that invest or deal in real estate and it may purchase interests in real estate investment trusts, and (ii) the Global Natural Resources Fund may invest in any issuers in the natural resources industries, as described in the Prospectus at the time. (For purposes of this restriction, investments by a 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 each of the Diversified Growth, Global Natural Resources, Global Value, Growth & Income, Information Age-TM-, MicroCap Growth, and Partners Funds, which policy may be changed without shareholder approval, to invest more than 15% of its net assets in securities which are not readily marketable, including securities restricted as to resale (other than securities restricted as to resale but B-17 determined by the Trustees, or persons designated by the Trustees to make such determinations, to be readily marketable). All percentage limitations on investments will apply at the time of investment and shall not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of such investment. Except for the investment restrictions listed above as fundamental or to the extent designated as such in the Prospectus, the other investment policies described in this Statement or in the Prospectus are not fundamental and may be changed by approval of the Trustees. As a matter of policy, the Trustees would not materially change a Fund's investment objective without shareholder approval. The Investment Company Act of 1940, as amended (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 a Fund, or (2) 67% or more of the shares present at a meeting if more than 50% of the outstanding shares are represented at the meeting in person or by proxy. MANAGEMENT OF THE FUNDS TRUSTEES AND OFFICERS The Trustees of the Trust are responsible for generally overseeing the conduct of the Trust'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, 555 California Street, San Francisco, CA 94104 Mr. Auerbach, 51, is the President and Chairman of the Board of Auerbach Associates, Inc., a management consulting firm which he founded in 1979. Mr. Auerbach is also President of LBA&C, Inc., which served until July 1997 as general partner of Tuttle & Company, which provides mortgage pipeline interest rate hedging services and related software to a variety of institutional clients. He also served until July 1997 as President of Tuttle & Auerbach Securities, Inc., an introducing broker trading futures on behalf of institutional hedging clients and individuals. He is also a Director of Roelof Mining, Inc. He was a professor of Business Administration at St. Mary's College, Moraga, California until June 1992. He is the co-founder, and served as the Chairman until March 1986, of Intraview Systems Corporation, a privately-held company whose assets were acquired by Worlds of Wonder, Inc. Mr. Auerbach is a limited partner in Robertson Stephens Residential Fund, L.P., RS Property Fund I, L.P., and Robertson Stephens Commercial Property Fund, L.P., of which RSRF Company, L.L.C., RSRE II., L.L.C., and Robertson, Stephens & Company, Inc., respectively, affiliates of RSIM, L.P., and RSIM, Inc., are the general partners. Mr. Auerbach has been a Trustee of the Trust since June 1987. JOHN W. GLYNN, JR., TRUSTEE c/o RS Investment Management, 555 California Street, San Francisco, CA 94104 Mr. Glynn, 57, is the Principal and Chairman of the Board of Glynn Capital Management, an investment management firm which he founded in 1983. Mr. Glynn is a Director of Neurex Corporation, and of Sterling Payot Company, a private investment banking firm that advises executives and companies on financial and strategic matters. 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, PRESIDENT AND PRINCIPAL EXECUTIVE OFFICER c/o RS Investment Management, 555 California Street, San Francisco, CA 94104 Mr. Hecht, 47, was elected President and Principal Executive Officer of the Trust in February 1999. Mr. Hecht is the chief executive officer of RSIM, L.P. and RSIM, Inc. He is also the chief executive officer and a member of RS Investment Management Co., LLC, the parent company to RSIM, L.P. and RSIM, Inc. Mr. Hecht served as Chief Operating Officer of Robertson, Stephens & Company, Inc. from January 1993 to 1997, as Chief Financial Officer of Robertson, Stephens & Company LLC (and its predecessors) from June 1984 to January 1993 and as the head of that firm's Investment Management Group. He was also a limited partner of Robertson, Stephens & Company LLC, and a member of the Management and Executive Committees of Robertson, Stephens & Company, Inc. Previously, Mr. Hecht served as President and Chief Executive Officer of the Trust from October 1988 until December 1997. From May 1987 through May 1995, he served as Chief Financial Officer of the Trust. Mr. Hecht was a Director of RSIM, Inc. and of Robertson, Stephens & Company, Inc., from June 1989 to January 1993, and from January 1993 to October 1998, respectively. Mr. Hecht served as the Trust's Secretary from May 1987 through January 1989, as RSIM, L.P.'s Secretary from 1993 to the present, and as RSIM, Inc.'s Secretary from May 1987 through June 1989. He was a Trustee of the Trust from June 1987 until December 1997. JAMES K. PETERSON, TRUSTEE c/o RS Investment Management, 555 California Street, San Francisco, CA 94104 Mr. Peterson, 56, is an employee of Mitchum, Jones & Templeton, Inc.; he served as Director of Investment Management for the IBM Retirement Funds from April 1988 until October 1996. Mr. Peterson was a Manager of the IBM Retirement Funds from March 1981 until April 1988. Mr. Peterson has been a Trustee of the Trust since June 1987. B-18 *ANDREW P. PILARA, JR., TRUSTEE c/o RS Investment Management, 555 California Street, San Francisco, CA 94104 Mr. Pilara, 56, is a managing director of RSIM, L. P. and RSIM, Inc. He is also a managing member of RS Investment Management Co., LLC the parent company of RSIM L.P. and RSIM, Inc. He served as the Principal Executive Officer and the President of the Trust from October 1997 and December 1997, respectively, until February 1999. Mr. Pilara has been responsible for managing the Partners Fund since the Fund's inception in July 1995 and is responsible for managing the Global Natural Resources and Global Value Funds. Since August 1993 he has been a member of The Contrarian Fund-TM- management team. Mr. Pilara has been involved in the securities business for over 25 years, with experience in portfolio management, research, trading, and sales. Prior to joining RS Investment Management, L.P., he was president of Pilara Associates, an investment management firm he established in 1974. He holds a B.A. in economics from St. Mary's College. Mr. Pilara has been a Trustee of the Trust since September 1997. ANDREW C. MORRISON, TREASURER AND SECRETARY c/o RS Investment Management, 555 California Street, San Francisco, CA 94104 Mr. Morrison, 30, is a Vice President at RS Investment Management where he started as a performance analyst in 1994. He has over 7 years experience in the investment management industry, starting his career at Wm Mason & Company in Los Angeles in 1991. He has a B.A. in Economics from the University of California at Los Angeles. He has been an officer of the Trust since September 1998. Pursuant to the terms of the Advisory Agreements with the Funds, 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 an annual fee of $5,000 per Fund and reimburses their actual out-of-pocket expenses relating to attendance at meetings of the Board of Trustees.
COMPENSATION TABLE Pension or Retirement Benefits Estimated Total Name of Aggregate Accrued As Annual Compensation Person, Compensation Part of Trust Benefits Upon From Fund Paid Position From Trust Expenses Retirement to Trustees - --------------------------------------------------------------------------------------------------------------- Leonard Auerbach, Trustee $90,000 -- -- $90,000 John W. Glynn, Jr., Trustee $90,000 -- -- $90,000 James K. Peterson, Trustee $95,488 -- -- $95,488 Andrew P. Pilara, Jr., Trustee -- -- -- --
- ---------------------- * DENOTES A TRUSTEE WHO IS AN "INTERESTED PERSON," AS DEFINED IN THE 1940 ACT. B-19 CONTROL PERSONS AND SHARE OWNERSHIP As of February 10, 1999, to the Funds' knowledge, the shareholders who owned of record or beneficially more than 5% of the outstanding shares of any Fund were as follows:
Percentage of Percentage of Outstanding Outstanding Shares of the Shares of Shareholder Shares Owned Class Owned Fund Owned ----------- ------------ ----------- ---------- THE CONTRARIAN FUND-TM- CLASS A SHARES Charles Schwab & Co. Inc. 3,906,812.193 24.08% 23.96% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 1,413,385.225 8.71% 8.67% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES Bear Stearns Securities Corp. 9,586.820 12.68% 0.06% FBO 126-01287-13 1 Metrotech Center North Brooklyn NY 11201-3870 Dain Raucher Inc. FBO 5,493.689 7.26% 0.03% Sharon K. Lundgren & Kent Thor Lundgren JT TEN 9911 N Corey Lane Mequon, WI 53092-6207 McDonald Co. Secs. Inc. C/FBO 4,454.179 5.89% 0.03% George Meyerratken IRA 870 Sharon Drive, Suite 3 Florence, KY 41042-1272 DIVERSIFIED GROWTH FUND CLASS A SHARES Charles Schwab & Co. Inc 1,455,794.600 36.98% 36.37% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Fracisco, CA 94104-4122 National Financial Services Corp. 629,106.840 15.98% 15.72% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES Dominic N. Ferrara & Rita A. 7,560.091 11.58% 0.19% Ferrara TTEE U/A 9/1/79 Dominic N. Ferrara PSP Ross Park Professional Center 1 Ross Park Blvd. Steubenville, OH 43952-2673 B-20 NFSC FEBO # OLF-204382 4,733.813 7.25% 0.12% William S. Collum 125 Sterling Way Hatsfield, PA 19440-3716 Katie H. Gordon** 3,322.335 5.09% 0.08% 5311 Beacon Ct. Bakersfield, CA 93312-4980 Scott A. Gordon** 3,322.335 5.09% 0.08% 5311 Beacon Ct. Bakersfield, CA 93312-4980 EMERGING GROWTH FUND CLASS A SHARES Charles Schwab & Co. Inc. 3,848,236.444 21.18% 21.12% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 2,498,774.768 13.75% 13.71% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES NSFC FBO # U18-007897 7,652.510 13.98% 0.04% Nationsbank of Texas N.A. FBO IRA of Frank Dunham Jr. 30022000183285 PO Box 831575 Dallas, TX 75283-1571 CoreLink Financial 6,216.182 11.36% 0.03% PO Box 4054 Concord, CA 94524-4054 BHC Securities Inc. 2,821.610 5.15% 0.02% Attn: Mutual Funds Dept. FAO 40078978 One Commerce Square 2005 Market Street, Suite 1200 Philadelphia, PA 19103-7084 - ------------------- ** Owned of Record and Beneficially B-21 GLOBAL NATURAL RESOURCES FUND CLASS A SHARES Charles Schwab & Co. Inc. 1,510,186.094 49.70% 49.63% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 315,451.528 10.38% 10.37% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES NFSC FEBO # X77-005371 2,020.719 46.32% 0.07% Diagnostic Imaging Assoc. Ltd. Amended & Restated Pension Plan FBO M. Reza Faji Et Al. 2041 Blvd. of the Allies Pittsburgh, PA 15219-5801 NFSC FEBO # A1K-609455 1,725.311 39.55% 0.06% Linda Peterson & Mark Peterson JT TEN 272 Route 526 Imlaystown, NJ 08526-1307 NFSC FEBO # A1K-609269 609.373 13.97% 0.02% Qamar Ahmad GDN & Sadaf Ahmad JT TEN 26 Joseph Court Monmouth Junction, NJ 08852-2506 GLOBAL VALUE FUND CLASS A SHARES Charles Schwab & Co. Inc. 162,602.202 18.75% 17.90% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, Ca 94104-4122 G. Randy Hecht** 125,741.936 14.50% 13.85% 22 Turtle Rock Court Tiburon, CA 94920-1300 Andrew P. Pilara, Jr.** 63,896.438 7.37% 7.04% c/o BancAmerica Robertson Stephens 555 California, Suite 2600 San Franscico, CA 94104-1502 B-22 National Financial Services Corp. 51,393.034 5.93% 5.66% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES CoreLine Financial 19,183.802 46.75% 2.11% PO Box 4054 Concord, CA 94524-4054 Roney & Co. CUST FBO 5,831.456 14.21% 0.64% Edward I. Brown IRA R/O 126 Ponce De Leon Islamorada, FL 33036-4116 Roney & Co. CUST FBO 2,511.047 6.12% 0.28% Judity C. Bankey IRA R/O 437 Broadleaf Rochester, MI 48306-2818 Judy S. Craddick** 2,363.919 5.76% 0.26% 2 Reliez Manor Court Lafayette, CA 94549-2652 Wanda J. Zimmerman TTEE 2,190.417 5.34% 0.24% U/A DTD 7/24/95 Wanda J. Zimmerman Trust 156 Maywood Rochester, MI 48307-1537 Roney & Co. as CUST 2,094.751 5.10% 0.23% FBO Duane Joseph Peltier IRA 382 Beachview Drive Rochester, MI 48306-2807 GROWTH & INCOME FUND CLASS A SHARES Charles Schwab & Co. Inc. 4,313,329.780 35.60% 35.17% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 1,275,458.975 10.53% 10.40% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 B-23 CLASS C SHARES CoreLink Financial 11,667.591 7.92% 0.10% PO Box 4054 Concord, CA 94524-4054 INFORMATION AGE FUND-TM- CLASS A SHARES Charles Schwab & Co. Inc. 3,104,968.708 36.12% 36.07% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 1,521,619.995 17.70% 17.68% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES Raymond James & Assoc. Inc. 2,158.662 20.15% 0.03% CUST FBO John L. White Jr. IRA R/O 4 Wilcote Way Medford, NJ 08055-3333 NFSC FEBO # X01-271039 901.744 8.42% 0.01% John M. Miller 108 Main Street Norwell, MA 02061-2413 Donaldson Lufkin Jenrette 762.248 7.12% 0.01% Securites Corp. P.O. Box 2052 Jersey City, NJ 07303-2052 Judy S. Craddick** 759.878 7.09% 0.01% 2 Reliez Manor Court Lafayette, CA 94549-2652 Resources Trust Company TTEE 748.234 6.98% 0.01% IRA U/A 05/26/98 FBO Ernest Deustachio R-213-36-6304 PO Box 5900 Denver, CO 80217-5900 NFSC FEBO # 04J-675318 674.536 6.30% 0.01% NFSC/FMTC IRA FBO Steven Somers Smith 2728 Vincente St. San Francisco, CA 94116-2862 B-24 MICROCAP GROWTH FUND CLASS A SHARES Goodness Ltd.** 1,456,664.239 25.23% 25.05% PO Box N-7776 Nassau, Bahamas Charles Schwab & Co. Inc. 934,429.046 16.18% 16.07% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 844,758.884 14.63% 14.53% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES Trust Company of America Cust FBO 2,222.003 5.47% 0.04% Gale L. Fry Acct # 14534 7103 S. Revere Parkway Englewood, CO 80112-3936 Resources Trust Company N.A. 2,178.649 5.36% 0.04% FBO George Whittaker IRA I235700644 DTD 08/23/1997 PO Box 5900 Denver, CO 80217-5900 PARTNERS FUND CLASS A SHARES Charles Schwab & Co. Inc. 1,107,058.056 31.52% 31.42% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 356,259.989 10.14% 10.11% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES Robert G. Moulton TTEE 3,729.985 36.07% 0.11% Robert G. Moulton DDS SC PSP U/A 6-1-88 504 South Main Street Jefferson, WI 53549-1736 B-25 Resources Trust Company TTEE 1,369.128 13.24% 0.04% IRA U/A 05/19/97 FBO Gerald A. Root I-371-40-7703 PO Box 5900 Denver, CO 80217-5900 Donaldson Lufkin Jenrette 1,369.128 13.24% 0.04% Securities Corp. PO Box 2052 Jersey City, NJ 07303-2052 State Street Bank & Trust Company 867.961 8.39% 0.02% IRA R/O Jyoti S. Shah** 266 Slater Blvd. Staten Island, NY 10305-3241 NFSC FEBO # 179-838152 716.073 6.93% 0.02% FMT Co. CUST IRA FBO Alan A. Schetelich 2294 Edgewood Terrace Scotch Plains, NJ 07076-2107 NFSC FEBO # X59-050318 655.628 6.34% 0.02% Paula R. Weissman 12 D Dorado Drive Convent Station, NJ 07961 Donaldson Lufkin Jenrette 591.672 5.72% 0.02% Securities Corp. PO Box 2052 Jersey City, NJ 07303-2052 VALUE + GROWTH FUND CLASS A SHARES Charles Schwab & Co. Inc. 7,700,674.601 30.64% 30.56% Reinvest Account Attn: Mutual Funds Department 101 Montgomery Street San Francisco, CA 94104-4122 National Financial Services Corp. 3,576,481.357 14.23% 14.19% FBO The Exclusive Benefit of Our Customers PO Box 3908 Church Street Station New York, NY 10008-3908 CLASS C SHARES Resources Trust Company, N.A. 5,613.967 8.88% 0.02% FBO George Whittaker IRA I235700644 DTD 08/23/1997 PO Box 5900 Denver, CO 80217-5900
B-26 On February 10, 1999 the officers and Trustees of the Trust, as a group, beneficially owned less than 1% of the outstanding shares of each Fund, except for the Global Value Fund where the officers and Trustees of the Trust, as a group, beneficially owned 190,154.531 shares, approximately 20.94% of the outstanding shares of that 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. RS INVESTMENT MANAGEMENT RS Investment Management Co. LLC ("RSIM Co."), a Delaware limited liability company, is the owner of all of the outstanding beneficial interest in RSIM, L.P. and RSIM, Inc. 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 Funds, own 22%, 15%, and 20%, respectively. The remainder of the membership interests is owned by other employees of RSIM Co. or its affiliates and by other persons otherwise unaffiliated with RSIM Co. Each of Messrs. Callinan, Hecht, Pilara, and Stephens and Messrs. David Evans and James Foster, employees of RSIM Co. or its affiliates, is a member of the Board of Managers of RSIM Co. Mr. Hecht serves as the President and Principal Executive Officer of the Trust. Mr. Pilara serves as a Trustee of the Trust. Pursuant to Investment Advisory Agreements (the "Advisory Agreements"), RS Investment Management, at its expense, furnishes investment management services with respect to the assets of each Fund, consistent with the investment objective and policies of such Fund and subject to the supervision and direction of the Trust's Board of Trustees, and (i) furnishes the Trust with investment advice, research, and recommendations with respect to the investment of each Fund's assets and the purchase and sale of its portfolio securities, (ii) furnishes the Trust and each Fund with reports, statements, and other data on securities, economic conditions, and other pertinent subjects, and (iii) in general superintends and manages the investments of each Fund, subject to the ultimate supervision and direction of the Board of Trustees. In addition, the Advisory Agreements provide that RS Investment Management provides all administrative services needed for the management and operation of each Fund and furnishes such office space and personnel as are needed by the Fund (except in the case of the Diversified Growth, Global Natural Resources, Global Value, Growth & Income, The Information Age, and MicroCap Growth Funds, where such administrative services are furnished by RS Investment Management pursuant to an Administrative Services Agreement with those Funds, as described in "Administrative Fees" below). The services of RS Investment Management to the Funds are not deemed to be exclusive, and RS Investment Management 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 Funds may reimburse RS Investment Management (on a cost recovery basis only) for any services performed for a Fund by it outside its duties under the Advisory Agreements. Each Advisory Agreement provides that RS Investment Management 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 in question, 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. Each of the Advisory Agreements is subject to annual approval, commencing in 2001, by (i) the vote of the Trustees or of a majority of the outstanding voting securities (as defined in the 1940 Act) of the affected Fund, and (ii) the vote of a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the B-27 Trust, RSIM, L.P., or RSIM, Inc. Each is terminable by RS Investment Management, the Trust, or a vote of a majority of the outstanding voting securities of the affected Fund, without penalty, on 60 days written notice and will terminate automatically in the event of its assignment. Each Advisory Agreement also provides that RS Investment Management may, at its own expense, delegate certain of its responsibilities under the Agreement to sub-advisers for the Funds, who would be required to furnish an investment program and make investment decisions for the Funds. RSIM, L.P. has entered into sub-advisory agreements with Elijah Asset Management, in respect of the Information and Value + Growth Funds, and with Eastbourne in respect of a portion of the assets of The Contrarian Fund-TM-. See "The Sub-Advisors," below. THE SUB-ADVISORS Elijah Asset Management serves as sub-advisor to The Information Age Fund-TM- and the Value + Growth Fund. Eastbourne serves as sub-adviser in respect of a portion of the assets of The Contrarian Fund-TM- . Pursuant to each sub-advisory agreement ("Sub-Advisory Agreements"), each Sub-Adviser (i) manages such of the Fund's assets as are allocated to it in accordance with the Fund's investment objective, policies, and limitations and with any additional policies or guidelines established from time to time by RSIM, L.P. or the Board of Trustees, (ii) makes investment decisions for the Fund as to those assets, and (iii) places orders to purchase and sell securities and other investments for the Fund in respect of those assets. Each Sub-Advisory Agreement requires the Sub-Adviser to keep the Trust and RSIM, L.P informed of developments materially affecting the Fund in question. RSIM, L.P. currently allocates all of the assets of The Information Age Fund-TM- and the Value + Growth Fund to Elijah Asset Management for management by that firm. RSIM, L.P. currently allocates only a portion of the assets of The Contrarian Fund-TM- to Eastbourne for management, as described below. ELIJAH ASSET MANAGEMENT, LLC. Elijah Asset Management is a newly formed Delaware limited liability company; its sole managing member is Ronald E. Elijah, who currently serves as portfolio manager to the Information Age Fund-TM- and the Value + Growth Fund. Mr. Elijah owns 80% of the outstanding voting interest in Elijah Asset Management and is the sole managing member of the company; each of Mr. John P. McNiff and Radnor Holdings Corp. owns an additional 10% of the outstanding voting interest in Elijah Asset Management. Under the Sub-Advisory Agreement with Elijah Asset Management, RSIM, L.P will pay a fee to Elijah Asset Management with respect to each of The Information Age Fund-TM- and the Value + Growth Fund equal to 50% of the fees paid to RSIM, L.P. by such Fund pursuant to the Advisory Agreement. The Sub-Advisory Agreement with Elijah Asset Management may be terminated as to either Fund (i) by the Trust at any time without penalty, upon the vote of a majority of the Trust's Trustees or by vote of a majority of the outstanding voting securities of the Fund in question, upon 60 days written notice to Elijah Asset Management and RSIM, L.P., (ii) by RSIM, L.P. at any time without penalty, upon 60 days written notice to Elijah Asset Management and the Trust (which right RSIM, L.P. has agreed with Elijah Asset Management not to exercise except under certain circumstances, as described below), or (iii) by Elijah Asset Management at any time without penalty, upon 60 days written notice to RSIM, L.P. and the Trust. The Sub-Advisory Agreement will continue in effect for a period of more than two years in respect of a Fund only if its continuance is approved annually by the Board of Trustees of the Trust or the shareholders of the Fund in question and by the disinterested Trustees of the Trust. RSIM, L.P. has entered into a separate agreement with Elijah Asset Management relating generally to Elijah Asset Management's management of assets of a number of clients of RSIM, L.P., including the Funds. That agreement includes provisions, by way of example, requiring Elijah Asset Management to provide certain types of information to RSIM, L.P., to continue to employ Mr. Ronald Elijah as the full-time principal portfolio manager of the accounts of those clients, to comply with all applicable laws, rules, and regulations, and to comply with such investment guidelines and protocols as RSIM, L.P. may establish from time to time. It also includes provisions requiring RSIM, L.P. to make payments to Elijah Asset Management at an annual rate of up to 0.025% of the average daily net assets of each of the Funds in consideration of Elijah Asset Management's B-28 cooperation with RSIM, L.P. in respect of the promotion of the shares of the Funds. In that agreement, RSIM, L.P. has also agreed not to exercise its right to terminate the Sub-Advisory Agreement in respect of either Fund for a period of three years except for cause, which is defined in the agreement to include, among other things, Elijah Asset Management's becoming subject to a statutory disqualification preventing it from serving as sub-adviser; Elijah Asset Management's (or any affiliate's) becoming subject to any claim, investigation, action, or suit that could reasonably be expected to injure or call into question the goodwill, reputation, or business of any Fund, of RSIM, L.P., or of any of their affiliates; any breach by Elijah Asset Management of any material provision of the agreement or of the Sub-Advisory Agreement; or Elijah Asset Management's (or any affiliate's) committing any act of fraud or dishonesty that could injure the goodwill, reputation, or business of any Fund or of RSIM, L.P. or of any of their affiliates. RSIM, L.P. has also agreed not to exercise its right to terminate the Sub-Advisory Agreement in respect of the Fund after that three-year period except for cause so long as the investment performance of the Fund meets certain criteria agreed upon by RSIM, L.P. and Elijah Asset Management. Nothing in that agreement limits in any way the right of any Fund to terminate a Sub-Advisory Agreement in accordance with its terms or the right or ability of RSIM, L.P. to provide evaluations and recommendations to the Board of Trustees as to Elijah Asset Management, its services, or its status as sub-adviser to a Fund. In its agreement with RSIM, L.P., Elijah Asset Management has agreed to limit its management of other mutual funds comparable to the Information Age and Value + Growth Funds. EASTBOURNE MANAGEMENT, L.L.C. Eastbourne is a newly formed Delaware limited liability company; its sole managing member and owner of a majority of the outstanding membership interest is Rick Barry, who currently serves as a member of the portfolio management team for The Contrarian Fund-TM-. Mr. Barry owns the majority of the outstanding membership interest in Eastbourne; certain employees of Eastbourne own the remaining membership interests. Currently, RSIM, L.P. allocates a portion of The Contrarian Fund's assets for management by Eastbourne in circumstances where RSIM, L.P. believes that management of those assets by Eastbourne would be in the best interest of the Fund. RSIM, L.P. allocates a portion of the Fund's assets to Eastbourne in circumstances where, for example, RSIM, L.P. believes that an increase in, or change to, the Fund's short positions might be desirable, or where it believes that long investments by the Fund might be desirable in sectors or companies where Eastbourne might offer a successful investment program. Under the Sub-Advisory Agreement, RSIM, L.P. pays a fee to Eastbourne in an amount equal to 40% of the fees received by RSIM, L.P. under its Investment Advisory Agreement with the Fund in respect of assets allocated to Eastbourne. The Sub-Advisory Agreement with Eastbourne may be terminated (i) at any time without penalty by the Trust, upon the vote of a majority of the Trust's Trustees or by vote of the majority of the outstanding voting securities of The Contrarian Fund-TM-, upon 60 days written notice to Eastbourne and RSIM, L.P., (ii) by RSIM, L.P. at any time without penalty, upon 60 days written notice to Eastbourne and the Trust, or (iii) by Eastbourne at any time without penalty, upon 60 days written notice to RSIM, L.P. and the Trust. The Sub-Advisory Agreement will continue in effect for a period of more than two years in respect of the Fund only if its continuance is approved annually by the Board of Trustees of the Trust or the shareholders of the Fund and by the disinterested Trustees of the Trust. Eastbourne may from time to time place limits on the amount of assets it will manage for The Contrarian Fund-TM- and other clients of RSIM, L.P. for the purpose of making "short" investments; currently, Eastbourne has fixed that limit at $50 million. MANAGEMENT AND ADMINISTRATIVE FEES MANAGEMENT FEES. The Funds pay RS Investment Management fees as compensation for the services provided by it under the Advisory Agreements. The amount of these management fees is calculated daily and payable monthly at the following annual rates based on the average daily net assets of each Fund: The Contrarian Fund-TM- 1.50% Diversified Growth Fund 1.00% B-29 Emerging Growth Fund 1.00% Global Natural Resources Fund 1.00% Global Value Fund 1.00% Growth & Income Fund 1.00% Information Age Fund-TM- 1.00% MicroCap Growth Fund 1.25% Partners Fund 1.25% Value + Growth Fund 1.00% These management fees are higher than those paid by most other investment companies. RS Investment Management also may at its discretion from time to time pay Fund expenses from its own assets, or reduce the management fee of a Fund. ADMINISTRATIVE SERVICES. The Diversified Growth Fund, Global Natural Resources Fund, Global Value Fund, Growth & Income Fund, The Information Age Fund-TM-, and MicroCap Growth Fund have entered into an Administrative Services Agreement with RSIM, L.P., pursuant to which RSIM, L.P. continuously provides business management services to the Funds and generally manages all of the business and affairs of the Funds, subject to the general oversight of the Trustees. No fees are payable by these Funds under the Administrative Services Agreement. The Administrative Services Agreement is subject to annual approval, commencing in 2001, by (i) the Board of Trustees, and (ii) the vote of a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act). The Administrative Services Agreement may be terminated without penalty, by the Trust or by the vote of a majority of the outstanding voting securities (as defined in the 1940 Act) of the affected Fund, on 30 days notice to RSIM, L.P. RECENT MANAGEMENT AND ADMINISTRATIVE FEES PAID BY THE FUNDS.
Reimbursement Administration Management Fees(1) of Expenses(2) Fees(3) ------------------ -------------- -------------- THE CONTRARIAN FUND-TM- Year ended 12/31/96 $13,472,471 -- -- Year ended 12/31/97 $13,674,978 -- -- Year ended 12/31/98 $3,977,993 -- -- DIVERSIFIED GROWTH FUND 8/1/96 - 12/31/96 $135,953 $22,771 $33,988 Year ended 12/31/97 $646,730 $126,477 $161,683 Year ended 12/31/98 $734,620 $151,559 $82,199 EMERGING GROWTH FUND Year ended 12/31/96 $1,805,586 -- -- Year ended 12/31/97 $2,277,624 -- -- Year ended 12/31/98 $2,833,019 -- -- GLOBAL NATURAL RESOURCES FUND Year ended 12/31/96 $487,594 $107,877 $121,899 Year ended 12/31/97 $1,438,918 $9,044 $359,729 Year ended 12/31/98 $507,251 $132,665 $69,681 GLOBAL VALUE FUND 4/1/97 - 12/31/97 $130,016 $163,698 $32,504 Year ended 12/31/98 $169,479 $175,876 $21,758
B-30
Reimbursement Administration Management Fees(1) of Expenses(2) Fees(3) ------------------ -------------- -------------- GROWTH & INCOME FUND Year ended 12/31/96 $2,462,636 $140,905 $615,659 Year ended 12/31/97 $2,972,467 $1,235,367 $743,117 Year ended 12/31/98 $2,451,091 $853,895 $288,447 THE INFORMATION AGE FUND-TM- Year ended 12/31/96 $720,640 -- $180,160 Year ended 12/31/97 $1,234,823 -- $308,706 Year ended 12/31/98 $1,177,214 -- $126,941 MICROCAP GROWTH FUND 8/15/96 - 12/31/96 $25,237 $67,948 $5,047 Year ended 12/31/97 $530,205 $274,052 $106,041 Year ended 12/31/98 $1,386,701 $104,172 $126,373 PARTNERS FUND Year ended 12/31/96 $514,459 $91,703 -- Year ended 12/31/97 $2,580,567 $1,746 -- Year ended 12/31/98 $1,496,310 $236,741 -- VALUE + GROWTH FUND Year ended 12/31/96 $8,168,685 -- -- Year ended 12/31/97 $7,509,306 -- -- Year ended 12/31/98 $7,015,541 -- --
(1) Before giving effect to any reimbursement or waiver by RSIM, L.P. or RSIM, Inc. (2) Includes amount of management fees waived or reimbursed by RSIM, L.P. or RSIM, Inc. plus the amount of any other expenses for which RSIM, L.P. or RSIM, Inc. reimbursed the Fund or which RSIM, L.P. or RSIM, Inc. bore on behalf of the Fund. (3) On May 26, 1998, the Administrative Services Agreement between the Trust on behalf of certain of the Funds and RSIM, L.P. was amended to provide that no fee is payable by the Funds under that Agreement. Prior to such date, certain of the Funds paid fees under the Administrative Services Agreement at an annual rate of 0.25% of a Fund's average daily net assets. EXPENSES Each Fund will pay all expenses related to its operation which are not borne by an Adviser, including but not limited to taxes, interest, brokerage fees and commissions, compensation paid to Provident Distributors, Inc., Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428 ("Provident" or the "Distributor"), the Trust's distributor, under the Funds' 12b-1 Plan, fees paid to members of the Board of Trustees who are not officers, directors, stockholders, or employees of an Adviser or Provident, SEC fees and related expenses, state Blue Sky qualification fees, charges of custodians, transfer agents, registrars or other agents, outside auditing, accounting, and legal services, charges for the printing of prospectuses and statements of additional information for regulatory purposes or for distribution to shareholders, certain shareholder report charges, and charges relating to corporate matters. PORTFOLIO TRANSACTIONS AND BROKERAGE Investment decisions for the Funds and for the other investment advisory clients of an Adviser and its affiliates are made with a view to achieving their respective investment objectives. Investment decisions are the product of many factors in addition to basic suitability for the particular client involved. Thus, a particular security may be bought or sold for certain clients even though it could have been bought or sold for other clients at the same time. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling the security. In some instances, one client may sell a particular security to another client. It also sometimes B-31 happens that two or more clients simultaneously purchase or sell the same security, in which event each day's transactions in such security are, insofar as possible, averaged as to price and allocated between such clients in a manner which in the Adviser's opinion is equitable to each and in accordance with the amount being purchased or sold by each. There may be circumstances when purchases or sales of portfolio securities for one or more clients will have an adverse effect on other clients. Each Adviser employs professional staffs of portfolio managers who draw upon a variety of resources for research information for the Funds. Transactions on U.S. stock exchanges, commodities markets, and futures markets and other agency transactions involve the payment by a Fund of negotiated brokerage commissions. Such commissions vary among different brokers. A particular broker may charge different commissions according to such factors as the difficulty and size of the transaction. Transactions in foreign investments often involve the payment of fixed brokerage commissions, which may be higher than those in the United States. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price paid by the Trust usually includes an undisclosed dealer commission or mark-up. In underwritten offerings, the price paid by the Trust includes a disclosed, fixed commission or discount retained by the underwriter or dealer. It has for many years been a common practice in the investment advisory business for advisers of investment companies and other institutional investors to receive brokerage and research services (as defined in the Securities Exchange Act of 1934, as amended (the "1934 Act")) from broker-dealers that execute portfolio transactions for the clients of such advisers and from third parties with which such broker-dealers have arrangements. Consistent with this practice, the Advisers receive brokerage and research services and other similar services from many broker-dealers with which they place a Fund's portfolio transactions and from third parties with which these broker-dealers have arrangements. These services include such matters as general economic and market reviews, industry and company reviews, evaluations of investments, recommendations as to the purchase and sale of investments, newspapers, magazines, pricing services, quotation services, news services, and personal computers utilized by an Adviser's managers and analysts. Where the services referred to above are not used exclusively by an Adviser for research purposes, the Adviser, based upon its own allocations of expected use, bears that portion of the cost of these services which directly relates to its non-research use. Some of these services are of value to an Adviser and its affiliates in advising various of its clients (including the Funds), although not all of these services are necessarily useful and of value in managing the Funds. The management fee paid by a Fund is not reduced because an Adviser or its affiliates receive these services even though the Adviser might otherwise be required to purchase some of these services for cash. The Advisers place all orders for the purchase and sale of portfolio investments for the Funds and buy and sell investments for the Funds through a substantial number of brokers and dealers. Each Adviser seeks the best overall terms available for the Funds, except to the extent an Adviser may be permitted to pay higher brokerage commissions as described below. In doing so, an Adviser, having in mind a Fund's best interests, considers all factors it deems relevant, including, by way of illustration, price, the size of the transaction, the nature of the market for the security or other investment, the amount of the commission, the timing of the transaction taking into account market prices, and trends, the reputation, experience, and financial stability of the broker-dealer involved and the quality of service rendered by the broker-dealer in other transactions. As permitted by Section 28(e) of the 1934 Act, an Adviser may cause a Fund to pay a broker-dealer which provides "brokerage and research services" (as defined in the 1934 Act) to the Adviser an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the Fund on an agency basis in excess of the commission which another broker-dealer would have charged for effecting that transaction. An Adviser's authority to cause a Fund to pay any such greater commissions is also subject to such policies as the Trustees may adopt from time to time. None of the Advisers currently intends to cause the Funds to make such payments. It is the position of the staff of the Securities and Exchange Commission that Section 28(e) does not apply to the payment of such greater commissions in "principal" transactions. Accordingly, the Advisers will use their best efforts to obtain the best overall terms available with respect to such transactions. The following tables provide information regarding brokerage commissions paid by the Funds for the periods indicated. B-32
FISCAL YEAR FISCAL YEAR FISCAL YEAR THE CONTRARIAN FUND-TM- ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - ----------------------- -------------- -------------- -------------- Percentage of total transactions 77% 61% involving brokerage commissions Dollar amount of commissions $2,654,377 $3,072,174 Percentage (dollar amount) paid 0.3%($2,370) 0.6%($16,986) 1%($27,230) to Robertson, Stephens & Company LLC ("RS&Co.")/BancAmerica Robertson Stephens ("BARS")/NationsBanc Montgomery Securities/("NMS") Percentage of brokerage transactions 3% 1% effected through RS&Co./BARS/NMS Percentage of transactions effected 23% 39% without brokerage commissions
FISCAL YEAR FISCAL YEAR PERIOD RS DIVERSIFIED GROWTH FUND ENDED 12/31/98 ENDED 12/31/97 8/1/96 - 12/31/96 - -------------------------- -------------- -------------- ----------------- Percentage of total transactions 46% 57% involving brokerage commissions Dollar amount of commissions $611,542 $125,233 Percentage (dollar amount) paid 4.3%($40,890) 9.6%($58,721) 13% ($16,648) to RS&Co./BARS/NMS Percentage of brokerage transactions 8% 20% effected through RS&Co./BARS/NMS Percentage of transactions effected 54% 43% without brokerage commissions
FISCAL YEAR FISCAL YEAR FISCAL YEAR EMERGING GROWTH FUND ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - -------------------- -------------- -------------- -------------- Percentage of total transactions 40% 27% involving brokerage commissions Dollar amount of commissions $892,322 $479,020 Percentage (dollar amount) paid to 12.3%($74,833) 10.0%($89,505) 5% ($23,895) RS&Co./BARS/NMS B-33 Percentage of total transactions 77% 61% Percentage of brokerage transactions 6% 2% effected through RS&Co./BARS/NMS Percentage of transactions effected 60% 73% without brokerage commissions
FISCAL YEAR FISCAL YEAR FISCAL YEAR VALUE + GROWTH FUND ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - ------------------- -------------- -------------- -------------- Percentage of total transactions 58% 53% involving brokerage commissions Dollar amount of commissions $2,286,747 $3,175,482 Percentage (dollar amount) paid to 6.19%($139,451) 5.2%($118,446) 12% ($375,005) RS&Co./BARS/NMS Percentage of brokerage transactions 3% 8% effected through RS&Co./BARS/NMS Percentage of transactions effected 42% 47% without brokerage commissions
GLOBAL NATURAL FISCAL YEAR FISCAL YEAR FISCAL YEAR RESOURCES FUND ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - -------------- -------------- -------------- -------------- Percentage of total transactions 82% 69% involving brokerage commissions Dollar amount of commissions $416,574 $362,984 Percentage (dollar amount) paid to 0.4%($1,000) 0.3%($1,120) 1% (2,302) RS&Co./BARS/NMS Percentage of brokerage transactions 0.4% 2% effected through RS&Co./BARS/NMS Percentage of transactions effected 18% 31% without brokerage commissions
FISCAL YEAR PERIOD GLOBAL VALUE FUND ENDED 12/31/98 2/20/97-12/31/97 - ----------------- -------------- ---------------- Percentage of total transactions 73% involving brokerage commissions Dollar amount of commissions $99,195 Percentage (dollar amount) paid to 0.9%($1,555) 1.0%($980) RS&Co./BARS/NMS B-34 Percentage of brokerage transactions 3% effected through RS&Co./BARS/NMS Percentage of transactions effected 27% without brokerage commissions
FISCAL YEAR FISCAL YEAR FISCAL YEAR GROWTH & INCOME FUND ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - -------------------- -------------- -------------- -------------- Percentage of total transactions 55% 44% involving brokerage commissions Dollar amount of commissions $1,869,262 $1,257,368 Percentage (dollar amount) paid to 8.0%($139,293) 10%($186,869) 14% ($179,275) RS&Co./BARS/NMS Percentage of brokerage transactions 9% 6% effected through RS&Co./BARS/NMS Percentage of transactions effected 45% 56% without brokerage commissions
FISCAL YEAR FISCAL YEAR FISCAL YEAR INFORMATION AGE FUND-TM- ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - ------------------------ -------------- -------------- -------------- Percentage of total transactions 24% 22% involving brokerage commissions Dollar amount of commissions $339,164 $245,279 Percentage (dollar amount) paid to 6.4%($16,610) 5.9%($19,850) 13% ($31,080) RS&Co./BARS/NMS Percentage of brokerage transactions 3% 3% effected through RS&Co./BARS/NMS Percentage of transactions effected 76% 78% without brokerage commissions
FISCAL YEAR FISCAL YEAR FISCAL YEAR MICROCAP FUND ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - ------------- -------------- -------------- -------------- Percentage of total transactions 6% 5% involving brokerage commissions Dollar amount of commissions $62,898 $1,800 B-35 Percentage (dollar amount) paid to 2.39%($1,332) 0% 0% RS&Co./BARS/NMS Percentage of brokerage transactions 0% 0% effected through RS&Co./BARS/NMS Percentage of transactions effected 94% 95% without brokerage commissions
FISCAL YEAR FISCAL YEAR FISCAL YEAR PARTNERS FUND ENDED 12/31/98 ENDED 12/31/97 ENDED 12/31/96 - ------------- -------------- -------------- -------------- Percentage of total transactions 81% 63% involving brokerage commissions Dollar amount of commissions $599,656 $143,042 Percentage (dollar amount) paid to 0%($0) 0.5%($2,965) 0.5% ($680) RS&Co./BARS/NMS Percentage of brokerage transactions 0.4% 1% effected through RS&Co./BARS/NMS Percentage of transactions effected 19% 37% without brokerage commissions
THE FUNDS' DISTRIBUTOR Each of the Funds has adopted a Distribution Plan under Rule 12b-l of the 1940 Act (the "Plan") in respect of its Class A Shares. Pursuant to the Plan, each Fund may pay Provident, from the assets attributable to the Fund's Class A shares, distribution fees, for services Provident renders and costs and expenses it incurs in connection with the promotion and distribution of the Fund's shares, at an annual rate of 0.25% of the Fund's average daily net assets. (The Contrarian Fund-TM- may pay fees under the Plan at a rate of up to 0.75% of the Fund's average daily net assets; the Board of Trustees has currently limited payments under the Plan by that Fund to a rate of 0.25% of the Fund's average daily net assets.) Such expenses may include, but are not limited to, costs of advertising and promoting the sale of shares of the Funds and payments to dealers, financial institutions, advisers, or other firms. They also include Provident's overhead expenses attributable to the distribution of each Fund's shares, which may include, for example, expenses for office space, communications, and salaries of Provident personnel, and any other of Provident's expenses attributable to the distribution of the Funds' shares. Affiliates of RSIM, L.P. provide certain services to Provident in respect of the promotion of the shares of the Funds. In return for those services, Provident pays to these affiliates substantially all of the payments received by Provident under the Plan. The Plan is a "compensation" plan. RECENT PAYMENTS UNDER THE FUNDS' CLASS A DISTRIBUTION PLAN **
The Contrarian Fund-TM- Distribution Fees Waiver - ----------------------- ----------------- ------ Year ended 12/31/96 $6,736,236 -- Year ended 12/31/97 $6,816,512 -- Year ended 12/31/98 $1,050,953 --
- ------------------ ** Distribution fees were paid to Edgewood Services, Inc., the Funds' distributor until December 31, 1998 ("Edgewood"). No payments were made under the Funds' Class C Plan during fiscal 1996. B-36
DIVERSIFIED GROWTH FUND 8/1/96 - 12/31/96 $33,988 -- Year ended 12/31/97 $161,523 -- Year ended 12/31/98 $181,969 -- EMERGING GROWTH FUND Year ended 12/31/96 $451,396 -- Year ended 12/31/97 $569,136 -- Year ended 12/31/98 $706,777 -- GLOBAL NATURAL RESOURCES FUND Year ended 12/31/96 $121,899 -- Year ended 12/31/97 $359,714 -- Year ended 12/31/98 $126,725 -- GLOBAL VALUE FUND 2/20/97 - 12/31/97 $31,862 -- Year ended 12/31/98 $41,710 -- GROWTH & INCOME FUND Year ended 12/31/96 $615,659 -- Year ended 12/31/97 $742,070 -- Year ended 12/31/98 $608,595 -- THE INFORMATION AGE FUND-TM- Year ended 12/31/96 $180,160 -- Year ended 12/31/97 $308,650 -- Year ended 12/31/98 $293,961 -- MICROCAP GROWTH FUND 8/15/96 - 12/31/96 $5,047 -- Year ended 12/31/97 $105,123 -- Year ended 12/31/98 $274,092 -- PARTNERS FUND Year ended 12/31/96 $102,892 -- Year ended 12/31/97 $514,757 -- Year ended 12/31/98 $297,791 -- VALUE + GROWTH FUND Year ended 12/31/96 $2,042,076 -- Year ended 12/31/97 $1,876,469 -- Year ended 12/31/98 $1,750,301 -- RECENT PAYMENTS UNDER THE FUNDS' CLASS C DISTRIBUTION PLAN**(1): THE CONTRARIAN FUND-TM- Distribution Fees Waiver 4/14/97 - 12/31/97 $20,977 -- Year ended 12/31/98 $18,507 -- B-37 DIVERSIFIED GROWTH FUND 9/10/97 - 12/31/97 $478 -- Year ended 12/31/98 $5,057 -- EMERGING GROWTH FUND 5/8/97 - 12/31/97 $811 -- Year ended 12/31/98 $4,433 -- GLOBAL NATURAL RESOURCES FUND 7/30/97 - 12/31/97 $48 -- Year ended 12/31/98 $263 -- GLOBAL VALUE FUND 6/30/97 - 12/31/97 $1,926 -- Year ended 12/31/98 $1,893 -- GROWTH & INCOME FUND 5/9/97 - 12/31/97 $3,140 -- Year ended 12/31/98 $12,533 -- THE INFORMATION AGE FUND-TM- 7/11/97 - 12/31/97 $167 -- Year ended 12/31/98 $1,029 -- MICROCAP GROWTH FUND 6/18/97 - 12/31/97 $2,755 -- Year ended 12/31/98 $9,744 -- PARTNERS FUND 4/14/97 - 12/31/97 $4,068 -- Year ended 12/31/98 $4,414 -- VALUE + GROWTH FUND 5/28/97 - 12/31/97 $2,570 -- Year ended 12/31/98 $10,753 --
(1) The Distribution Plan adopted in respect of the Funds' Class C shares (the "Class C Plan") was in effect through April 1999. The Class C Plan provided for payments by each Fund from the assets attributable to the Funds' Class C shares at an annual rate of up to 1.00% (although each of the Funds' had limited payments under the Class C Plan to an annual rate of 0.75% of a Fund's average daily net assets attributable to its Class C shares. Affiliates of RSIM, L.P. received substantially all of the payments paid under the Class C Plan. ** Distribution fees were paid to Edgewood Services, Inc., the Funds' distributor until December 31, 1998 ("Edgewood"). No payments were made under the Funds' Class C Plan during fiscal 1996. RECENT CONTINGENT DEFERRED SALES CHARGES ("CDSC") RECEIVED FOR CLASS C SHARES(1): The Funds paid CDSCs during fiscal 1997 and 1998 in the following amounts:
THE CONTRARIAN FUND-TM- CDSC PAID 4/14/97 - 12/31/97 $5,351.73 Year ended 12/31/98 $18,057.11 B-38 DIVERSIFIED GROWTH FUND 9/10/97 - 12/31/97 $45.32 Year Ended 12/31/98 $344.44 EMERGING GROWTH FUND 5/8/97 - 12/31/97 $108.62 Year ended 12/31/98 $2,563.77 GLOBAL NATURAL RESOURCES FUND 7/30/97 - 12/31/97 $32.13 Year ended 12/31/98 $0 GLOBAL VALUE FUND 6/30/97 - 12/31/97 $522.73 Year ended 12/31/98 $662.95 GROWTH & INCOME FUND 5/9/97 - 12/31/97 $105.01 Year ended 12/31/98 $2,154.00 THE INFORMATION AGE FUND-TM- 7/11/97 - 12/31/97 $34 Year ended 12/31/98 $2,105.76 MICROCAP GROWTH FUND 6/18/97 - 12/31/97 $438.82 Year ended 12/31/98 $2,579.04 PARTNERS FUND 4/14/97 - 12/31/97 $958.57 Year ended 12/31/98 $1,543.46 VALUE + GROWTH FUND 5/28/97 - 12/31/97 $4,958.15 Year ended 12/31/98 $3,006.03
(1)Class C shares were subject to a 1.00% contingent deferred sales charge ("CDSC") if redeemed within one year after purchase. Affiliates of RSIM, L.P. received substantially all of the proceeds of any CDSC imposed on redemption of shares. HOW NET ASSET VALUE IS DETERMINED Each Fund determines the net asset value per share of each class of its shares once daily, as of 4:30 p.m. eastern time, on each day the New York Stock Exchange (the "Exchange") is open. The Exchange is closed Saturdays, Sundays, New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, the Independence Day (observed), Labor Day, Thanksgiving, and Christmas. Securities for which market quotations are readily available are valued using the last reported sale price or, if no sales are reported (as in the case of some securities traded over-the-counter), at the mean between the closing bid and asked prices, except that certain U.S. Government securities are stated at the mean between the last reported bid and asked prices. Short-term investments having remaining maturities of 60 days or less are stated at amortized cost, which approximates market value. All other securities and assets are valued at their fair value following procedures approved by the Trustees. B-39 Reliable market quotations are not considered to be readily available for long-term corporate bonds and notes, certain preferred stocks, or certain foreign securities. These investments are stated at fair value on the basis of valuations furnished by pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. If any securities held by a Fund are restricted as to resale, their fair value is determined in accordance with the guidelines and procedures adopted by the Trust's Board of Trustees. The fair value of such securities is generally determined as the amount which a Fund could reasonably expect to realize from an orderly disposition of such securities over a reasonable period of time. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the securities (including any registration expenses that might be borne by the Fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted securities of the same class (both at the time of purchase and at the time of valuation), the size of the holding, the prices of any recent transactions or offers with respect to such securities, and any available analysts' reports regarding the issuer. Generally, trading in certain securities (such as foreign securities) is substantially completed each day at various times prior to the close of the Exchange. The values of these securities used in determining the net asset value of a Fund's shares are computed as of such times. Also, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain securities (such as convertible bonds and U.S. Government securities) are determined based on market quotations collected earlier in the day at the latest practicable time prior to the close of the Exchange. Occasionally, events affecting the value of such securities may occur between such times and the close of the Exchange which will not be reflected in the computation of a Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value following procedures approved by the Trustees. TAXES Each 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, a 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," a Fund must, among other things, (a) derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other dispositions of stock, securities, or foreign currencies, and other income (including gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities, or currencies and (b) diversify its holdings so that, at the close of each quarter of its taxable year, (i) at least 50% of the value of its total assets consists of cash, cash items, U.S. Government securities, and other securities limited generally with respect to any one issuer to not more than 5% of the total assets of the Fund and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the B-40 securities of any issuer (other than U.S. Government securities). In order to receive the favorable tax treatment accorded regulated investment companies and their shareholders, moreover, a Fund must in general distribute with respect to each taxable year at least 90% of the sum of its taxable net investment income, its net tax-exempt income, and the excess, if any, of net short-term capital gains over net long-term capital gains. An excise tax at the rate of 4% will be imposed on the excess, if any, of each 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. Each Fund intends to make distributions sufficient to avoid imposition of the excise tax. Distributions declared by a 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 a Fund from sources outside the United States, such income and gains may be subject to foreign taxes which are withheld at the source. Thus, a Fund's yield on foreign investments would be decreased by such taxes. The effective rate of foreign taxes to which a Fund will be subject depends on the specific countries in which its assets will be invested and the extent of the assets invested in each such country and therefore cannot be determined in advance. If a Fund engages in hedging transactions, including hedging transactions in options, futures contracts, and straddles, or other similar transactions, it will be subject to special tax rules (including constructive sale, mark-to- market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the Fund, defer losses to the Fund, cause adjustments in the holding periods of the Fund's securities, convert long-term capital gains into short-term capital gains, or convert short-term capital losses into long- term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders. Each Fund will endeavor to make any available elections pertaining to such transactions in a manner believed to be in the best interests of the Fund. A Fund's transactions in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. A Fund's transactions in foreign currency-denominated debt instruments and its hedging activities will likely produce a difference between its book income and its taxable income. This difference may cause a portion of the Fund's distributions of book income to constitute returns of capital for tax purposes or require the Fund to make distributions exceeding book income in order to permit the Fund to continue to qualify, and be taxed under Subchapter M of the Code, as a regulated investment company. Under federal income tax law, a portion of the difference between the purchase price of zero-coupon securities in which a 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, a Fund could be required at times to liquidate other investments in order to satisfy its distribution requirements. A 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 B-41 subject to a U.S. withholding tax at a rate of 30% on a Fund's distributions from its ordinary income and the excess of its net short-term capital gain over its net long-term capital loss, unless the tax is reduced or eliminated by an applicable tax treaty. Distributions from the excess of the Fund's net capital gain received by such shareholders and any gain from the sale or other disposition of shares of the Fund generally will not be subject to U.S. Federal income taxation, provided that non-resident alien status has been certified by the shareholder. Different U.S. tax consequences may result if the shareholder is engaged in a trade or business in the United States, is present in the United States for a sufficient period of time during a taxable year to be treated as a U.S. resident, or fails to provide any required certifications regarding status as a non-resident alien investor. Foreign shareholders should consult their tax advisors regarding the U.S. and foreign tax consequences of an investment in the Fund. The IRS recently revised its regulations affecting the application to foreign investors of the back-up withholding and withholding tax rules described above. The new regulations will generally be effective for payments made on or after January 1, 2000 (although transition rules will apply). In some circumstances, the new rules will increase the certification and filing requirements imposed on foreign investors in order to qualify for exemption from 31% back-up withholding tax and for reduced withholding tax rates under income tax treaties. Foreign investors in each Fund should consult their tax advisors with respect to the potential application of these new regulations. The foregoing is a general and abbreviated summary of the applicable provisions of the Code and related regulations currently in effect. For the complete provisions, reference should be made to the pertinent Code sections and regulations. The Code and regulations are subject to change by legislative or administrative actions. Dividends and distributions also may be subject to local, state and foreign taxes. Shareholders are urged to consult their tax advisers regarding specific questions as to federal, state, local, and foreign taxes. The foregoing discussion relates solely to U.S. federal income tax law. Non-U.S. investors should consult their tax advisers concerning the tax consequences of ownership of shares of the Fund. Statements as to the tax status of distributions will be mailed annually. HOW PERFORMANCE IS DETERMINED STANDARDIZED PERFORMANCE INFORMATION Average annual total return of a class of shares of a Fund for one-, five-, and ten-year periods (or for such shorter periods as shares of that class of shares of the Fund have been offered) is determined by calculating the actual dollar amount of investment return on a $1,000 investment in that class of shares at the beginning of the period, and then calculating the annual compounded rate of return which would produce that amount. Total return for a period of one year or less is equal to the actual return of that class of shares during that period. Total return calculations assume reinvestment of all Fund distributions at net asset value on their respective reinvestment dates. Total return may be presented for other periods. At times, RS Investment Management may reduce its compensation or assume expenses of the Fund in order to reduce the Fund's expenses. Any such fee reduction or assumption of expenses would increase the Fund's total return during the period of the fee reduction or assumption of expenses. All data are based on past performance and do not predict future results. PERFORMANCE INFORMATION Yield and total return data for a Fund's Class A shares may from time to time be included in advertisements about the Funds. A Fund's "yield" is calculated by dividing the annualized net investment income per Class A share during a recent 30-day period by the net asset value per Class A share on the last day of that period. "Total return" for one-, five-, and ten-year periods, and for the life of a Fund, through the most recent calendar quarter represents the average annual compounded rate of return (or, in the case of a period of one year or less, the actual rate of return) on an investment of $1,000 in the Fund's Class A shares. Total return may also be presented for other B-42 periods. Quotations of yield or total return for a period when an expense limitation was in effect will be greater than if the limitation had not been in effect. A Fund's performance may be compared to various indices. Information may be presented in advertisements about a Fund describing the background and professional experience of the Fund's investment advisor or any portfolio manager. All data are based on a 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 a Fund's investment objective and policies. These factors should be considered when comparing a Fund's investment results to those of other mutual funds and other investment vehicles. The average annual total returns of the Class A shares of each of the Funds for the periods indicated through December 31, 1998 are set forth below.
THE CONTRARIAN FUND-TM- Year ended December 31, 1998 (32.51)% Five years ended December 31, 1998 (6.47)% From inception (6/30/93) through December 31, 1998 (3.96)% DIVERSIFIED GROWTH FUND Year ended December 31, 1998 16.28% From inception (8/1/96) through December 31, 1998 29.55% EMERGING GROWTH FUND Year ended December 31, 1998 28.02% Five years ended December 31, 1998 19.09% Ten years ended December 31, 1998 20.18% GLOBAL NATURAL RESOURCES FUND Year ended December 31, 1998 (34.45)% From inception (11/15/95) through December 31, 1998 (7.78)% GLOBAL VALUE FUND Year ended December 31, 1998 11.11% From inception (4/1/97) through December 31, 1998 17.84% GROWTH & INCOME FUND Year ended December 31, 1998 11.65% From inception (7/12/95) through December 31, 1998 20.42% INFORMATION AGE FUND-TM- Year ended December 31, 1998 52.20% From inception (11/15/95) through December 31, 1998 22.85% MICROCAP GROWTH FUND Year ended December 31, 1998 (0.63)% From inception (8/15/96) through December 31, 1998 16.09% PARTNERS FUND Year ended December 31, 1998 (27.23)% From inception (7/12/95) through December 31, 1998 7.31% VALUE + GROWTH B-43 Year ended December 31, 1998 27.44% Five years ended December 31, 1998 23.80% From inception (5/12/92) through December 31, 1998 22.70%
NON-STANDARDIZED TOTAL RETURN INFORMATION From time to time, a 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 a class of the Fund's shares, and cumulative total return. Cumulative total return is calculated in a similar manner to average annual total return, except that the results are not annualized. Each calculation assumes that all dividends and distributions are reinvested at net asset value on the reinvestment dates during the period. INDICES AND PUBLICATIONS A Fund may compare its performance with that of appropriate indices such as the Standard & Poor's Composite Index of 500 stocks ("S&P 500"), Standard & Poor's MidCap 400 Index ("S&P 400"), the NASDAQ Industrial Index, the NASDAQ Composite Index, Russell 2000 Index, or other unmanaged indices so that investors may compare such results with those of a group of unmanaged securities. The S&P 500, the S&P 400, the NASDAQ Industrial Index, the NASDAQ Composite Index, and the Russell 2000 Index are unmanaged groups of common stocks traded principally on national securities exchanges and the over the counter market, as the case may be. A Fund may also, from time to time, compare its performance to other mutual funds with similar investment objectives and to the industry as a whole, as quoted by rating services and publications, such as Lipper Analytical Services, Inc., Morningstar Mutual Funds, Forbes, Money, and Business Week. In addition, one or more portfolio managers or other employees of an Adviser may be interviewed by print media, such as THE WALL STREET JOURNAL or BUSINESS WEEK, or electronic news media, and such interviews may be reprinted or excerpted for the purpose of advertising regarding the Fund. RELATIVE VOLATILITY - BETA From time to time a Fund may present a statistical measure of the volatility of a Fund's performance relative to the volatility of the performance of the S&P 500. A Fund calls this comparative measure its "beta." Beta is approximate, because it is statistical, and is not necessarily indicative of future fund performance volatility. Thus, if a Fund's portfolio volatility perfectly represents that of the S&P 500, a Fund's beta would be 1.0. If a Fund's beta is greater than 1.0, a Fund's portfolio would tend to represent a greater market risk than the S&P 500 because a Fund's portfolio would tend to be more sensitive to movements in the securities markets. For example, if a Fund's beta is 1.1, a Fund's performance would tend to vary approximately 10% more than would the performance of the S&P 500. If a Fund's beta is 0.9, a Fund's performance would tend to vary 10% less than the performance of the S&P 500. The correlation is not usually exact because, depending upon the diversification of a Fund's portfolio, a beta of less than 1.0 may indicate only that the portfolio is less sensitive to market movements, not that the Fund's portfolio has low overall risk. The beta included with any presentation of the Fund's performance data will be calculated according to the following formula: [EQUATION] Where: n = number of months measured B-44 FT = rate of return on the Fund in month T MT = rate of return on the market index, I.E., the S&P 500, in month T F = arithmetic average monthly rate of return of the Fund M = arithmetic average monthly rate of return on the market index, I.E., the S&P 500 ADDITIONAL INFORMATION TRANSFER AGENT AND CUSTODIAN State Street Bank and Trust Company, c/o National Financial Data Services, at P.O. Box 419717, Kansas City, MO 64141, serves as the Funds' transfer agent and dividend-paying agent ("Transfer Agent"). PFPC Trust Company ("PFPC Trust"), 400 Bellevue Parkway, Wilmington, DE 19809, serves as the Funds' custodian ("Custodian"). As Custodian, PFPC Trust and subcustodians approved by the Board of Trustees hold the securities in the Funds' portfolios and other assets for safekeeping. The Transfer Agent and Custodian do not participate in making investment decisions for the Funds. INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP, 555 California Street, San Francisco, California 94104, are the Trust's independent accountants, providing audit services, tax return review, and other tax consulting services and assistance and consultation in connection with the review of various Securities and Exchange Commission filings. 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 a 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. B-45 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. 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 B-46 payments are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments will be made during such grace period. The "D" rating will also be used upon the filing of a bankruptcy petition if debt service payments are jeopardized. The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus to show relative standing within the major rating categories. MOODY'S RATINGS Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa: Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A: Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa: Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba: Bonds which are Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times over the future. Uncertainty of position characterizes bonds in this class. B: Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa: Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. 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. B-47 FITCH RATINGS AAA: Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events. AA: Bonds considered to be investment grade and of very high credit quality. The obligor"s ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated "AAA." Because bonds rate in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated "F-1+." A: Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. BBB: Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the rating of these bonds will fall below investment grade is higher than for bonds with higher ratings. BB: Bonds are considered to be speculative. The obligor's ability to pay interest and repay principal may be affected over time by adverse economic changes. However, business and financial alternatives can be identified which could assist the obligor in satisfying its debt service requirements. B: Bonds are considered highly speculative. While bonds in this class are currently meeting debt service requirements, the probability of continued timely payment of principal and interest reflects the obligor's limited margin of safety and the need for reasonable business and economic activity throughout the life of the issues. CCC: Bonds have certain identifiable characteristics that, if not remedied, may lead to default. The ability to meet obligations requires an advantageous business and economic environment. CC: Bonds are minimally protected. Default in payment of interest and/or principal seems probable. C: Bonds are in imminent default in payment of interest or principal. DDD, DD, and D: Bonds in default on interest and/or principal payments. Such bonds are extremely speculative and should be valued on the basis of their ultimate recovery value in liquidation or reorganization of the obligor. "DDD" represents the highest potential for recovery on these bonds, and "D" represents the lowest potential for recovery. Note: Fitch ratings (other than the "AAA," "DDD," "DD," or "D" categories) may be modified by the addition of a plus (+) or minus (-) sign to show relative position of a credit within the rating category. B-48 FINANCIAL STATEMENTS [To be filed by Amendment] B-49 PART C. OTHER INFORMATION ITEM 23. EXHIBITS. a(i). Amended and Restated Agreement and Declaration of Trust of Registrant.* a(ii). Amendment to Amended and Restated Agreement and Declaration of Trust of Registrant.* 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.* c(iii). Portions of By-laws Relating to Shareholders' Rights.* d(i). 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 Growth & Income Fund, The Information Age Fund-TM-, RS MicroCap Growth Fund, RS Partners Fund and RS Value + Growth Fund. * d(ii). Investment Advisory Agreement between RS Investment Management, Inc. and Registrant (on behalf of RS Emerging Growth Fund).* d(iii). Form of Investment Advisory Agreement between Robertson, Stephens & Company Investment Management, L.P. and Registrant (on behalf of RS International Fund).(H) d(iv). Form of Investment Advisory Agreement between Robertson, Stephens & Company Investment Management, L.P. and Registrant (on behalf of RS Asia Fund).(I) d(v). Form of Investment Advisory Agreement between Robertson, Stephens & Company Investment Management, L.P. and Registrant (on behalf of RS International Investors Fund).(I) d(vi). Form of Investment Advisory Agreement between Robertson, Stephens & Company Investment Management, L.P. and Registrant (on behalf of RS Large Capitalization Equity Income Fund).(I) d(vii). Form of Investment Advisory Agreement between Robertson, Stephens & Company Investment Management, L.P. and Registrant (on behalf of RS Large Capitalization Value Fund).(I) d(viii). Form of Investment Advisory Agreement between Robertson, Stephens & Company Investment Management, L.P. and Registrant (on behalf of RS 50/500 Fund).(I) d(ix). 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).* d(x). Sub-Advisory Agreement among RS Investment Management, L.P., Eastbourne Management, L.L.C. and the Registrant (on behalf of The Contrarian Fund-TM-).* e. Distribution Agreement with Provident Distributors, Inc.* f. Inapplicable. g. Form of Custodian Agreement between Registrant and PFPC Trust Company.* h(i). Administrative Services Agreement.* h(ii). Form of Sub-Administration and Accounting Services Agreement between Registrant and PFPC, Inc.* i. Inapplicable. j. Consent of Independent Accountants.+ k. Inapplicable. l. Letter of Understanding Relating to Initial Capital.(A,D) m. Distribution Plan Pursuant to Rule 12b-1 dated September 30, 1997 (for Class A shares).(G) n. Finanical Data Schedules for Period ending December 31, 1998.+ o. 18f-3 Plan.(F) p. Power of Attorney.* 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. (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. * Filed herewith. + To be filed by Amendment. 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. Each of RS Investment Management, L.P. (formerly, Robertson, Stephens & Company Investment Management, L.P.) ("RSIM, L.P."), RS Investment Management, Inc. ("RSIM, Inc."), Elijah Asset Management, LLC and Eastbourne Management, L.L.C. 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 G. Randall Hecht, the chief executive officer of RSIM, L.P. and RSIM, Inc., is set forth in Part B herein. Information about James Callinan, a managing director of RSIM, L.P. and RSIM, Inc. is set forth in Part A herein. Information about Andrew P. Pilara, Jr., also a managing director of RSIM, L.P. and RSIM, Inc. is set forth in Part B herein. Paul H. Stephens, a managing director of RSIM, L.P. and RSIM, Inc., was previously a founding partner, managing director, and chief investment officer of Robertson, Stephens & Company LLC (now BancBoston Robertson Stephens). Information about Ronald E. Elijah, the sole managing member of Elijah Asset Management, LLC, is set forth in Part A herein. John McNiff, a member of Elijah Asset Management, has been a member of Golden Gate Fund Management, an investment adviser, since December 1998. Mr. McNiff has also been the managing director of Longwood Investment Advisors, Inc. (Three Radnor Corp. Center, Radnor, PA), an investment adviser, since December 1993. In addition Mr. McNiff is an indirect limited partner of Chartwell Investment Partners (1235 Westlakes Drive, Suite 330, Berwyn, PA), an investment adviser. Mr. McNiff serves as Director of both Longwood Offshore Management, Ltd and Wineup Corp. (both at 1235 Westlakes Drive, Suite 330, Berwyn, PA), both investment advisers. Mr. McNiff has served as an officer of Trinity Capital Partners (Three Radnor Corp. Center, Radnor, PA), an investment adviser, since July 1990. Mr. McNiff served as chairman of the board of CAM Investment Advisors, Inc. (Three Radnor Corp. Center, Radnor, PA), an investment adviser, until May 1998. Mr. Rick Barry is a manager and member of Eastbourne Management, L.L.C. ("Eastbourne"). Mr. Barry was previously a managing director of RS Investment Management. Each of Mr. Chris Bonomo, Mr. Jim Carruthers, Jr., Ms. Cathy O'Neill and Mr. Jeff Heely is a manager and member of Eastbourne. ITEM 27. PRINCIPAL UNDERWRITERS. (a) Provident Distributors, Inc., the Distributor for shares of the Registrant, acts as principal underwriter for the following open-end investment companies, including the Registrant: Pacific Horizon Funds, Inc., Time Horizon Funds, World Horizon Funds, Inc., Pacific Innovations Trust, International Dollar Reserve Fund I, Ltd., Municipal Fund for Temporary Investment, Municipal Fund for New York Investors, Inc., Municipal Fund for California Investors, Inc., Temporary Investment Fund, Inc., Trust for Federal Securities, Columbia Common Stock Fund, Inc., Columbia Growth Fund, Inc., Columbia International Stock Fund, Inc., Columbia Special Fund, Inc., Columbia Small Cap Fund, Inc., Columbia Real Estate Equity Fund, Inc., Columbia Balanced Fund, Inc., Columbia Daily Income Company, Columbia U.S. Government Securities Fund, Inc., Columbia Fixed Income Securities Fund, Inc., Columbia Municipal Bond Fund, Inc., Columbia High Yield Fund, Inc., WT Mutual Fund, Kalmar Pooled Investment Trust, The RBB Fund, Inc., RS Investment Trust, Hilliard-Lyons Government Fund, Inc., Hilliard-Lyons Growth Fund, Inc., The Rodney Square Fund, Inc., The Rodney Square Tax-Exempt Fund, Inc., The Rodney Square Strategic Equity Fund, Inc., The Rodney Square Stategic Fixed-Income Fund, Inc., The BlackRock Funds, Inc. (distributed by BlackRock Distributors, Inc., a wholly owned subsidiary of Provident Distributors, Inc.), The OffitBank Investment Fund, Inc. (distributed by Offit Funds Distributor, Inc., a wholly owned subsidiary of Provident Distributors, Inc.), The OffitBank Variable Insurance Fund, Inc. (distributed by Offit Funds Distributor, Inc., a wholly owned subsidiary of Provident Distributors, Inc.) and CVO Greater China Fund, Inc. (distributed by Offit Funds Distributor, Inc., a wholly owned subsidiary of Provident Distributors, Inc.). (b) For information as to the business, profession, vocation or employment of a substantial nature of each of the Distributor, its officers and partners, reference is made to the Form BD filed by the Distributor (File No. 8-46564), which is incorporated by reference herein. (c) Inapplicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS The records required by Section 31(a) and Rule 31a-1 through 3 under the 1940 Act will be maintained by Registrant at its offices, 555 California Street, San Francisco, CA 94104 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. 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 4th day of March, 1999. RS INVESTMENT TRUST By: George R. 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 March 4, 1999, by the following persons in the capacities indicated. SIGNATURE CAPACITY GEORGE R. HECHT* President and Principal Executive - ------------------------- Officer George R. Hecht Trustee - ------------------------- Andrew P. Pilara, Jr. /s/ANDREW C. MORRISON Treasurer - ------------------------- Andrew C. Morrison 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/ ANDREW C. MORRISON ---------------------- ANDREW C. MORRISON, ATTORNEY-IN-FACT PURSUANT TO THE POWERS OF ATTORNEY FILED HEREWITH. EXHIBIT INDEX
Exhibit No. Title - ----------- ----- a(i). Amended and Restated Agreement and Declaration of Trust of Registrant. a(ii). Amendment to Amended and Restated Agreement and Declaration of Trust of Registrant. c(ii). Portions of Amended and Restated Agreement and Declaration of Trust Relating to Shareholders' Rights. c(iii). Portions of By-laws Relating to Shareholders' Rights. d(i). 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 Growth & Income Fund, The Information Age Fund-TM-, RS MicroCap Growth Fund, RS Partners Fund and RS Value + Growth Fund. d(ii). Investment Advisory Agreement between RS Investment Management, Inc. and Registrant (on behalf of RS Emerging Growth Fund). d(ix). 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). d(x). Sub-Advisory Agreement among RS Investment Management, L.P., Eastbourne Management, L.L.C. and the Registrant (on behalf of The Contrarian Fund-TM-). e. Distribution Agreement with Provident Distributors, Inc. g. Form of Custodian Servies Agreement between Registrant and PFPC Trust Company. h(i). Administrative Services Agreement. h(ii). Form of Sub-Administration and Accounting Services Agreement between Registrant and PFPC, Inc. p. Power of Attorney.
EX-99.A 2 EXHIBIT 99.A - AMENDED & RESTATED AGREEMENT EXHIBIT a(i) AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST ROBERTSON STEPHENS INVESTMENT TRUST a Massachusetts Business Trust Dated: March 13, 1997 TABLE OF CONTENTS Page ARTICLE I Name and Definitions . . . . . . . . . . . . . . . . . . . . . . . .4 Section 1. NAME. . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 Section 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE II Purpose of Trust. . . . . . . . . . . . . . . . . . . . . . . . . .5 ARTICLE III Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 Section 1. DIVISION OF BENEFICIAL INTEREST . . . . . . . . . . . . . . .6 Section 2. OWNERSHIP OF SHARES . . . . . . . . . . . . . . . . . . . . .6 Section 3. INVESTMENTS IN THE TRUST. . . . . . . . . . . . . . . . . . .6 Section 4. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY . . . .6 Section 5. POWER OF BOARD OF TRUSTEES TO CHANGE PROVISIONS RELATING TO SHARES . . . . . . . . . . . . . . . . . . . .7 Section 6. ESTABLISHMENT AND DESIGNATION OF SERIES OR CLASSES. . . . . .8 Section 7. INDEMNIFICATION OF SHAREHOLDERS . . . . . . . . . . . . . . .10 ARTICLE IV The Board of Trustees . . . . . . . . . . . . . . . . . . . . . . .10 Section 1. NUMBER, ELECTION AND TENURE . . . . . . . . . . . . . . . . .10 Section 2. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE . . . . . . .11 Section 3. POWERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .11 Section 4. PAYMENT OF EXPENSES BY THE TRUST. . . . . . . . . . . . . . .14 Section 5. PAYMENT OF EXPENSES BY SHAREHOLDERS . . . . . . . . . . . . .14 Section 6. OWNERSHIP OF ASSETS OF THE TRUST. . . . . . . . . . . . . . .15 Section 7. SERVICE CONTRACTS . . . . . . . . . . . . . . . . . . . . . .15 ARTICLE V Shareholder Voting Powers and Meetings . . . . . . . . . . . . . . .16 Section 1. VOTING POWERS . . . . . . . . . . . . . . . . . . . . . . . .16 Section 2. VOTING POWER AND MEETINGS . . . . . . . . . . . . . . . . . .16 Section 3. QUORUM AND REQUIRED VOTE. . . . . . . . . . . . . . . . . . .17 Section 4. ACTION BY WRITTEN CONSENT . . . . . . . . . . . . . . . . . .17 Section 5. RECORD DATES. . . . . . . . . . . . . . . . . . . . . . . . .17 Section 6. ADDITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . . .18 ARTICLE VI Net Asset Value, Distributions, and Redemptions . . . . . . . . . .18 Section 1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . .18 -2- Section 2. REDEMPTIONS AND REPURCHASES . . . . . . . . . . . . . . . . .18 Section 3. REDEMPTIONS AT THE OPTION OF THE TRUST. . . . . . . . . . . .19 ARTICLE VII Compensation and Limitation of Liability of Trustees. . . . . . .19 Section 1. COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . .19 Section 2. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . .19 Section 3. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . .20 ARTICLE VIII Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . .20 Section 1. TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. .20 Section 2. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. . . . . . . . . . . . . . . . . . . . . . . . .21 Section 3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. . . . . . .21 Section 4. TERMINATION OF TRUST OR SERIES. . . . . . . . . . . . . . . .21 Section 5. MERGER AND CONSOLIDATION. . . . . . . . . . . . . . . . . . .22 Section 6. FILING OF COPIES, REFERENCES, HEADINGS. . . . . . . . . . . .22 Section 7. APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . . .22 Section 8. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . . . .22 Section 9. TRUST ONLY. . . . . . . . . . . . . . . . . . . . . . . . . .22 Section 10. USE OF THE NAME "RCS EMERGING GROWTH FUND". . . . . . . . . .23 -3- -4- AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST OF ROBERTSON STEPHENS INVESTMENT TRUST THIS AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST is made and entered into this 13th day of March, 1997 by the Trustees named hereunder. WITNESSETH that WHEREAS, the Trustees desire and have agreed to manage all property coming into their hands as trustees of a Massachusetts business trust in accordance with the provisions hereinafter set forth; NOW, THEREFORE, the Trustees hereby direct that this Agreement and Declaration of Trust be filed with the Secretary of The Commonwealth of Massachusetts and do hereby declare that they will hold all cash, securities and other assets, which they may from time to time acquire in any manner as Trustees hereunder, IN TRUST, and manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders of Shares in this Trust. ARTICLE I Name and Definitions SECTION 1. NAME. This Trust shall be known as ROBERTSON STEPHENS INVESTMENT TRUST and the Trustees shall conduct the business of the Trust under that name or any other name as they, in their sole discretion, from time to time determine. SECTION 2. DEFINITIONS. Whenever used herein, unless otherwise required by the context or specifically provided: (a) The "Trust" refers to the Massachusetts business trust established by this Agreement and Declaration of Trust, as amended from time to time; (b) "Trustees" refers to the persons named at the end of this Declaration of Trust and constituting the Board of Trustees of the Trust, so long as they continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly elected or appointed to serve on the Board of Trustees in accordance with Article IV hereof; (c) "Shares" means the equal proportionate transferable units of interest into which the beneficial interest in the Trust shall be divided from time to time or, if more than one Series of Shares is authorized by the Trustees, the equal proportionate units into which each -5- Series of Shares shall be divided from time to time or, if more than one class of Shares of any Series is authorized by the Trustees, the equal proportionate units into which each class of such Series of Shares shall be divided from time to time; (d) "Shareholder" means a record owner of Shares; (e) The "1940 Act" refers to the Investment Company Act of 1940 and the Rules and Regulations thereunder, all as amended from time to time; (f) The terms "Commission" and "Principal Underwriter" shall have meanings given them in the 1940 Act; (g) "Declaration of Trust" shall mean this Agreement and Declaration of Trust, as amended or restated from time to time; (h) "By-Laws" shall mean the By-Laws of the Trust as amended from time to time; (i) "Series Company" refers to the form of registered open-end investment company described in Section 18(f)(2) of the 1940 Act or in any successor statutory provision; and (j) "Series" refers to each Series of Shares established and designated under or in accordance with the provisions of Article III. (k) The term "class" or "class of Shares" refers to the division of Shares representing any series into two or more classes as provided in Article III. ARTICLE II Purpose of Trust The purpose of the Trust is to conduct, operate and carry on the business of a managed investment company registered under the 1940 Act through one or more portfolios invested primarily in securities. -6- ARTICLE III Shares SECTION 1. DIVISION OF BENEFICIAL INTEREST. The Shares of the Trust shall be issued in one or more Series as the Trustees may, without Shareholder approval, authorize. The Trustees may, without Shareholder approval, divide the Shares of any Series into two or more classes, Shares of each such class having such preferences or special or relative rights or privileges (including conversion rights, if any) as the Trustees may determine and as are not inconsistent with any provision of this Agreement and Declaration of Trust. Each Series shall be preferred over all other Series in respect of the assets allocated to that Series. The beneficial interest in each Series shall at all times be divided into Shares, without par value, each of which shall, except as the Trustees may otherwise authorize in the case of any Series that is divided into two or more classes, represent an equal proportionate interest in the Series with each other Share of the same Series, none having priority or preference over another. The number of Shares authorized shall be unlimited, and the Shares so authorized may be represented in part by fractional shares. The Trustees may from time to time divide or combine the Shares of any Series or class into a greater or lesser number without thereby changing the proportionate beneficial interests in the Series or class. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust or any Series. SECTION 2. OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of each Series. No certificates certifying the ownership of Shares shall be issued except as the Board of Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each Series and class and as to the number of Shares of each Series and class held from time to time by each. SECTION 3. INVESTMENTS IN THE TRUST. The Trustees may accept investments in the Trust from such persons, at such times, on such terms, and for such consideration as they from time to time authorize. SECTION 4. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares shall be deemed to be personal property giving only the rights provided in this instrument. Every Shareholder, by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. The death of a Shareholder during the existence of the Trust shall not operate to terminate the Trust, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but entitles such representative only to the rights of said deceased Shareholder under this Trust. Ownership of Shares shall not entitle the -7- Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholders, nor, except as specifically provided herein, to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay. SECTION 5. POWER OF BOARD OF TRUSTEES TO CHANGE PROVISIONS RELATING TO SHARES. Notwithstanding any other provision of this Declaration of Trust and without limiting the power of the Board of Trustees to amend the Declaration of Trust as provided elsewhere herein, the Board of Trustees shall have the power to amend this Declaration of Trust, at any time and from time to time, in such manner as the Board of Trustees may determine in their sole discretion, without the need for Shareholder action, so as to add to, delete, replace or otherwise modify any provisions relating to the Shares contained in this Declaration of Trust, provided that before adopting any such amendment without Shareholder approval, the Board of Trustees shall determine that it is consistent with the fair and equitable treatment of all Shareholders or that Shareholder approval is not otherwise required by the 1940 Act or other applicable law. Without limiting the generality of the foregoing, the Board of Trustees may, for the above-stated purposes, amend the Declaration of Trust to: (a) create one or more Series or classes of Shares (in addition to any Series or classes already existing or otherwise) with such rights and preferences and such eligibility requirements for investment therein as the Trustees shall determine and reclassify any or all outstanding Shares as shares of a particular Series or class in accordance with such eligibility requirements; (b) amend any of the provisions set forth in paragraphs (a) through (h) of Section 5 of this Article III; (c) combine one or more Series or classes of Shares into a single Series or class on such terms and conditions as the Trustees shall determine. (d) change or eliminate any eligibility requirements for investment in Shares of any Series or class, including, without limitation, to provide for the issue of Shares of any Series or class in connection with any merger or consolidation of the Trust with the other trust or company or any acquisition by the Trust of part or all of the assets of another trust or investment company; (e) change the designation of any Series or class of Shares; -8- (f) change the method of allocating dividends among the various Series or classes of Shares; (g) allocate assets, liabilities and expenses of the Trust to a particular Series of Shares or apportion the same among two or more Series, provided that any liabilities or expenses incurred by a particular Series of Shares shall be payable solely out of the assets of that Series; and to the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any classes of Shares, allocate assets, liabilities, income and expenses of a Series to a particular class of Shares of that Series or apportion the same among two or more classes of Shares of that Series; (h) specifically allocate assets to any or all Series of Shares or create one or more additional Series of Shares which are preferred over all other Series of Shares in respect of assets specifically allocated thereto or any dividends paid by the Trust with respect to any net income, however determined, earned from the investment and reinvestment of any assets so allocated or otherwise and provide for any special voting or other rights with respect to such Series. SECTION 6. ESTABLISHMENT AND DESIGNATION OF SERIES OR CLASSES. The establishment and designation of any Series or class of Shares shall be effective upon the resolution by a majority of the then Trustees, setting forth such establishment and designation and the relative rights an preferences of such Series or class, or as otherwise provided in such resolution. Shares of each Series or class established pursuant to this Section 6, unless otherwise provided in the resolution establishing such Series or class, shall have the following relative rights and preferences: (a) ASSETS BELONGING TO SERIES. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to that Series for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of account of the Trust. Such considerations, assets, income, earnings, profits and proceeds thereof, from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as "assets belonging to" that Series. In the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments which are not readily identifiable as belonging to any particular Series (collectively "General Assets"), the Trustees shall allocate such General Assets to, between or among any one or more of the Series in such manner and on such basis as they, in their sole discretion, deem fair and equitable, and any General Asset so allocated to a particular Series shall belong to that Series; and, in the event that there are any assets, income, earnings, -9- profits and proceeds thereof, funds or payments belonging to any Series which are not readily identifiable as belonging to any particular class (collectively "Series General Assets"), the Trustees shall allocate such Series General Assets to, between or among any one or more of the classes of such Series in such manner and on such basis as they, in their sole discretion, deem fair and equitable, and any Series General Asset so allocated to a particular class shall belong to that class. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all Series and classes for all purposes. (b) LIABILITIES BELONGING TO SERIES. The assets belonging to each particular Series shall be charged with the liabilities of the Trust in respect to that Series and all expenses, costs, charges and reserves attributable to that Series and any general liabilities of the Trust, or of any Series, which are not readily identifiable as belonging to any particular Series, or any particular class of any Series, shall be allocated and charged by the Trustees to and among any one or more of the Series, or to and among any one or more of the classes of such Series, as the case may be, in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. The liabilities, expenses, costs, charges, and reserves so charged to a Series or class are herein referred to as "liabilities belonging to" that Series or class. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the holders of all Series and classes for all purposes. Under no circumstances shall the assets allocated or belonging to any particular Series be charged with liabilities attributable to any other Series. All persons who have extended credit which has been allocated to a particular Series, or who have a claim or contract which has been allocated to any particular Series, shall look only to the assets of that particular Series for payment of such credit, claim or contract. (c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, AND REPURCHASES. Notwithstanding any other provisions of this Declaration of Trust, including, without limitation, Article VI, no dividend or distribution (including, without limitation, any distribution paid upon termination of the Trust or of any Series) with respect to, nor any redemption or repurchase of, the Shares of any Series shall be effected by the Trust other than from the assets belonging to such Series, nor, except as specifically provided in Section 7 of this Article III, shall any Shareholder of any particular Series otherwise have any right or claim against the assets belonging to any other Series except to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Series. The Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. (d) VOTING. Notwithstanding any other provision of this Declaration of Trust, on any matter submitted to a vote of Shareholders, all Shares of the Trust then entitled to vote shall be voted in the aggregate as a single class without regard to Series or class; except (1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more Series or classes materially differently, Shares shall be voted by individual Series or class; and (2) when the Trustees have determined that the matter affects only the interests of one -10- or more Series or classes, then only Shareholders of such Series or classes shall be entitled to vote thereon. (e) FRACTIONS. Any fractional Share of a Series or class of any Series shall carry proportionately all the rights and obligations of a whole share of that Series or class, as the case may be, including rights with respect to voting, receipt of dividends and distributions, redemptions of Shares and termination of the Trust. (f) EXCHANGE PRIVILEGE. The Trustees shall have the authority to provide that the holders of Shares of any Series shall have the right to exchange said Shares for Shares of one or more other Series of Shares in accordance with such requirements and procedures as may be established by the Trustees. (g) COMBINATION OF SERIES. The Trustees shall have the authority, without the approval of the Shareholders of any Series or class of any Series unless otherwise required by applicable law, to combine the assets and liabilities belonging to any two or more Series or classes into assets and liabilities belonging to a single Series or class. (h) ELIMINATION OF SERIES OR CLASSES. At any time that there are no Shares outstanding of any particular Series or class of any Series previously established and designated, the Trustees may amend this Declaration of Trust to abolish that Series or class and to rescind the establishment and designation thereof. SECTION 7. INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators, or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust to be held harmless from and indemnified against all loss and expense arising from such liability. ARTICLE IV The Board of Trustees SECTION 1. NUMBER, ELECTION AND TENURE. The number of Trustees constituting the Board of Trustees shall be five (5), unless such number shall be changed from time to time by written instrument signed by a majority of the Board of Trustees, provided, however, that the number of Trustees shall in no event be less than one nor more than 15. The Board of Trustees, by action of a majority of the then Trustees at a duly constituted meeting, may fill vacancies in the Board of Trustees or remove Trustees with or without cause. Each Trustee shall serve during the continued lifetime of the Trust until he or she dies, resigns, is declared bankrupt or incompetent by a court of appropriate jurisdiction, or is removed, or, if sooner, until the next -11- meeting of Shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor. Any Trustee may resign at any time by written instrument signed by him or her and delivered to any officer of the Trust or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Except to the extent expressly provided in a written agreement with the Trust, no Trustee resigning and no Trustee removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. The Shareholders may fix the number of Trustees and elect Trustees at any meeting of Shareholders called by the Trustees for that purpose. SECTION 2. EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death, declination, resignation, retirement, removal, or incapacity of one or more Trustees, or all of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Whenever a vacancy in the Board of Trustees shall occur, until such vacancy is filled as provided in Article IV, Section 1, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration of Trust. As conclusive evidence of such vacancy, a written instrument certifying the existence of such vacancy may be executed by an officer of the Trust or by a majority of the Board of Trustees. In the event of the death, declination, resignation, retirement, removal, or incapacity of all the then Trustees within a short period of time and without the opportunity for at least one Trustee being able to appoint additional Trustees to fill vacancies, the Trust's investment adviser or investment advisers jointly, if there is more than one, are empowered to appoint new Trustees subject to the provisions of Section 16(a) of the 1940 Act. SECTION 3. POWERS. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Board of Trustees, and such Board shall have all powers necessary or convenient to carry out that responsibility including the power to engage in securities transactions of all kinds on behalf of the Trust. Without limiting the foregoing, the Trustees may: adopt By-Laws not inconsistent with this Declaration of Trust providing for the regulation and management of the affairs of the Trust and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders; fill vacancies in or remove from their number, and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; appoint from their own number and establish and terminate one or more committees consisting of two or more Trustees which may exercise the powers and authority of the Board of Trustees to the extent that the Trustees determine; employ one or more custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities or with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing agent or both; provide for the issuance and distribution of Shares by the Trust directly or through one or more Principal Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to applicable law; set record dates for the determination of Shareholders with respect to various matters; declare and pay dividends and distributions to Shareholders of each Series from the assets of such Series; and in general -12- delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian, transfer or shareholder servicing agent, or Principal Underwriter. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Trustees. Without limiting the foregoing, the Board of Trustees shall have power and authority: (a) To invest and reinvest cash, to hold cash uninvested, and to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, write options on, lend or otherwise deal in or dispose of contracts for the future acquisition or delivery of fixed income or other securities, and securities of every nature and kind, including, without limitation, all types of bonds, debentures, stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, certificates of deposit or indebtedness, commercial paper, repurchase agreements, bankers' acceptances, and other securities of any kind, issued, created, guaranteed, or sponsored by any and all persons, including, without limitation, states, territories, and possessions of the United States and the District of Columbia and any political subdivision, agency, or instrumentality thereof, any foreign government or any political subdivision of the U.S. Government or any foreign government, or any international instrumentality, or by any bank or savings institution, or by any corporation or organization organized under the laws of the United States or of any state, territory, or possession thereof, or by any corporation or organization organized under any foreign law, or in "when issued" contracts for any such securities, to change the investments of the assets of the privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more persons, firms, associations, or corporations to exercise any of said rights, powers, and privileges in respect of any of said instruments; (b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write, options with respect to or otherwise deal in any property rights relating to any or all of the assets of the Trust; (c) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property; and to execute and delivery proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper; (d) To exercise powers and right of subscription or otherwise which in any manner arise out of ownership of securities; -13- (e) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise. (f) Subject to the provisions of Article III, Section 3, to allocate assets, liabilities, income and expenses of the Trust to a particular Series of Shares or to apportion the same among two or more Series, provided that any liabilities or expenses incurred by or arising in connection with a particular Series of Shares shall be payable solely out of the assets of that Series; and to the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any classes of Shares, to allocate assets, liabilities, income and expenses of a Series to a particular class of Shares of the Series or to apportion the same among two or more classes of Shares of that Series; (g) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer of any security which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust; (h) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Trustees shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Trustees shall deem proper; (i) To compromise, attribute or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including but not limited to claims for taxes; (j) To enter into joint ventures, general or limited partnerships and any other combinations or associations; (k) To borrow funds or other property in the name of the Trust exclusively for Trust purposes; (l) To endorse or guarantee the payment of any notes or other obligations of any person; to make contracts of guaranty or suretyship; or otherwise assume liability for payment thereof; (m) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers, principal underwriters, or independent -14- contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Trustee, officer, employee, agent, investment adviser, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence; whether or not the Trust would have the power to indemnify such person against liability; and (n) To adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust. The Trustees shall not be limited to investing in obligations maturing before the possible termination of the Trust or one or more of its Series. The Trustees shall not in any way be bound or limited by any present or future law or custom in regard to investment by fiduciaries. The Trustees shall not be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder. SECTION 4. PAYMENT OF EXPENSES BY THE TRUST. The Trustees are authorized to pay or cause to be paid out of the principal or income of the Trust, or partly out of the principal and partly out of income, as they deem fair, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including, but not limited to; the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, investment adviser or manager, principal underwriter, auditors, counsel, custodian, transfer agent, Shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur. SECTION 5. PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder, or each Shareholder of any particular Series or class, to pay directly, in advance or arrears, for charges of the Trust's custodian or transfer, Shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends owed such Shareholder and/or by reducing the number of shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder. SECTION 6. OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of the Trust shall at all times be considered as vested in the Board of Trustees. SECTION 7. SERVICE CONTRACTS. -15- (a) Subject to such requirements and restrictions as may be set forth in the By-Laws, the Trustees may, at any time and from time to time, contract for exclusive or nonexclusive advisory and/or management services for the Trust or for any Series with any corporation, trust, association or other organization (the "Manager"); and any such contract may contain such other terms as the Trustees may determine, including, without limitation, authority for the Manager to determine from time to time without prior consultation with the Trustees what investments shall be purchased, held, sold or exchanged and what portion, if any, of the assets of the Trust shall be held uninvested and to make changes in the Trust's investments. (b) The Trustees may also, at any time and from time to time, contract with any corporation, trust, association or other organization, appointing it exclusive or nonexclusive distributor or Principal Underwriter for the Shares of one or more of the Series or classes. Every such contract shall comply with such requirements and restrictions as may be set forth in the By-Laws; and any such contract may contain such other terms as the Trustees may determine. (c) The Trustees are also empowered, at any time and from time to time, to contract with any corporations, trusts, associations or other organizations, appointing it or them the custodian, transfer agent and/or shareholder servicing agent for the Trust or one or more of its Series or classes. Every such contract shall comply with such requirements and restrictions as may be set forth in the By-Laws or stipulated by resolution of the Trustees. (d) The Trustees are further empowered, at any time and from time to time, to contract with any entity to provide such other services to the Trust or one or more of the Series or classes, as the Trustees determine to be in the best interests of the Trust and the applicable Series or class. (e) The fact that: (i) any of the Shareholders, Trustees, or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, adviser, principal underwriter, distributor, or affiliate or agent of or for any corporation, trust, association, or other organizational or for any parent or affiliate of any organization with which an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other type of service contract may have been or may hereafter be made, or that any such organization, or any parent or affiliate thereof, is a Shareholder or has an interest in the Trust, or that (ii) any corporation, trust, association or other organization with which an advisory or management contract or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other type of service contract may have been or may hereafter be made also has an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other service contract with one or more other corporations, trust, associations, or other organizations, or has other business or interests -16- shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same, or create any liability or accountability to the Trust or its Shareholders, provided approval of each such contract is made pursuant to the requirements of the 1940 Act. ARTICLE V Shareholder Voting Powers and Meetings SECTION 1. VOTING POWERS. Subject to the voting powers of one or more classes of Shares as set forth elsewhere in this Declaration of Trust or in the Bylaws, the Shareholders shall have power to vote only (i) for the election of Trustees as provided in Article IV, Section 1, (ii) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should, or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, (iii) with respect to the termination of the Trust or any Series or class to the extent and as provided in Article VIII, Section 4, and (iv) with respect to such additional matters relating to the Trust as may be required by any registration of the Trust with the Commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. At any time when no Shares of a Series or class are outstanding, the Trustees may exercise all rights of Shareholders of that Series or class with respect to matters affecting that Series or class, take any action required by law, this Declaration of Trust or the By-Laws, to be taken by Shareholders. SECTION 2. VOTING POWER AND MEETINGS. Meetings of the Shareholders of the Trust or of any Series or class may be called by the Trustees for the purpose of electing Trustees as provided in Article IV, Section 1 and for such other purposes as may be prescribed by law, by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may also be called by the Trustees from time to time for the purpose of taking action upon any other matter deemed by the Trustees to be necessary or desirable. A meeting of Shareholders may be held at any place designated by the Trustees. Written notice of any meeting of Shareholders shall be give or caused to be given by the Trustees by mailing such notice at least seven (7) days before such meeting, postage prepaid, stating the time and place of the meeting, to each Shareholder entitled to vote at such meeting, at the Shareholder's address as it appears on the records of the Trust. Whenever notice of a meeting is required to be given to a Shareholder under this Declaration of -17- Trust or the By-Laws, a written waiver thereof, executed before or after the meeting by such Shareholder or his or her attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice. SECTION 3. QUORUM AND REQUIRED VOTE. Except when a larger quorum is required by applicable law, by the By-Laws or by this Declaration of Trust, forty percent (40%) of the Shares entitled to vote on a particular matter shall constitute a quorum for the transaction of business on that matter at a Shareholders' meeting, except that where any provision of law or of this Declaration of Trust or the By-Laws requires that holders of any Series or class shall vote as a Series or class, then forty percent (40%) of the aggregate number of Shares of that Series or class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that Series or class. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the original meeting without further notice. Except when a larger vote is required by any provision of this Declaration of Trust or the By-Laws or by applicable law, when a quorum is present, a majority of the Shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of this Declaration of Trust or of the By-Laws permits or requires that the holders of any Series or class shall vote as a Series or class, then a majority of the Shares of that Series or class voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that Series or class is concerned. SECTION 4. ACTION BY WRITTEN CONSENT. Any action taken by Shareholders may be taken without a meeting if Shareholders holding a majority of the Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of this Declaration of Trust or by the By-Laws) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. SECTION 5. RECORD DATES. For the purpose of determining the Shareholders of any Series or class who are entitled to vote or act at any meeting or any adjournment thereof, the Trustees may from time to time fix a time, which shall be not more than ninety (90) days before the date of any meeting of Shareholders, as the record date for determining the Shareholders of such Series or class having the right to notice of and to vote at such meeting and any adjournment thereof, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Trust after the record date. For the purpose of determining the Shareholders of any Series or class who are entitled to receive payment or any dividend or of any other distribution, the Trustees may from time to time fix a date, which shall be before the date for the payment of such dividend or such other payment, as the record date for determining the Shareholders of such Series or class having the right to receive such dividend or distribution. Without fixing a record date the Trustees may for voting and/or distribution purposes close the register or transfer books for one or more Series or classes -18- for all or any part of the period between a record date and a meeting of Shareholders or the payment of a distribution. Nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different Series or classes. SECTION 6. ADDITIONAL PROVISIONS. The By-Laws may include further provisions for Shareholders' votes and meetings and related matters. ARTICLE VI Net Asset Value, Distributions, and Redemptions SECTION 1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND DISTRIBUTIONS. The term "net asset value" of the Shares of each Series or class shall mean: (i) the value of all the assets of such Series or class; (ii) less the total liabilities of such Series or class; (iii) divided by the number of Shares of such Series or class outstanding, in each case at the time of each determination. The "number of Shares of such Series or class outstanding" for the purposes of such computation shall be exclusive of any Shares of such Series or class to be redeemed and not then redeemed as to which the redemption price has been determined, but shall include Shares of such Series or class presented for repurchase and not then repurchased and Shares of such Series or class to be redeemed and not then redeemed as to which the redemption price has not been determined and Shares of such Series or class the sale of which has been confirmed. Any fractions involved in the computation of net asset value per share shall be adjusted to the nearest cent unless the Trustees shall determine to adjust such fractions to a fraction of a cent. Determinations under this Section made in good faith shall be binding on all parties concerned. The manner of determining the net assets of any Series or class or of determining the net asset value of the Shares of any Series or class may from time to time be altered as necessary or desirable in the judgment of the Trustees to conform to any other method prescribed or permitted by any applicable law or regulation. SECTION 2. REDEMPTIONS AND REPURCHASES. The Trust shall purchase such Shares as are offered by any Shareholder for redemption, upon the presentation of a proper instrument of transfer together with a request directed to the Trust or a person designated by the Trust that the Trust purchase such Shares or in accordance with such other procedures for redemption as the Trustees may from time to time authorize; and the Trust will pay therefor the net asset value thereof, as determined in accordance with the By-Laws and applicable law, next determined. Payment for said Shares shall be made by the Trust to the Shareholder within seven days after the date on which the request is made in proper form. The obligation set forth in this Section 2 is subject to the provision that in the event that any time the New York Stock Exchange is closed for other than weekends or holidays, or if permitted by the Rules of the Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the Trust to dispose of the investments of the applicable Series or to determine fairly the value of the net assets belonging to such Series or during any other period permitted by -19- order of the Commission for the protection of investors, such obligations may be suspended or postponed by the Trustees. The redemption price may in any case or cases be paid wholly or partly in kind if the Trustees determine that such payment is advisable in the interest of the remaining Shareholders of the Series for which the Shares are being redeemed. Subject to the foregoing, the fair value, selection and quantity of securities or other property so paid or delivered as all or part of the redemption price may be determined by or under authority of the Trustees. In no case shall the Trust be liable for any delay of any corporation or other person in transferring securities selected for delivery as all or part of any payment in kind. SECTION 3. REDEMPTIONS AT THE OPTION OF THE TRUST. The Trust shall have the right at its option and at any time to redeem Shares of any Shareholder at the net asset value thereof as described in Section 1 of this Article VI: (i) if at such time such Shareholder owns Shares of any Series having an aggregate net asset value of less than an amount determined from time to time by the Trustees, but not to exceed $40,000; or (ii) to the extent that such Shareholder owns Shares equal to or in excess of a percentage, determined from time to time by the Trustees, of the outstanding Shares of the Trust or of any Series or class of any Series. ARTICLE VII Compensation and Limitation of Liability of Trustees SECTION 1. COMPENSATION. The Trustees as such shall be entitled to reasonable compensation from the Trust, and they may fix the amount of such compensation. Nothing herein shall in any way prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking or other services and payment for the same by the Trust. SECTION 2. LIMITATION OF LIABILITY. The Trustees shall not be responsible or liable in any event for any neglect or wrong-doing of any officer, agent, employee, manager or Principal Underwriter of the Trust, nor shall any Trustee be responsible for the act or omission of any other Trustee, but nothing herein contained shall protect any Trustee against any liability to which he or she would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. Every note, bond, contract, instrument, certificates or undertaking and every other act or thing whatsoever issued, executed or done by or on behalf of the Trust or the Trustees or any of them in connection with the Trust shall be conclusively deemed to have been issued, executed or done only in or with respect to their or his or her capacity as Trustees or Trustee, and such Trustees or Trustee shall not be personally liable thereon. SECTION 3. INDEMNIFICATION. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for and to provide by -20- resolution or in the By-Laws for indemnification out of Trust assets for liability and for all expenses reasonably incurred or paid or expected to be paid by a Trustee or officer in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust. The provisions, including any exceptions and limitations concerning indemnification, may be set forth in detail in the By-Laws or in a resolution of the Board of Trustees. ARTICLE VIII Miscellaneous SECTION 1. TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All persons extending credit to, contracting with or having any claim against the Trust or any Series shall look only to the assets of the Trust, or, to the extent that the liability of the Trust may have been expressly limited by contract to the assets of a particular Series, only to the assets belonging to the relevant Series, for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee. Every note, bond, contract, instrument, certificate or undertaking made or issued on behalf of the Trust by the Board of Trustees, by any officers or officer or otherwise may include a notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts and may recite that the note, bond, contract, instrument, certificate or undertaking was executed or made by or on behalf of the Trust or by them as Trustee or Trustees or as officers or officer or otherwise and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust or upon the assets belonging to the Series or class for the benefit of which the Trustees have caused the note, bond, contract, instrument, certificate or undertaking to be made or issued, and may contain such further recital as he or she or they may deem appropriate, but the omission of any such recital shall not operate to bind any Trustee or Trustees or officer or officers or Shareholders of any other person individually. SECTION 2. TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY. The exercise by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. A Trustee shall be liable solely for his or her own wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Declaration of Trust, and shall be under no liability for any act or omission in accordance with -21- such advice nor for failing to follow such advice. The Trustees shall not be required to give any bond as such, nor any surety if a bond is required. SECTION 3. LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person dealing with the Trustees shall be bound to make any inquiry concerning the validity of any transaction made or to be made by the Trustees or to see to the application of any payments made or property transferred to the Trust or upon its order. SECTION 4. TERMINATION OF TRUST OR SERIES. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the affirmative vote of a "majority of the outstanding voting securities" of each Series (as the quoted phrase is defined in the 1940 Act), voting separately by Series, or by the Trustees by written notice to the Shareholders. Any Series may be terminated at any time by vote of the affirmative vote of "majority of the outstanding voting securities" of that Series (as the quoted phrase is defined in the 1940 Act) or by the Trustees by written notice to the Shareholders of that Series. Upon termination of the Trust (or any Series, as the case may be), after paying or otherwise providing for all charges, taxes, expenses and liabilities belonging, severally, to each Series (or the applicable Series, as the case may be), whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets belonging, severally, to each Series (or the applicable Series, as the case may be), to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds belonging to each Series (or the applicable Series, as the case may be), to the Shareholders of that Series, as a Series, ratably according to the number of Shares of that Series held by the several Shareholders on the date of termination, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of Shares of that Series, provided that any distribution to the Shareholders of a particular class of Shares shall be made to such Shareholders pro rata in proportion to the number of Shares of such class held by each of them. SECTION 5. MERGER AND CONSOLIDATION. The Trustees may cause the Trust or one or more of its Series to be merged into or consolidated with another Trust or company or the Shares exchanged under or pursuant to any state or Federal statute, if any, or otherwise to the extent permitted by law. Such merger or consolidation of Share exchange must be authorized by vote of a majority of the outstanding Shares of the Trust, as whole, or any affected Series, as may be applicable; provided that in all respects not governed by statute or applicable law, the Trustees shall have power to prescribe the procedure necessary or appropriate to accomplish a sale of assets, merger or consolidation. SECTION 6. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with any other governmental office where such filing may from time to time be required. Anyone dealing with -22- the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument, and all expressions like "herein," "hereof," and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or affect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original. SECTION 7. APPLICABLE LAW. This Agreement and Declaration of Trust is created under and is to be governed by and construed and administered according to the laws of The Commonwealth of Massachusetts. The Trust shall be of the type commonly called a Massachusetts business trust, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a trust. SECTION 8. AMENDMENTS. This Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees. SECTION 9. TRUST ONLY. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment, or any form of legal relationship other than a trust. Nothing in this Agreement and Declaration of Trust shall be construed to make the Shareholders, either by themselves, or with the Trustees, partners or members of a joint stock association. SECTION 10. USE OF THE NAME "RCS EMERGING GROWTH FUND". The Trust recognizes that Robertson Stephens & Company LLC ("RS&Co.") and its affiliates have exclusive use, control and rights to the name and identifying words "RCS Emerging Growth Fund." The Trust also recognizes that in consideration of the sponsorship and creation of the Trust and such Series as may be created from time to time, RS&Co. has exclusive use, control and rights to the names they have designated and may designate for the Trust and its Series. The Trust understands that RS&Co. has consented (a) to the use by the Trust of the identifying words or name "RCS Emerging Growth Fund" as the name of the Trust and (b) to the use by the Trust of the names or identifying words which may be used for each of the Trust's Series from RS&Co., as Manager of the Trust and said Series. Such names or identifying words or any variations thereof may be used from time to time in other connections and for other purposes by RS&Co. or affiliated entities. RS&Co. has the right to require the Trust to cease using the names designated for each Series of the Trust during the time RS&Co. or an affiliate was employed as the investment manager or adviser of the Trust or such Series if the Trust and said Series cease to employ RS&Co. or such affiliate in such capacity. Future names adopted by the Trust for itself and its -23- Series shall be the property of RS&Co. and its affiliates, and the use of each names shall be subject to the same conditions set forth in this Section insofar as such names or identifying words require the consent of RS&Co. IN WITNESS WHEREOF, the Trustees named below do hereby set their hands as of the 13th day of March, 1997. /S/ LEONARD S. AUERBACH ---------------------------------------------- Leonard S. Auerbach /S/ DANIEL R. COONEY ---------------------------------------------- Daniel R. Cooney /S/ G. RANDY HECHT ---------------------------------------------- G. Randy Hecht /S/ JAMES K. PETERSON ---------------------------------------------- James K. Peterson ---------------------------------------------- John P. Rohal -24- EX-99.A(II) 3 EXHIBIT 99.A(II) - AMENDED & RESTATED AGREEMENT EXHIBIT (a)(ii) AMENDMENT to AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST of ROBERTSON STEPHENS INVESTMENT TRUST February 26, 1999 The undersigned, being at least a majority of the Trustees of Robertson Stephens Investment Trust (the "Trust"), hereby amend the Amended and Restated Agreement and Declaration of Trust of the Trust by deleting therefrom Article I, Section 1 in its entirety and replacing it with the following: Section 1. Name. This Trust shall be known as RS INVESTMENT TRUST, and the Trustees shall conduct the business of the Trust under that name or any other name as they, in their sole discretion, from time to time determine. IN WITNESS WHEREOF, the Trustees named below do hereby set their hands as of the 26th day of February 1999. /s/ Leonard B. Auerbach ------------------------------------------ Leonard B. Auerbach /s/ John W. Glynn, Jr. ------------------------------------------ John W. Glynn, Jr. /s/ James K. Peterson ------------------------------------------ James K. Peterson ------------------------------------------ Andrew P. Pilara, Jr. EX-99.C(II) 4 EXHIBIT 99.C(II) PORTIONS OF AMENDED & RESTATED AG EXHIBIT c(ii) PORTIONS OF AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST PERTAINING TO SHAREHOLDERS' RIGHTS RS INVESTMENT TRUST ARTICLE III Shares Section 1. DIVISION OF BENEFICIAL INTEREST. The Shares of the Trust shall be issued in one or more Series as the Trustees may, without Shareholder approval, authorize. The Trustees may, without Shareholder approval, divide the Shares of any Series into two or more classes, Shares of each such class having such preferences or special or relative rights or privileges (including conversion rights, if any) as the Trustees may determine and as are not inconsistent with any provision of this Agreement and Declaration of Trust. Each Series shall be preferred over all other Series in respect of the assets allocated to that Series. The beneficial interest in each Series shall at all times be divided into Shares, without par value, each of which shall, except as the Trustees may otherwise authorize in the case of any Series that is divided into two or more classes, represent an equal proportionate interest in the Series with each other Share of the same Series, none having priority or preference over another. The number of Shares authorized shall be unlimited, and the Shares so authorized may be represented in part by fractional shares. The Trustees may from time to time divide or combine the Shares of any Series or class into a greater or lesser number without thereby changing the proportionate beneficial interests in the Series or class. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust or any Series. Section 2. OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of each Series. No certificates certifying the ownership of Shares shall be issued except as the Board of Trustees may otherwise determine from time to time. The Trustees may make such rules as they consider appropriate for the transfer of Shares and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each Series and class and as to the number of Shares of each Series and class held from time to time by each. Section 4. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Shares shall be deemed to be personal property giving only the rights provided in this instrument. Every Shareholder, by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. The death of a Shareholder during the existence of the Trust shall not operate to terminate the Trust, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but entitles such representative only to the rights of said deceased Shareholder under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners. Neither the Trust nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any Shareholders, nor, except as specifically provided herein, to call upon any Shareholder for the payment of any sum of money or assessment whatsoever other than such as the Shareholder may at any time personally agree to pay. Section 5. POWER OF BOARD OF TRUSTEES TO CHANGE PROVISIONS RELATING TO SHARES. Notwithstanding any other provision of this Declaration of Trust and without limiting the power of the Board of Trustees to amend the Declaration of Trust as provided elsewhere herein, the Board of Trustees shall have the power to amend this Declaration of Trust, at any time and from time to time, in such manner as the Board of Trustees may determine in their sole discretion, without the need for Shareholder action, so as to add to, delete, replace or otherwise modify any provisions relating to the Shares contained in this Declaration of Trust, provided that before adopting any such amendment without Shareholder approval, the Board of Trustees shall determine that it is consistent with the fair and equitable treatment of all Shareholders or that Shareholder approval is not otherwise required by the 1940 Act or other applicable law. Without limiting the generality of the foregoing, the Board of Trustees may, for the above-stated purposes, amend the Declaration of Trust to: (a) create one or more Series or classes of Shares (in addition to any Series or classes already existing or otherwise) with such rights and preferences and such eligibility requirements for investment therein as the Trustees shall determine and reclassify any or all outstanding Shares as shares of a particular Series or class in accordance with such eligibility requirements; (b) amend any of the provisions set forth in paragraphs (a) through (h) of Section 5 of this Article III; (c) combine one or more Series or classes of Shares into a single Series or class on such terms and conditions as the Trustees shall determine. (d) change or eliminate any eligibility requirements for investment in Shares of any Series or class, including, without limitation, to provide for the issue of Shares of any Series or class in connection with any merger or consolidation of the Trust with the other trust or company or any acquisition by the Trust of part or all of the assets of another trust or investment company; 2 (e) change the designation of any Series or class of Shares; (f) change the method of allocating dividends among the various Series or classes of Shares; (g) allocate assets, liabilities and expenses of the Trust to a particular Series of Shares or apportion the same among two or more Series, provided that any liabilities or expenses incurred by a particular Series of Shares shall be payable solely out of the assets of that Series; and to the extent necessary or appropriate to give effect to the preferences and special or relative rights and privileges of any classes of Shares, allocate assets, liabilities, income and expenses of a Series to a particular class of Shares of that Series or apportion the same among two or more classes of Shares of that Series; (h) specifically allocate assets to any or all Series of Shares or create one or more additional Series of Shares which are preferred over all other Series of Shares in respect of assets specifically allocated thereto or any dividends paid by the Trust with respect to any net income, however determined, earned from the investment and reinvestment of any assets so allocated or otherwise and provide for any special voting or other rights with respect to such Series. Section 6. ESTABLISHMENT AND DESIGNATION OF SERIES OR CLASSES. The establishment and designation of any Series or class of Shares shall be effective upon the resolution by a majority of the then Trustees, setting forth such establishment and designation and the relative rights an preferences of such Series or class, or as otherwise provided in such resolution. Shares of each Series or class established pursuant to this Section 6, unless otherwise provided in the resolution establishing such Series or class, shall have the following relative rights and preferences: (a) ASSETS BELONGING TO SERIES. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be, shall irrevocably belong to that Series for all purposes, subject only to the rights of creditors, and shall be so recorded upon the books of account of the Trust. Such considerations, assets, income, earnings, profits and proceeds thereof, from whatever source derived, including, without limitation, any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds, in whatever form the same may be, are herein referred to as "assets belonging to" that Series. In the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments which are not readily identifiable as belonging to any particular Series (collectively "General Assets"), the Trustees shall allocate such General Assets to, between or among any one or more of the Series in such manner and on such basis as they, in their sole discretion, deem fair and equitable, and any General Asset so allocated to a particular Series shall 3 belong to that Series; and, in the event that there are any assets, income, earnings, profits and proceeds thereof, funds or payments belonging to any Series which are not readily identifiable as belonging to any particular class (collectively "Series General Assets"), the Trustees shall allocate such Series General Assets to, between or among any one or more of the classes of such Series in such manner and on such basis as they, in their sole discretion, deem fair and equitable, and any Series General Asset so allocated to a particular class shall belong to that class. Each such allocation by the Trustees shall be conclusive and binding upon the Shareholders of all Series and classes for all purposes. (b) LIABILITIES BELONGING TO SERIES. The assets belonging to each particular Series shall be charged with the liabilities of the Trust in respect to that Series and all expenses, costs, charges and reserves attributable to that Series and any general liabilities of the Trust, or of any Series, which are not readily identifiable as belonging to any particular Series, or any particular class of any Series, shall be allocated and charged by the Trustees to and among any one or more of the Series, or to and among any one or more of the classes of such Series, as the case may be, in such manner and on such basis as the Trustees in their sole discretion deem fair and equitable. The liabilities, expenses, costs, charges, and reserves so charged to a Series or class are herein referred to as "liabilities belonging to" that Series or class. Each allocation of liabilities, expenses, costs, charges and reserves by the Trustees shall be conclusive and binding upon the holders of all Series and classes for all purposes. Under no circumstances shall the assets allocated or belonging to any particular Series be charged with liabilities attributable to any other Series. All persons who have extended credit which has been allocated to a particular Series, or who have a claim or contract which has been allocated to any particular Series, shall look only to the assets of that particular Series for payment of such credit, claim or contract. (c) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, AND REPURCHASES. Notwithstanding any other provisions of this Declaration of Trust, including, without limitation, Article VI, no dividend or distribution (including, without limitation, any distribution paid upon termination of the Trust or of any Series) with respect to, nor any redemption or repurchase of, the Shares of any Series shall be effected by the Trust other than from the assets belonging to such Series, nor, except as specifically provided in Section 7 of this Article III, shall any Shareholder of any particular Series otherwise have any right or claim against the assets belonging to any other Series except to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Series. The Trustees shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders. (d) VOTING. Notwithstanding any other provision of this Declaration of Trust, on any matter submitted to a vote of Shareholders, all Shares of the Trust then entitled to vote shall be voted in the aggregate as a single class without regard to Series or class; except (1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more Series or classes materially differently, Shares shall be voted by individual Series or 4 class; and (2) when the Trustees have determined that the matter affects only the interests of one or more Series or classes, then only Shareholders of such Series or classes shall be entitled to vote thereon. (e) FRACTIONS. Any fractional Share of a Series or class of any Series shall carry proportionately all the rights and obligations of a whole share of that Series or class, as the case may be, including rights with respect to voting, receipt of dividends and distributions, redemptions of Shares and termination of the Trust. (f) EXCHANGE PRIVILEGE. The Trustees shall have the authority to provide that the holders of Shares of any Series shall have the right to exchange said Shares for Shares of one or more other Series of Shares in accordance with such requirements and procedures as may be established by the Trustees. (g) COMBINATION OF SERIES. The Trustees shall have the authority, without the approval of the Shareholders of any Series or class of any Series unless otherwise required by applicable law, to combine the assets and liabilities belonging to any two or more Series or classes into assets and liabilities belonging to a single Series or class. (h) ELIMINATION OF SERIES OR CLASSES. At any time that there are no Shares outstanding of any particular Series or class of any Series previously established and designated, the Trustees may amend this Declaration of Trust to abolish that Series or class and to rescind the establishment and designation thereof. Section 7. INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former Shareholder shall be held to be personally liable solely by reason of his or her being or having been a Shareholder and not because of his or her acts or omissions or for some other reason, the Shareholder or former Shareholder (or his or her heirs, executors, administrators, or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled out of the assets of the Trust to be held harmless from and indemnified against all loss and expense arising from such liability. ARTICLE IV The Board of Trustees Section 1. NUMBER, ELECTION AND TENURE. The number of Trustees constituting the Board of Trustees shall be five (5), unless such number shall be changed from time to time by written instrument signed by a majority of the Board of Trustees, provided, however, that the number of Trustees shall in no event be less than one nor more than 15. The Board of Trustees, by action of a majority of the then Trustees at a duly constituted meeting, may fill vacancies in the Board of Trustees or remove Trustees with or without cause. Each Trustee shall serve during the continued lifetime of the Trust until he or she dies, resigns, is declared bankrupt or 5 incompetent by a court of appropriate jurisdiction, or is removed, or, if sooner, until the next meeting of Shareholders called for the purpose of electing Trustees and until the election and qualification of his or her successor. Any Trustee may resign at any time by written instrument signed by him or her and delivered to any officer of the Trust or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time. Except to the extent expressly provided in a written agreement with the Trust, no Trustee resigning and no Trustee removed shall have any right to any compensation for any period following his or her resignation or removal, or any right to damages on account of such removal. The Shareholders may fix the number of Trustees and elect Trustees at any meeting of Shareholders called by the Trustees for that purpose. Section 3. POWERS. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Board of Trustees, and such Board shall have all powers necessary or convenient to carry out that responsibility including the power to engage in securities transactions of all kinds on behalf of the Trust. Without limiting the foregoing, the Trustees may: adopt By-Laws not inconsistent with this Declaration of Trust providing for the regulation and management of the affairs of the Trust and may amend and repeal them to the extent that such By-Laws do not reserve that right to the Shareholders; fill vacancies in or remove from their number, and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; appoint from their own number and establish and terminate one or more committees consisting of two or more Trustees which may exercise the powers and authority of the Board of Trustees to the extent that the Trustees determine; employ one or more custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities or with a Federal Reserve Bank, retain a transfer agent or a shareholder servicing agent or both; provide for the issuance and distribution of Shares by the Trust directly or through one or more Principal Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to applicable law; set record dates for the determination of Shareholders with respect to various matters; declare and pay dividends and distributions to Shareholders of each Series from the assets of such Series; and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian, transfer or shareholder servicing agent, or Principal Underwriter. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Trustees. Without limiting the foregoing, the Board of Trustees shall have power and authority: (f) Subject to the provisions of Article III, Section 3, to allocate assets, liabilities, income and expenses of the Trust to a particular Series of Shares or to apportion the same among two or more Series, provided that any liabilities or expenses incurred by or arising in connection with a particular Series of Shares shall be payable solely out of the assets of that Series; and to the extent necessary or appropriate to give effect to the preferences and special or relative rights 6 and privileges of any classes of Shares, to allocate assets, liabilities, income and expenses of a Series to a particular class of Shares of the Series or to apportion the same among two or more classes of Shares of that Series; (m) To purchase and pay for entirely out of Trust property such insurance as they may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, investment advisers, principal underwriters, or independent contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such person as Trustee, officer, employee, agent, investment adviser, principal underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence; whether or not the Trust would have the power to indemnify such person against liability; Section 5. PAYMENT OF EXPENSES BY SHAREHOLDERS. The Trustees shall have the power, as frequently as they may determine, to cause each Shareholder, or each Shareholder of any particular Series or class, to pay directly, in advance or arrears, for charges of the Trust's custodian or transfer, Shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends owed such Shareholder and/or by reducing the number of shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder. Section 7. SERVICE CONTRACTS. (e) The fact that: (i) any of the Shareholders, Trustees, or officers of the Trust is a shareholder, director, officer, partner, trustee, employee, manager, adviser, principal underwriter, distributor, or affiliate or agent of or for any corporation, trust, association, or other organizational or for any parent or affiliate of any organization with which an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other type of service contract may have been or may hereafter be made, or that any such organization, or any parent or affiliate thereof, is a Shareholder or has an interest in the Trust, or that (ii) any corporation, trust, association or other organization with which an advisory or management contract or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other type of service contract may have been or may hereafter be made also has an advisory or management contract, or principal underwriter's or distributor's contract, or transfer, shareholder servicing or other service 7 contract with one or more other corporations, trust, associations, or other organizations, or has other business or interests shall not affect the validity of any such contract or disqualify any Shareholder, Trustee or officer of the Trust from voting upon or executing the same, or create any liability or accountability to the Trust or its Shareholders, provided approval of each such contract is made pursuant to the requirements of the 1940 Act. ARTICLE V Shareholder Voting Powers and Meetings Section 1. VOTING POWERS. Subject to the voting powers of one or more classes of Shares as set forth elsewhere in this Declaration of Trust or in the Bylaws, the Shareholders shall have power to vote only (i) for the election of Trustees as provided in Article IV, Section 1, (ii) to the same extent as the stockholders of a Massachusetts business corporation as to whether or not a court action, proceeding or claim should, or should not be brought or maintained derivatively or as a class action on behalf of the Trust or the Shareholders, (iii) with respect to the termination of the Trust or any Series or class to the extent and as provided in Article VIII, Section 4, and (iv) with respect to such additional matters relating to the Trust as may be required by any registration of the Trust with the Commission (or any successor agency) or any state, or as the Trustees may consider necessary or desirable. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy. A proxy with respect to Shares held in the name of two or more persons shall be valid if executed by any one of them unless at or prior to exercise of the proxy the Trust receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a Shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger. At any time when no Shares of a Series or class are outstanding, the Trustees may exercise all rights of Shareholders of that Series or class with respect to matters affecting that Series or class, take any action required by law, this Declaration of Trust or the By-Laws, to be taken by Shareholders. Section 2. VOTING POWER AND MEETINGS. Meetings of the Shareholders of the Trust or of any Series or class may be called by the Trustees for the purpose of electing Trustees as provided in Article IV, Section 1 and for such other purposes as may be prescribed by law, by this Declaration of Trust or by the By-Laws. Meetings of the Shareholders may also be called by the Trustees from time to time for the purpose of taking action upon any other matter deemed by the Trustees to be necessary or desirable. A meeting of Shareholders may be held at any place designated by the Trustees. Written notice of any meeting of Shareholders shall be give or 8 caused to be given by the Trustees by mailing such notice at least seven (7) days before such meeting, postage prepaid, stating the time and place of the meeting, to each Shareholder entitled to vote at such meeting, at the Shareholder's address as it appears on the records of the Trust. Whenever notice of a meeting is required to be given to a Shareholder under this Declaration of Trust or the By-Laws, a written waiver thereof, executed before or after the meeting by such Shareholder or his or her attorney thereunto authorized and filed with the records of the meeting, shall be deemed equivalent to such notice. Section 3. QUORUM AND REQUIRED VOTE. Except when a larger quorum is required by applicable law, by the By-Laws or by this Declaration of Trust, forty percent (40%) of the Shares entitled to vote on a particular matter shall constitute a quorum for the transaction of business on that matter at a Shareholders' meeting, except that where any provision of law or of this Declaration of Trust or the By-Laws requires that holders of any Series or class shall vote as a Series or class, then forty percent (40%) of the aggregate number of Shares of that Series or class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that Series or class. Any lesser number shall be sufficient for adjournments. Any adjourned session or sessions may be held within a reasonable time after the date set for the original meeting without further notice. Except when a larger vote is required by any provision of this Declaration of Trust or the By-Laws or by applicable law, when a quorum is present, a majority of the Shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of this Declaration of Trust or of the By-Laws permits or requires that the holders of any Series or class shall vote as a Series or class, then a majority of the Shares of that Series or class voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that Series or class is concerned. Section 4. ACTION BY WRITTEN CONSENTS. Any action taken by Shareholders may be taken without a meeting if Shareholders holding a majority of the Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of this Declaration of Trust or by the By-Laws) consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders. Section 5. RECORD DATES. For the purpose of determining the Shareholders of any Series or class who are entitled to vote or act at any meeting or any adjournment thereof, the Trustees may from time to time fix a time, which shall be not more than ninety (90) days before the date of any meeting of Shareholders, as the record date for determining the Shareholders of such Series or class having the right to notice of and to vote at such meeting and any adjournment thereof, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Trust after the record date. For the purpose of determining the Shareholders of any Series or class who are entitled to receive payment or any dividend or of any other distribution, the Trustees may from time to time fix a 9 date, which shall be before the date for the payment of such dividend or such other payment, as the record date for determining the Shareholders of such Series or class having the right to receive such dividend or distribution. Without fixing a record date the Trustees may for voting and/or distribution purposes close the register or transfer books for one or more Series or classes for all or any part of the period between a record date and a meeting of Shareholders or the payment of a distribution. Nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different Series or classes. Section 6. ADDITIONAL PROVISIONS. The By-Laws may include further provisions for Shareholders' votes and meetings and related matters. ARTICLE VI Net Asset Value, Distributions, and Redemptions Section 1. DETERMINATION OF NET ASSET VALUE, NET INCOME, AND DISTRIBUTIONS. The term "net asset value" of the Shares of each Series or class shall mean: (i) the value of all the assets of such Series or class; (ii) less the total liabilities of such Series or class; (iii) divided by the number of Shares of such Series or class outstanding, in each case at the time of each determination. The "number of Shares of such Series or class outstanding" for the purposes of such computation shall be exclusive of any Shares of such Series or class to be redeemed and not then redeemed as to which the redemption price has been determined, but shall include Shares of such Series or class presented for repurchase and not then repurchased and Shares of such Series or class to be redeemed and not then redeemed as to which the redemption price has not been determined and Shares of such Series or class the sale of which has been confirmed. Any fractions involved in the computation of net asset value per share shall be adjusted to the nearest cent unless the Trustees shall determine to adjust such fractions to a fraction of a cent. Determinations under this Section made in good faith shall be binding on all parties concerned. The manner of determining the net assets of any Series or class or of determining the net asset value of the Shares of any Series or class may from time to time be altered as necessary or desirable in the judgment of the Trustees to conform to any other method prescribed or permitted by any applicable law or regulation. Section 2. REDEMPTIONS AND REPURCHASES. The Trust shall purchase such Shares as are offered by any Shareholder for redemption, upon the presentation of a proper instrument of transfer together with a request directed to the Trust or a person designated by the Trust that the Trust purchase such Shares or in accordance with such other procedures for redemption as the Trustees may from time to time authorize; and the Trust will pay therefor the net asset value thereof, as determined in accordance with the By-Laws and applicable law, next determined. Payment for said Shares shall be made by the Trust to the Shareholder within seven days after the date on which the request is made in proper form. The obligation set forth in this Section 2 is subject to the provision that in the event that any time the New York Stock Exchange is closed 10 for other than weekends or holidays, or if permitted by the Rules of the Commission during periods when trading on the Exchange is restricted or during any emergency which makes it impracticable for the Trust to dispose of the investments of the applicable Series or to determine fairly the value of the net assets belonging to such Series or during any other period permitted by order of the Commission for the protection of investors, such obligations may be suspended or postponed by the Trustees. The redemption price may in any case or cases be paid wholly or partly in kind if the Trustees determine that such payment is advisable in the interest of the remaining Shareholders of the Series for which the Shares are being redeemed. Subject to the foregoing, the fair value, selection and quantity of securities or other property so paid or delivered as all or part of the redemption price may be determined by or under authority of the Trustees. In no case shall the Trust be liable for any delay of any corporation or other person in transferring securities selected for delivery as all or part of any payment in kind. Section 3. REDEMPTIONS AT THE OPTION OF THE TRUST. The Trust shall have the right at its option and at any time to redeem Shares of any Shareholder at the net asset value thereof as described in Section 1 of this Article VI: (i) if at such time such Shareholder owns Shares of any Series having an aggregate net asset value of less than an amount determined from time to time by the Trustees, but not to exceed $40,000; or (ii) to the extent that such Shareholder owns Shares equal to or in excess of a percentage, determined from time to time by the Trustees, of the outstanding Shares of the Trust or of any Series or class of any Series. ARTICLE VIII Miscellaneous Section 1. TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE. All persons extending credit to, contracting with or having any claim against the Trust or any Series shall look only to the assets of the Trust, or, to the extent that the liability of the Trust may have been expressly limited by contract to the assets of a particular Series, only to the assets belonging to the relevant Series, for payment under such credit, contract or claim; and neither the Shareholders nor the Trustees, nor any of the Trust's officers, employees or agents, whether past, present or future, shall be personally liable therefor. Nothing in this Declaration of Trust shall protect any Trustee against any liability to which such Trustee would otherwise be subject by reason of wilful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee. Every note, bond, contract, instrument, certificate or undertaking made or issued on behalf of the Trust by the Board of Trustees, by any officers or officer or otherwise may include a notice that this Declaration of Trust is on file with the Secretary of The Commonwealth of Massachusetts and may recite that the note, bond, contract, instrument, certificate or undertaking was executed or made by or on behalf of the Trust or by them as Trustee or Trustees or as 11 officers or officer or otherwise and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only upon the assets and property of the Trust or upon the assets belonging to the Series or class for the benefit of which the Trustees have caused the note, bond, contract, instrument, certificate or undertaking to be made or issued, and may contain such further recital as he or she or they may deem appropriate, but the omission of any such recital shall not operate to bind any Trustee or Trustees or officer or officers or Shareholders of any other person individually. Section 4. TERMINATION OF TRUST OR SERIES. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by the affirmative vote of a "majority of the outstanding voting securities" of each Series (as the quoted phrase is defined in the 1940 Act), voting separately by Series, or by the Trustees by written notice to the Shareholders. Any Series may be terminated at any time by vote of the affirmative vote of "majority of the outstanding voting securities" of that Series (as the quoted phrase is defined in the 1940 Act) or by the Trustees by written notice to the Shareholders of that Series. Upon termination of the Trust (or any Series, as the case may be), after paying or otherwise providing for all charges, taxes, expenses and liabilities belonging, severally, to each Series (or the applicable Series, as the case may be), whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets belonging, severally, to each Series (or the applicable Series, as the case may be), to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds belonging to each Series (or the applicable Series, as the case may be), to the Shareholders of that Series, as a Series, ratably according to the number of Shares of that Series held by the several Shareholders on the date of termination, except to the extent otherwise required or permitted by the preferences and special or relative rights and privileges of any classes of Shares of that Series, provided that any distribution to the Shareholders of a particular class of Shares shall be made to such Shareholders pro rata in proportion to the number of Shares of such class held by each of them. Section 5. MERGER AND CONSOLIDATION. The Trustees may cause the Trust or one or more of its Series to be merged into or consolidated with another Trust or company or the Shares exchanged under or pursuant to any state or Federal statute, if any, or otherwise to the extent permitted by law. Such merger or consolidation of Share exchange must be authorized by vote of a majority of the outstanding Shares of the Trust, as whole, or any affected Series, as may be applicable; provided that in all respects not governed by statute or applicable law, the Trustees shall have power to prescribe the procedure necessary or appropriate to accomplish a sale of assets, merger or consolidation. Section 6. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with any other 12 governmental office where such filing may from time to time be required. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument, and all expressions like "herein," "hereof," and "hereunder," shall be deemed to refer to this instrument as amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or affect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original. Section 9. TRUST ONLY. It is the intention of the Trustees to create only the relationship of Trustee and beneficiary between the Trustees and each Shareholder from time to time. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment, or any form of legal relationship other than a trust. Nothing in this Agreement and Declaration of Trust shall be construed to make the Shareholders, either by themselves, or with the Trustees, partners or members of a joint stock association. EX-99.C(III) 5 EXHIBIT 99.C(III) - PORTION OF BY-LAWS EXHIBIT c(iii) PORTIONS OF BY-LAWS OF RS INVESTMENT TRUST AS AMENDED THROUGH JULY 22, 1997 PERTAINING TO SHAREHOLDERS' RIGHTS ARTICLE II Meetings of Shareholders SECTION 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of shareholders shall be sent or otherwise given in accordance with Section 4 of this Article II not less than seven (7) nor more than seventy-five (75) days before the date of the meeting. The notice shall specify (i) the place, date, and hour of the meeting, and (ii) the general nature of the business to be transacted. The notice of any meeting at which Trustees are to be elected also shall include the name of any nominee or nominees whom at the time of the notice are intended to be presented for election. SECTION 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the Trust or its transfer agent or given by the shareholder to the Trust for the purpose of notice. If no such address appears on the Trust's books or is given, notice shall be deemed to have been given if sent to that shareholder by first-class mail or telegraphic or other written communication to the Trust's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the Trust is returned to the Trust by the United States Postal Service marked to indicate that the Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the Trust for a period of one year from the date of the giving of the notice. An affidavit of the mailing or other means of given any notice of any shareholder's meeting shall be executed by the secretary, assistance secretary or any transfer agent of the Trust giving the notice and shall be filed and maintained in the minute book of the Trust. SECTION 5. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, whether or not a quorum is present, may by adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. When any meeting of shareholders is adjourned to another time or place, notice need not be given of the adjourned meeting at which the adjournment is taken, unless a new record date of the adjourned meeting is fixed or unless the adjournment is for more than sixty (60) days from the date set for the original meeting, in which case the Board of Trustees shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 3 and 4 of this Article II. At any adjourned meeting the Trust may transact any business which might have been transacted at the original meeting. SECTION 6. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of the Declaration of Trust, as in effect at such time. The shareholders' vote may be by voice vote or by ballot, provided, however, that any election for Trustees must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of Trustees, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to the total shares that the shareholder is entitled to vote on such proposal. SECTION 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The transactions of the meeting of shareholders, however called and noticed and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present either in person or by proxy and if either before or after the meeting, each person entitled to vote who was not present in person or by proxy signs a written waiver of notice or a consent to a holding of the meeting or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any meeting of shareholders. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the beginning of the meeting. SECTION 8. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action which may be taken at any meeting of shareholders may be taken without a meeting and without prior notice if a consent in writing setting forth the action so taken is signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all shares entitled to vote on that action were present and voted. All such consents shall be filed with the Secretary of the Trust and shall be 2 maintained in the Trust's records. Any shareholder giving a written consent or the shareholder's proxy holders or a transferee of the shares or a personal representative of the shareholder or their respective proxy holders may revoke the consent by a writing received by the Secretary of the Trust before written consents of the number of shares required to authorize the proposed action have been filed with the Secretary. If the consents of all shareholders entitled to vote have not been solicited in writing and if the unanimous written consent of all such shareholders shall not have been received, the Secretary shall give prompt notice of the action approved by the shareholders without a meeting. This notice shall be given in the manner specified in Section 4 of this Article II. In the case of approval of (i) contracts or transactions in which a Trustee has a direct or indirect financial interest, (ii) indemnification of agents of the Trust, and (iii) a reorganization of the Trust, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval. SECTION 9. RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of any meeting or to vote or entitled to give consent to action without a meeting, the Board of Trustees may fix in advance a record date which shall not be more than ninety (90) days nor less than seven (7) days before the date of any such meeting as provided in the Declaration of Trust. If the Board of Trustees does not so fixed a record date: (a) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (b) The record date for determining shareholders entitled to give consent to action in writing without a meeting, (i) when no prior action by the Board of Trustees has been taken, shall be the day on which the first written consent is given, or (ii) when prior action of the Board of Trustees has been taken, shall be at the close of business on the day on which the Board of Trustees adopt the resolution relating to that action or the seventy-fifth day before the date of such other action, whichever is later. SECTION 10. PROXIES. Every person entitled to vote for Trustees or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholder's attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it before the vote pursuant to that proxy by a writing delivered to the Trust stating that the proxy is revoked or by a 3 subsequent proxy executed by or attendance at the meeting and voting in person by the person executing that proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Trust before the vote pursuant to that proxy is counted; provided however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy unless otherwise provided in the proxy. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of the Massachusetts Business Corporation Law. SECTION 11. INSPECTORS OF ELECTION. Before any meeting of shareholders, the Board of Trustees may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed, as inspector fails to appear or fails or refuses to act, the chairman of the meeting may and on the request of any shareholder or a shareholder's proxy, shall appoint a person to fill the vacancy. These inspectors shall: (c) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; (d) Receive votes, ballots or consents; (e) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (f) Count and tabulate all votes or consents; (g) Determine when the polls shall close; (h) Determine the result; and (i) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. SECTION 12. ELECTRONIC PROXY, ETC. The placing of a shareholder's name on a proxy pursuant to telephone or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such shareholder shall constitute execution of such proxy by or on behalf of such shareholder. 4 ARTICLE III Trustees SECTION 2. VACANCIES. Vacancies in the Board of Trustees may be filled by a majority of the remaining Trustees, though less than a quorum, or by a sole remaining Trustee, unless the Board of Trustees calls a meeting of shareholders for the purposes of electing Trustees. In the event that at any time less than a majority of the Trustees holding office at that time were so elected by the holders of the outstanding voting securities of the Trust, the Board of Trustees shall forthwith cause to be held as promptly as possible, and in any event within sixty (60) days, a meeting of such holders for the purpose of electing Trustees to fill any existing vacancies in the Board of Trustees, unless such period is extended by order of the United States Securities and Exchange Commission. ARTICLE VI Indemnification of Trustees, Officers, Employees and Other Agents SECTION 1. MANDATORY INDEMNIFICATION. (a) Subject to the exceptions and limitations contained in paragraph (b) below: (i) every person who is or has been a Trustee, officer, employee or agent of the Trust (including persons who serve at its request as directors, officers, employees or trustees of another organization in which it has any interest, as a shareholder, creditor or otherwise) shall be indemnified by the Trust against all liability and against all expenses reasonably incurred or paid by him in connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or having been a Trustee, officer, employee or agent and against amounts paid or incurred by him in the settlement thereof; (ii) the word "claim," "action," "suit," or "proceeding" shall apply to all claims, actions, suits or proceedings (civil, criminal, or other, including appeals), actual or threatened; and the words "liability" and "expense" shall include, without limitation, attorneys' fees, costs, judgments, amounts paid in settlement, fines, penalties and other liabilities. (b) No indemnification shall be provided hereunder to a Trustee, officer, employee or agent: 5 (i) against any liability to the Trust or the shareholders by reason of a final adjudication by the court or other body before which the proceeding was brought that he engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office; (ii) with respect to any matter as to which he shall have been finally adjudicated not to have acted in good faith in the reasonable belief that his action was in the best interest of the Trust; (iii) in the event of a settlement involving a payment by a Trustee, officer, employee or agent or other disposition not involving a final adjudication as provided in paragraph (b)(i) or (b)(ii) resulting in a payment by a Trustee, officer, employee or agent, unless there has been either a determination that such Trustee, officer, employee or agent did not engage in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office by the court or other body approving the settlement or other disposition or a reasonable determination, based upon a review of readily available facts (as opposed to a full trial-type inquire) that he did not engage in such conduct: (A) by vote of a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter); or (B) by written opinion of independent legal counsel. (c) The rights of indemnification herein provided may be insured against by policies maintained by the Trust, shall be severable, shall not affect any other rights to which any Trustee, officer, employee or agent may now or hereafter be entitled, shall continue as to a person who has ceased to be such Trustee, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such person. Nothing contained herein shall affect any rights to indemnification to which personnel other than Trustees, officers, employee and agents may be entitled by contract or otherwise under law. (d) Expenses of investigation, preparation and presentation of a defense to any claim, action, suit, or proceeding of the character described in paragraph (a) of this Section 1 shall be advance by the Trust prior to final disposition thereof upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification under this Section 1, provided that either (i) such undertaking is secured by a surety bond or some other appropriate security of the Trust shall be insured against losses arising out of any such advances; or 6 (ii) a majority of the Disinterested Trustees acting on the matter (provided that a majority of the Disinterested Trustees then in office act on the matter) or an independent legal counsel in a written opinion, shall determine, based upon a review of readily available facts (as opposed to a full trial-type inquiry), that there is reason to believe that the recipient ultimately will be found entitled to indemnification. As used in this Section 1, a "Disinterested Trustee" is one (i) who is not an "Interested Person" of the Trust as defined in the Investment Company Act of 1940, as amended (including anyone who has been exempted from being an "Interested Person" by any rule, regulation or order of the United States Securities and Exchange Commission) and (ii) against whom none of such actions, suits or other proceedings or another action, suit or other proceeding on the same or similar grounds is then or had been pending. ARTICLE VII Records and Reports SECTION 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep at its principal executive office the original or a copy of these By-Laws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. SECTION 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the Board of Trustees and any committee or committees of the Board of Trustees shall be kept at such place or places designated by the Board of Trustees or in the absence of such designation of the principal executive office of the Trust. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholders or holder of a voting trust certificate at any reasonable time during usual business hours for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney and shall include the right to copy and make extracts. SECTION 5. FINANCIAL STATEMENTS. A copy of any financial statements and any income statement of the Trust for each quarterly period of each fiscal year and accompanying balance sheet of the Trust as of the end of each such period that has been prepared by the Trust shall be kept on file in the principal executive office of the Trust for at least twelve (12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder. The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accounting engaged by the Trust or the 7 certificate of an authorized officer of the Trust that the financial statements were prepared without audit from the books and records of the Trust. ARTICLE VIII General Matters SECTION 3. CERTIFICATES FOR SHARES. A certificate or certificates for shares of beneficial interest in any series of the Trust may be issued to a shareholder upon his request when such shares are fully paid. All certificates shall be signed in the name of the Trust by the chairman of the board or the president or vice president and by the treasurer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the series of shares owned by the shareholders. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent, or registrar before that certificate is issued, it may be issued by the Trust with the same effect as if that person were an officer, transfer agent or registrar at the date of issue. Notwithstanding the foregoing, the Trust may adopt and use a system of issuance, recordation and transfer of its shares by electronic or other means. SECTION 4. LOST CERTIFICATES. Except as provided in this Section 4, no new certificates for shares shall be issued to replace an old certificate unless the latter is surrendered to the Trust and canceled at the same time. The Board of Trustees may in case any share certificate or certificate for any other security is lost, stolen, or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board of Trustees may require, including a provision for indemnification of the Trust secured by a bond or other adequate security sufficient to protect the Trust against any claim that may be made against it, including any expense or liability on account of the alleged loss, theft, or destruction of the certificate or the issuance of the replacement certificate. ARTICLE IX Amendments SECTION 1. AMENDMENT BY SHAREHOLDERS. These By-Laws may be amended or repealed by the affirmative vote or written consent of a majority of the outstanding shares entitled to vote, except as otherwise provided by applicable law or by the Declaration of Trust or these By-Laws. EX-99.D(I) 6 EXHIBIT 99.D(I) - INVESTMENT ADVISORY AGREEMENT EXHIBIT d(i) RS INVESTMENT TRUST INVESTMENT ADVISORY AGREEMENT This INVESTMENT ADVISORY AGREEMENT ("Agreement") made as of the 26th day of February, 1999, by and between RS INVESTMENT TRUST, a business trust organized and existing under the laws of The Commonwealth of Massachusetts (the "Trust"), on behalf of each of its series of shares of beneficial interest named on Schedule 1 to this Agreement, as it may be amended by the parties from time to time (each, a "Fund"), and RS INVESTMENT MANAGEMENT, L.P. (the "Adviser") W I T N E S S E T H : WHEREAS, the Trust is an open-end, management investment company, registered as such under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Trust desires to retain the Adviser to render advice and services to the Trust and each Fund pursuant to the terms and provisions of this Agreement, and the Adviser is interested in furnishing said advice and services; NOW, THEREFORE, in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto mutually agree as follows: 1. EMPLOYMENT OF ADVISER. (a) The Trust hereby employs the Adviser, and the Adviser hereby accepts such employment, to render investment advice and investment management services with respect to the assets of each Fund, consistent with the investment objective and policies of such Fund and subject to the supervision and direction of the Trust's Board of Trustees. The Adviser shall, except as otherwise provided for herein, as part of its duties hereunder, (i) furnish the Trust with investment advice, research, and recommendations with respect to the investment of each Fund's assets and the purchase and sale of its portfolio securities, including the taking of such other steps as may be necessary to implement such advice and recommendations, (ii) furnish the Trust and each Fund with reports, statements, and other data on securities, economic conditions, and other pertinent subjects in respect of the investment management of each Fund which the Trust's Board of Trustees may request, and (iii) in general superintend and manage the investments of each Fund, subject to the ultimate supervision and direction of the Trust's Board of Trustees. In addition, in respect of each Fund designated as an "Administrative Fund" on Schedule 1 to this Agreement, the Adviser shall, except as otherwise provided for herein, render or make available all administrative services needed for the management and operation of the Fund, and shall furnish such office space and personnel as are needed by the Fund. (b) The Adviser shall determine the securities to be purchased or sold by each Fund and will place orders pursuant to its determinations with or through such persons, brokers, or dealers in conformity with the policy with respect to brokerage as set forth in the Trust's Registration Statement and each Fund's Prospectus and Statement of Additional Information or as the Trustees may direct from time to time. 2. SUB-ADVISERS AND CONSULTANTS. The Adviser may from time to time, in its discretion, delegate certain of its responsibilities under this Agreement in respect of any Fund to one or more qualified companies, each of which is registered under the Investment Advisers Act of 1940, as amended, provided that the separate costs of employing such companies and of the companies themselves are borne by the Adviser and not by the Fund in question. 3. ADVISER IS INDEPENDENT CONTRACTOR. The Adviser shall, for all purposes herein, be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or represent the Trust or any Fund in any way, or in any way be deemed an agent for the Trust or any Fund. It is expressly understood and agreed that the services to be rendered by the Adviser to the Trust and each Fund under the provisions of this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby. 4. RESPONSIBILITIES AND PERSONNEL OF ADVISER. The Adviser agrees to use its best efforts in the furnishing of investment advice, research, and recommendations to each Fund, in the preparation of reports and information, and in the management of each Fund's assets, all pursuant to this Agreement, and for this purpose the Adviser shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it shall from time to time determine to be necessary to the performance of its obligations under this Agreement. Without limiting the generality of the foregoing, the staff and personnel of the Adviser shall be deemed to include persons employed or retained by the Adviser to furnish statistical, research, and other factual information, advice regarding economic factors and trends, information with respect to technical and scientific developments, and such other information, advice, and assistance as the Adviser may desire and request. 5. FURNISHING OF STATEMENTS AND REPORTS. The Trust shall from time to time furnish to the Adviser detailed statements of the portfolio investments and assets of each Fund and information as to each Fund's investment objectives and needs, and shall make available to the Adviser such financial reports, business descriptions and plans, proxy statements, legal information, and other information relating to its investments as may be in the possession of the Trust or available to it and such other information as the Adviser may reasonably request. 6. EXPENSES OF EACH PARTY. (a) The Adviser shall bear all expenses in connection with the performance of its services under this Agreement. The Adviser shall also pay (i) all compensation, if any, to the executive officers of the Trust and their related expenses and (ii) all compensation, if any, and out-of-pocket expenses of the Trust's Trustees, who are "interested persons" of the Trust (as defined in the Act). (b) The Trust shall bear all expenses of each Fund's organization, operations, and business not specifically assumed or agreed to be paid by the Adviser as provided in this Agreement. In particular, but without limiting the generality of the foregoing, the Trust on behalf of each Fund and out of such Fund's assets shall pay: (A) CUSTODY AND ACCOUNTING SERVICES. All expenses of the transfer, receipt, safekeeping, servicing, and accounting for the cash, securities, and other property of the Fund, including all charges of depositories, custodians, and other agents, if any; (B) SHAREHOLDER SERVICING. All expenses of maintaining and servicing shareholder accounts, including all charges for transfer, shareholder recordkeeping, dividend disbursing, redemption, and other agents for the benefit of the Fund; -2- (C) BOOKS AND RECORDS. All costs and expenses associated with the maintenance of the Fund's books of account and records as required by the Act; (D) SHAREHOLDER MEETINGS. All fees and expenses incidental to holding meetings of shareholders, including the printing of notices and proxy material, and proxy solicitation therefor, provided that the Adviser shall be responsible for and assume all expenses and fees with respect to meetings of the Fund's shareholders held solely for the benefit of the Adviser; (E) PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION. All expenses of preparing and printing of annual or more frequent revisions of the Prospectus and Statement of Additional Information relating to the offering of the Fund's shares and of mailing them to shareholders; (F) PRICING. All expenses of computing the Fund's net asset values per share, including the cost of any equipment or services used for obtaining price quotations; (G) COMMUNICATION EQUIPMENT. All charges for equipment or services used for communication between the Adviser or the Trust and the custodian, transfer agent, or any other agent selected by the Trust; (H) LEGAL AND ACCOUNTING FEES AND EXPENSES. All charges for services and expenses of the Trust's legal counsel and independent auditors for the benefit of the Trust; (I) TRUSTEES' FEES AND EXPENSES. All compensation of Trustees, other than those who are interested persons of or affiliated with the Adviser, and all expenses incurred in connection with their service and meetings; (J) FEDERAL REGISTRATION FEES. All fees and expenses of registering and maintaining the registration of the Trust under the Act and the registration of Fund shares under the Securities Act of 1933, as amended (the "1933 Act"), including all fees and expenses incurred in connection with the preparation, printing, and filing of any registration statement, Prospectus, and Statement of Additional Information under the 1933 Act or the Act, and any amendments or supplements thereto that may be made from time to time; (K) STATE REGISTRATION FEES. All fees and expenses (including the compensation of personnel who may be employed by the Adviser or an affiliate) of qualifying and maintaining qualification of the Trust and of the Fund shares for sale under securities laws of various states or jurisdictions, and of registration and qualification of the Trust under all other laws applicable to the Trust or its business activities (including registering the Trust as a broker-dealer, or any officer of the Trust or any person as agent or salesman of the Trust in any state); (L) ISSUE AND REDEMPTION OF TRUST SHARES. All expenses incurred in connection with the issue, redemption, and transfer of Fund shares, including the expense of confirming all Fund share transactions, and of preparing and transmitting the Fund's share certificates; (M) BONDING AND INSURANCE. All expenses of bond, liability, and other insurance coverage required by law or deemed advisable by the Board of Trustees; -3- (N) BROKERAGE COMMISSIONS. All brokerage commissions and other charges incident to the purchase, sale, or lending of the Fund's portfolio securities; (O) TAXES. All taxes or governmental fees payable by or in respect of the Trust or Fund to federal, state, or other governmental agencies, domestic or foreign, including stamp or other transfer taxes; (P) TRADE ASSOCIATION FEES. All fees, dues, and other expenses incurred in connection with the Trust's membership in any trade association or other investment organization; (Q) INTEREST. All interest which may accrue and be payable as a result of the Fund's activities; (R) STATIONERY AND POSTAGE. The cost of all stationery and postage required by the Fund, unless otherwise payable by another party with respect to an activity or expense referred to above; and (S) NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring expenses as may arise, including the costs of actions, suits, or proceedings to which the Trust on behalf of a Fund is a party and the expenses the Trust on behalf of a Fund may incur as a result of its legal obligation to provide indemnification to its officers, Trustees, and agents. 7. REIMBURSEMENT FOR ADVANCED COSTS AND EXPENSES. To the extent the Adviser incurs any costs or performs any services which are an obligation of the Trust or the Fund, as set forth herein, the Trust on behalf of such Fund and out of such Fund's assets shall promptly reimburse the Adviser for such costs and expenses. To the extent the services for which the Fund is obligated to pay are performed by the Adviser, the Adviser shall be entitled to recover from such Fund only to the extent of its actual costs for such services. 8. FEES. (a) The Trust on behalf of each Fund and out of each Fund's assets agrees to pay to the Adviser, and the Adviser agrees to accept, as full compensation for all services furnished or provided to such Fund hereunder, and as full reimbursement for all expenses assumed by the Adviser, a management fee computed at the rate per annum set out on Schedule 1 hereto of the average daily net assets of such Fund. (b) The management fee shall be accrued daily during each month by the Trust on behalf of each Fund and paid to the Adviser on the first business day of the succeeding month. The initial monthly fee under this Agreement shall be payable on the first business day of the first month following the effective date of this Agreement. The fee to the Adviser shall be prorated for the portion of any month in which this Agreement is in effect which is not a complete month according to the proportion which the number of calendar days in the month during which the Agreement is in effect bears to the calendar days in the month. If this Agreement is terminated prior to the end of any month, the fee to the Adviser shall be payable within ten (10) days after the date of termination. (c) The Adviser may reduce or waive any portion of the compensation due to it hereunder, or for reimbursement of expenses by the Trust pursuant to Paragraph 7 of this Agreement, and any such reduction or waiver shall be applicable only with respect to the specific items waived and shall not constitute a waiver of any future compensation or reimbursement due to the Adviser hereunder. (d) The Adviser may agree not to require payment of any portion of the compensation or reimbursement of expenses otherwise due to it pursuant to this Agreement prior to the time such -4- compensation or reimbursement has accrued as a liability of the Fund in question. Any such agreement shall be applicable only with respect to the specific items covered thereby and shall not constitute an agreement not to require payment of any future compensation or reimbursement due to the Adviser hereunder. 9. SHORT POSITIONS IN FUNDS' SHARES. The Adviser agrees that neither it nor any of its officers or employees shall take any short position in the shares of any Fund. This prohibition shall not prevent the purchase of such shares by any of the officers and Trustees or employees of the Adviser or any trust, pension, profit-sharing, or other benefit plan for such persons or affiliates thereof, at a price not less than the net asset value thereof at the time of purchase, as allowed pursuant to rules promulgated under the Act. 10. RELATIONSHIP TO PROVISIONS OF AGREEMENT AND DECLARATION OF TRUST. Nothing herein contained shall be deemed to require the Trust to take any action contrary to its Agreement and Declaration of Trust or any applicable statute or regulation, or to relieve or deprive the Board of Trustees of the Trust of its responsibility for and control of the conduct of the affairs of the Trust and any Fund. 11. DUTIES AND STANDARDS OF CARE. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Trust or any Fund or to any shareholder of any Fund for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding, or sale of any security by the Fund. (b) No provision of this Agreement shall be construed to protect any Trustee or officer of the Trust or director or officer of the Adviser from liability in violation of Sections 17(h) and (i) of the Act. 12. TERM AND RENEWAL. This Agreement shall remain in effect for a period of two (2) years, unless sooner terminated in accordance with Paragraph 13 hereof, and shall continue in effect from year to year thereafter in respect of each Fund so long as such continuation is approved at least annually by (i) the Board of Trustees of the Trust or by the vote of a majority of the outstanding voting securities of such Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting for the purpose of voting on such approval. 13. TERMINATION. This Agreement may be terminated in respect of a Fund at any time, without payment of any penalty, by the Board of Trustees of the Trust or by a vote of a majority of the Fund's outstanding voting securities, upon sixty (60) days written notice to the Adviser, and by the Adviser upon sixty (60) days written notice to the Trust. This Agreement shall also terminate in the event of any assignment thereof, as defined in the Act. 14. CERTAIN DEFINITIONS. The terms "majority of the outstanding voting securities" of the Trust or the Fund and "interested persons" shall have the meanings as set forth in the Act. The term "net assets" shall have the meaning and shall be calculated as set forth in the Trust's Registration Statement from time to time. 15. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby. 16. HEADINGS. The headings used herein are for convenience and ease of reference only. No legal effect is intended, nor is to be derived from such headings. -5- 17. NOTICE. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this Agreement is executed on behalf of the Trustees of the Trust as Trustees, and not individually, and that the obligations arising out of this Agreement are not binding upon the Trustees or holders of the Trust's shares individually but are binding only upon the assets and property of the Fund in question. The Adviser acknowledges that it has received notice of and accepts the limitations of liability as set forth in the Agreement and Declaration of Trust of the Trust. The Adviser agrees that the Trust's obligations hereunder shall be limited to the Fund in question and to its assets, and that the Adviser or any affiliated or related party shall not seek satisfaction of any such obligation from any shareholder of any Fund nor from any Trustee, officer, employee, or agent of the Trust. 18. NAME. The Adviser owns or has the right to use the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," and "RSIM" which may be used by the Trust only with the consent of the Adviser. The Adviser consents to the use by the Trust of such words in such forms as the Adviser shall in writing approve, but only on condition and so long as (i) this Agreement shall remain in full force and (ii) the Trust shall fully perform, fulfill, and comply with all provisions of this Agreement expressed herein to be performed, fulfilled, or complied with by it. No such name shall be used by the Trust at any time or in any place or for any purposes or under any conditions except as in this section provided. The foregoing authorization by the Adviser to the Trust to use said name as part of a business or name is not exclusive of the right of the Adviser itself to use, or to authorize others to use, the same; the Trust acknowledges and agrees that as between the Adviser and the Trust, the Adviser has the exclusive right to so authorize others to use the same; the Trust acknowledges and agrees that as between the Adviser and the Trust, the Adviser has the exclusive right so to use, or authorize others to use, said words and the Trust agrees to take such action as may reasonably be requested by the Adviser to give full effect to the provisions of this section (including, without limitation, consenting to such use of said words). Without limiting the generality of the foregoing, the Trust agrees that, upon any termination of this Agreement by either party or upon the violation of any of its provisions by the Trust, the Trust will, at the request of the Adviser, use its best efforts to change the name of the Trust so as to eliminate all reference, if any, to the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," or "RSIM" and will not thereafter transact any business in a name containing the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," and "RSIM" in any form or combination whatsoever, or designate itself as the same entity as or successor to an entity of such name, or otherwise use the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," or "RSIM" or any other reference to the Adviser. Such covenants on the part of the Trust shall be binding upon it, its trustees, officers, stockholders, creditors, and all other persons claiming under or through it. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested by their duly authorized officers, all as of the day and year first above written. RS INVESTMENT TRUST /s/ George R. Hecht President RS INVESTMENT MANAGEMENT, L.P. By RS Investment Management Co. LLC /s/ George R. Hecht SCHEDULE I RS Diversified Growth Fund 1.00% RS Global Value Fund 1.00% RS Global Natural Resources Fund 1.00% RS Growth + Income Fund 1.00% The Information Age Fund-TM- 1.00% RS MicroCap Growth Fund 1.25% ADMINISTRATIVE FUNDS The Contrarian Fund-TM- 1.50% RS Partners Fund 1.25% RS Value + Growth Fund 1.00% EX-99.D(II) 7 EXHIBIT 99.D(II) - INVESTMENT ADVISORY AGREEMENT EXHIBIT d(ii) RS INVESTMENT TRUST INVESTMENT ADVISORY AGREEMENT This INVESTMENT ADVISORY AGREEMENT ("Agreement") made as of the 26th day of February, 1999, by and between RS INVESTMENT TRUST, a business trust organized and existing under the laws of The Commonwealth of Massachusetts (the "Trust"), on behalf of each of its series of shares of beneficial interest named on Schedule 1 to this Agreement, as it may be amended by the parties from time to time (each, a "Fund"), and RS INVESTMENT MANAGEMENT, INC. (the "Adviser") WITNESSETH: WHEREAS, the Trust is an open-end, management investment company, registered as such under the Investment Company Act of 1940, as amended (the "Act"); and WHEREAS, the Trust desires to retain the Adviser to render advice and services to the Trust and each Fund pursuant to the terms and provisions of this Agreement, and the Adviser is interested in furnishing said advice and services; NOW, THEREFORE, in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto mutually agree as follows: 1. EMPLOYMENT OF ADVISER. (a) The Trust hereby employs the Adviser, and the Adviser hereby accepts such employment, to render investment advice and investment management services with respect to the assets of each Fund, consistent with the investment objective and policies of such Fund and subject to the supervision and direction of the Trust's Board of Trustees. The Adviser shall, except as otherwise provided for herein, as part of its duties hereunder, (i) furnish the Trust with investment advice, research, and recommendations with respect to the investment of each Fund's assets and the purchase and sale of its portfolio securities, including the taking of such other steps as may be necessary to implement such advice and recommendations, (ii) furnish the Trust and each Fund with reports, statements, and other data on securities, economic conditions, and other pertinent subjects in respect of the investment management of each Fund which the Trust's Board of Trustees may request, and (iii) in general superintend and manage the investments of each Fund, subject to the ultimate supervision and direction of the Trust's Board of Trustees. In addition, in respect of each Fund designated as an "Administrative Fund" on Schedule 1 to this Agreement, the Adviser shall, except as otherwise provided for herein, render or make available all administrative services needed for the management and operation of the Fund, and shall furnish such office space and personnel as are needed by the Fund. (b) The Adviser shall determine the securities to be purchased or sold by each Fund and will place orders pursuant to its determinations with or through such persons, brokers, or dealers in conformity with the policy with respect to brokerage as set forth in the Trust's Registration Statement and each Fund's Prospectus and Statement of Additional Information or as the Trustees may direct from time to time. 2. SUB-ADVISERS AND CONSULTANTS. The Adviser may from time to time, in its discretion, delegate certain of its responsibilities under this Agreement in respect of any Fund to one or more qualified companies, each of which is registered under the Investment Advisers Act of 1940, as amended, provided that the separate costs of employing such companies and of the companies themselves are borne by the Adviser and not by the Fund in question. 3. ADVISER IS INDEPENDENT CONTRACTOR. The Adviser shall, for all purposes herein, be deemed to be an independent contractor, and shall, unless otherwise expressly provided and authorized, have no authority to act for or represent the Trust or any Fund in any way, or in any way be deemed an agent for the Trust or any Fund. It is expressly understood and agreed that the services to be rendered by the Adviser to the Trust and each Fund under the provisions of this Agreement are not to be deemed exclusive, and the Adviser shall be free to render similar or different services to others so long as its ability to render the services provided for in this Agreement shall not be impaired thereby. 4. RESPONSIBILITIES AND PERSONNEL OF ADVISER. The Adviser agrees to use its best efforts in the furnishing of investment advice, research, and recommendations to each Fund, in the preparation of reports and information, and in the management of each Fund's assets, all pursuant to this Agreement, and for this purpose the Adviser shall, at its own expense, maintain such staff and employ or retain such personnel and consult with such other persons as it shall from time to time determine to be necessary to the performance of its obligations under this Agreement. Without limiting the generality of the foregoing, the staff and personnel of the Adviser shall be deemed to include persons employed or retained by the Adviser to furnish statistical, research, and other factual information, advice regarding economic factors and trends, information with respect to technical and scientific developments, and such other information, advice, and assistance as the Adviser may desire and request. 5. FURNISHING OF STATEMENTS AND REPORTS. The Trust shall from time to time furnish to the Adviser detailed statements of the portfolio investments and assets of each Fund and information as to each Fund's investment objectives and needs, and shall make available to the Adviser such financial reports, business descriptions and plans, proxy statements, legal information, and other information relating to its investments as may be in the possession of the Trust or available to it and such other information as the Adviser may reasonably request. 6. EXPENSES OF EACH PARTY. (a) The Adviser shall bear all expenses in connection with the performance of its services under this Agreement. The Adviser shall also pay (i) all compensation, if any, to the executive officers of the Trust and their related expenses and (ii) all compensation, if any, and out-of-pocket expenses of the Trust's Trustees, who are "interested persons" of the Trust (as defined in the Act). (b) The Trust shall bear all expenses of each Fund's organization, operations, and business not specifically assumed or agreed to be paid by the Adviser as provided in this Agreement. In particular, but without limiting the generality of the foregoing, the Trust on behalf of each Fund and out of such Fund's assets shall pay: (A) CUSTODY AND ACCOUNTING SERVICES. All expenses of the transfer, receipt, safekeeping, servicing, and accounting for the cash, securities, and other property of the Fund, including all charges of depositories, custodians, and other agents, if any; -2- (B) SHAREHOLDER SERVICING. All expenses of maintaining and servicing shareholder accounts, including all charges for transfer, shareholder recordkeeping, dividend disbursing, redemption, and other agents for the benefit of the Fund; (C) BOOKS AND RECORDS. All costs and expenses associated with the maintenance of the Fund's books of account and records as required by the Act; (D) SHAREHOLDER MEETINGS. All fees and expenses incidental to holding meetings of shareholders, including the printing of notices and proxy material, and proxy solicitation therefor, provided that the Adviser shall be responsible for and assume all expenses and fees with respect to meetings of the Fund's shareholders held solely for the benefit of the Adviser; (E) PROSPECTUSES AND STATEMENTS OF ADDITIONAL INFORMATION. All expenses of preparing and printing of annual or more frequent revisions of the Prospectus and Statement of Additional Information relating to the offering of the Fund's shares and of mailing them to shareholders; (F) PRICING. All expenses of computing the Fund's net asset values per share, including the cost of any equipment or services used for obtaining price quotations; (G) COMMUNICATION EQUIPMENT. All charges for equipment or services used for communication between the Adviser or the Trust and the custodian, transfer agent, or any other agent selected by the Trust; (H) LEGAL AND ACCOUNTING FEES AND EXPENSES. All charges for services and expenses of the Trust's legal counsel and independent auditors for the benefit of the Trust; (I) TRUSTEES' FEES AND EXPENSES. All compensation of Trustees, other than those who are interested persons of or affiliated with the Adviser, and all expenses incurred in connection with their service and meetings; (J) FEDERAL REGISTRATION FEES. All fees and expenses of registering and maintaining the registration of the Trust under the Act and the registration of Fund shares under the Securities Act of 1933, as amended (the "1933 Act"), including all fees and expenses incurred in connection with the preparation, printing, and filing of any registration statement, Prospectus, and Statement of Additional Information under the 1933 Act or the Act, and any amendments or supplements thereto that may be made from time to time; (K) STATE REGISTRATION FEES. All fees and expenses (including the compensation of personnel who may be employed by the Adviser or an affiliate) of qualifying and maintaining qualification of the Trust and of the Fund shares for sale under securities laws of various states or jurisdictions, and of registration and qualification of the Trust under all other laws applicable to the Trust or its business activities (including registering the Trust as a broker-dealer, or any officer of the Trust or any person as agent or salesman of the Trust in any state); (L) ISSUE AND REDEMPTION OF TRUST SHARES. All expenses incurred in connection with the issue, redemption, and transfer of Fund shares, including the expense of confirming all Fund share transactions, and of preparing and transmitting the Fund's share certificates; -3- (M) BONDING AND INSURANCE. All expenses of bond, liability, and other insurance coverage required by law or deemed advisable by the Board of Trustees; (N) BROKERAGE COMMISSIONS. All brokerage commissions and other charges incident to the purchase, sale, or lending of the Fund's portfolio securities; (O) TAXES. All taxes or governmental fees payable by or in respect of the Trust or Fund to federal, state, or other governmental agencies, domestic or foreign, including stamp or other transfer taxes; (P) TRADE ASSOCIATION FEES. All fees, dues, and other expenses incurred in connection with the Trust's membership in any trade association or other investment organization; (Q) INTEREST. All interest which may accrue and be payable as a result of the Fund's activities; (R) STATIONERY AND POSTAGE. The cost of all stationery and postage required by the Fund, unless otherwise payable by another party with respect to an activity or expense referred to above; and (S) NONRECURRING AND EXTRAORDINARY EXPENSES. Such nonrecurring expenses as may arise, including the costs of actions, suits, or proceedings to which the Trust on behalf of a Fund is a party and the expenses the Trust on behalf of a Fund may incur as a result of its legal obligation to provide indemnification to its officers, Trustees, and agents. 7. REIMBURSEMENT FOR ADVANCED COSTS AND EXPENSES. To the extent the Adviser incurs any costs or performs any services which are an obligation of the Trust or the Fund, as set forth herein, the Trust on behalf of such Fund and out of such Fund's assets shall promptly reimburse the Adviser for such costs and expenses. To the extent the services for which the Fund is obligated to pay are performed by the Adviser, the Adviser shall be entitled to recover from such Fund only to the extent of its actual costs for such services. 8. FEES. (a) The Trust on behalf of each Fund and out of each Fund's assets agrees to pay to the Adviser, and the Adviser agrees to accept, as full compensation for all services furnished or provided to such Fund hereunder, and as full reimbursement for all expenses assumed by the Adviser, a management fee computed at the rate per annum set out on Schedule 1 hereto of the average daily net assets of such Fund. (b) The management fee shall be accrued daily during each month by the Trust on behalf of each Fund and paid to the Adviser on the first business day of the succeeding month. The initial monthly fee under this Agreement shall be payable on the first business day of the first month following the effective date of this Agreement. The fee to the Adviser shall be prorated for the portion of any month in which this Agreement is in effect which is not a complete month according to the proportion which the number of calendar days in the month during which the Agreement is in effect bears to the calendar days in the month. If this Agreement is terminated prior to the end of any month, the fee to the Adviser shall be payable within ten (10) days after the date of termination. (c) The Adviser may reduce or waive any portion of the compensation due to it hereunder, or for reimbursement of expenses by the Trust pursuant to Paragraph 7 of this Agreement, and any such reduction or waiver shall be applicable only with respect to the specific items waived and shall not constitute a waiver of any future compensation or reimbursement due to the Adviser hereunder. -4- (d) The Adviser may agree not to require payment of any portion of the compensation or reimbursement of expenses otherwise due to it pursuant to this Agreement prior to the time such compensation or reimbursement has accrued as a liability of the Fund in question. Any such agreement shall be applicable only with respect to the specific items covered thereby and shall not constitute an agreement not to require payment of any future compensation or reimbursement due to the Adviser hereunder. 9. SHORT POSITIONS IN FUNDS' SHARES. The Adviser agrees that neither it nor any of its officers or employees shall take any short position in the shares of any Fund. This prohibition shall not prevent the purchase of such shares by any of the officers and Trustees or employees of the Adviser or any trust, pension, profit-sharing, or other benefit plan for such persons or affiliates thereof, at a price not less than the net asset value thereof at the time of purchase, as allowed pursuant to rules promulgated under the Act. 10. RELATIONSHIP TO PROVISIONS OF AGREEMENT AND DECLARATION OF TRUST. Nothing herein contained shall be deemed to require the Trust to take any action contrary to its Agreement and Declaration of Trust or any applicable statute or regulation, or to relieve or deprive the Board of Trustees of the Trust of its responsibility for and control of the conduct of the affairs of the Trust and any Fund. 11. DUTIES AND STANDARDS OF CARE. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of obligations or duties hereunder on the part of the Adviser, the Adviser shall not be subject to liability to the Trust or any Fund or to any shareholder of any Fund for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding, or sale of any security by the Fund. (b) No provision of this Agreement shall be construed to protect any Trustee or officer of the Trust or director or officer of the Adviser from liability in violation of Sections 17(h) and (i) of the Act. 12. TERM AND RENEWAL. This Agreement shall remain in effect for a period of two (2) years, unless sooner terminated in accordance with Paragraph 13 hereof, and shall continue in effect from year to year thereafter in respect of each Fund so long as such continuation is approved at least annually by (i) the Board of Trustees of the Trust or by the vote of a majority of the outstanding voting securities of such Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons of any such party, cast in person at a meeting for the purpose of voting on such approval. 13. TERMINATION. This Agreement may be terminated in respect of a Fund at any time, without payment of any penalty, by the Board of Trustees of the Trust or by a vote of a majority of the Fund's outstanding voting securities, upon sixty (60) days written notice to the Adviser, and by the Adviser upon sixty (60) days written notice to the Trust. This Agreement shall also terminate in the event of any assignment thereof, as defined in the Act. 14. CERTAIN DEFINITIONS. The terms "majority of the outstanding voting securities" of the Trust or the Fund and "interested persons" shall have the meanings as set forth in the Act. The term "net assets" shall have the meaning and shall be calculated as set forth in the Trust's Registration Statement from time to time. 15. SEVERABILITY. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby. -5- 16. HEADINGS. The headings used herein are for convenience and ease of reference only. No legal effect is intended, nor is to be derived from such headings. 17. NOTICE. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts and notice is hereby given that this Agreement is executed on behalf of the Trustees of the Trust as Trustees, and not individually, and that the obligations arising out of this Agreement are not binding upon the Trustees or holders of the Trust's shares individually but are binding only upon the assets and property of the Fund in question. The Adviser acknowledges that it has received notice of and accepts the limitations of liability as set forth in the Agreement and Declaration of Trust of the Trust. The Adviser agrees that the Trust's obligations hereunder shall be limited to the Fund in question and to its assets, and that the Adviser or any affiliated or related party shall not seek satisfaction of any such obligation from any shareholder of any Fund nor from any Trustee, officer, employee, or agent of the Trust. 18. NAME. The Adviser owns or has the right to use the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," and "RSIM" which may be used by the Trust only with the consent of the Adviser. The Adviser consents to the use by the Trust of such words in such forms as the Adviser shall in writing approve, but only on condition and so long as (i) this Agreement shall remain in full force and (ii) the Trust shall fully perform, fulfill, and comply with all provisions of this Agreement expressed herein to be performed, fulfilled, or complied with by it. No such name shall be used by the Trust at any time or in any place or for any purposes or under any conditions except as in this section provided. The foregoing authorization by the Adviser to the Trust to use said name as part of a business or name is not exclusive of the right of the Adviser itself to use, or to authorize others to use, the same; the Trust acknowledges and agrees that as between the Adviser and the Trust, the Adviser has the exclusive right to so authorize others to use the same; the Trust acknowledges and agrees that as between the Adviser and the Trust, the Adviser has the exclusive right so to use, or authorize others to use, said words and the Trust agrees to take such action as may reasonably be requested by the Adviser to give full effect to the provisions of this section (including, without limitation, consenting to such use of said words). Without limiting the generality of the foregoing, the Trust agrees that, upon any termination of this Agreement by either party or upon the violation of any of its provisions by the Trust, the Trust will, at the request of the Adviser, use its best efforts to change the name of the Trust so as to eliminate all reference, if any, to the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," or "RSIM" and will not thereafter transact any business in a name containing the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," and "RSIM" in any form or combination whatsoever, or designate itself as the same entity as or successor to an entity of such name, or otherwise use the words "Robertson Stephens," "Robertson, Stephens & Company Investment Management," "RS," or "RSIM" or any other reference to the Adviser. Such covenants on the part of the Trust shall be binding upon it, its trustees, officers, stockholders, creditors, and all other persons claiming under or through it. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested by their duly authorized officers, all as of the day and year first above written. RS INVESTMENT TRUST /s/ George R. Hecht President -6- RS INVESTMENT MANAGEMENT, INC. By RS Investment Management Co. LLC /s/ George R. Hecht -7- SCHEDULE 1 ADMINISTRATIVE FUNDS RS Emerging Growth Fund 1.00% EX-99.D(IX) 8 EXHIBIT 99.D(IX) - SUB-ADVISORY AGREEMENT EXHIBIT d(ix) RS INVESTMENT TRUST SUB-ADVISORY AGREEMENT February 26, 1999 Elijah Asset Management, LLC 555 California Street San Francisco CA 94104 Dear Sirs: Under an Investment Advisory Agreement (the "Investment Advisory Agreement") between RS Investment Trust, a Massachusetts business trust (the "Trust"), and RS Investment Management, L.P., a California limited partnership (the "Adviser"), the Adviser serves as investment adviser to each of The Information Age Fund-TM- and RS Value + Growth Fund, each of which is a series of shares of the Trust (each, a "Fund"). The Adviser hereby confirms its agreement with Elijah Asset Management, LLC (the "Sub-Adviser") and the Trust with respect to the Sub-Adviser's serving as the sub-adviser of each Fund as follows: 1. INVESTMENT DESCRIPTION; APPOINTMENT The Adviser, with the approval of the Trust, hereby appoints the Sub-Adviser to act as investment adviser to each Fund for the periods and on the terms set forth in this Agreement, and with respect to the assets of each Fund designated by the Adviser to the Sub-Adviser from time to time (the "Designated Assets"). The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. PORTFOLIO MANAGEMENT DUTIES a. Subject to the supervision of the Adviser and the Trust's Board of Trustees, the Sub-Adviser will (i) manage the Designated Assets in accordance with each Fund's investment objective, policies, and limitations as stated in the Trust's Prospectus and Statement of Additional Information, as in effect from time to time, and with any additional policies or guidelines established from time to time by the Adviser or by the Board of Trustees of the Trust; (ii) make investment decisions for each Fund in respect of the Designated Assets; and (iii) place orders to purchase and sell securities and other investments for each Fund in respect of the Designated Assets. b. The Sub-Adviser will keep the Trust and the Adviser informed of developments materially affecting each Fund and shall, on the Sub-Adviser's own initiative and as reasonably requested by the Adviser or the Trust, furnish to the Trust and the Adviser from time to time whatever information the Adviser or the Board of Trustees reasonably believes appropriate for this purpose. c. The Sub-Adviser agrees that, in the performance of the duties required of it by this Agreement, it will comply with the Investment Company Act of 1940, as amended (the "Act"), and all rules and regulations thereunder, all applicable federal and state laws and regulations, and any applicable procedures adopted by the Trust's Board of Trustees or the Adviser and identified in writing to the Sub-Adviser. 3. BROKERAGE The Sub-Adviser shall determine the securities to be purchased or sold by each Fund in respect of the Designated Assets and will place orders pursuant to its determinations with or through such persons, brokers, or dealers in conformity with such policies with respect to brokerage as are set forth in the Trust's Prospectus and Statement of Additional Information as in effect from time to time or as the Board of Trustees may direct from time to time. 4. INFORMATION PROVIDED TO THE ADVISER AND THE TRUST a. The Sub-Adviser shall furnish to the Adviser and to the Board of Trustees of the Trust monthly, quarterly, and annual reports concerning the portfolio transactions and performance of each Fund in such form as may reasonably be requested by the Adviser or the Board of Trustees. The Sub-Adviser shall permit all books and records with respect to the Funds to be inspected and audited by the Adviser and the Trust at all reasonable times during normal business hours, upon reasonable notice. b. The Sub-Adviser agrees that it will make available to the Adviser and the Trust promptly upon their request copies of all of its records with respect to each Fund to assist the Adviser and the Trust in monitoring compliance with the Act and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as well as other applicable laws. The Sub-Adviser will furnish the Trust's Board of Trustees with respect to each Fund such periodic and special reports as the Adviser or the Board of Trustees may reasonably request. c. The Sub-Adviser agrees that it will immediately notify the Adviser and the Trust in the event that the Sub-Adviser or any of its affiliates: (i) becomes subject to a statutory disqualification that prevents the Sub-Adviser from serving as investment advisor pursuant to this Agreement; or (ii) is or expects to become the subject of an administrative proceeding or enforcement action by the SEC or other regulatory authority. The Sub-Adviser agrees to notify the Adviser immediately of (x) any material fact known to the Sub-Adviser respecting or relating to the Sub-Adviser that is not contained in the Prospectus or Statement of Additional Information of the Trust, or any amendment or supplement thereto, if the omission of such might make such document misleading, or (y) any statement contained therein relating to the Sub-Adviser that becomes untrue in any material respect. d. The Sub-Adviser represents that it is an investment adviser registered under the Advisers Act and other applicable laws and that the statements contained in the Sub-Adviser's registration under the Advisers Act on Form ADV, as of the date hereof, are true and correct and do not omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Sub-Adviser agrees to maintain the completeness and accuracy of its registration on Form ADV in accordance with all legal requirements relating -3- to that Form. The Sub-Adviser acknowledges that it is an "investment adviser" to each Fund within the meaning of the Act and the Advisers Act. 5. BOOKS AND RECORDS The Sub-Adviser agrees that all records that it maintains in respect of the Trust are the property of the Trust and further agrees to surrender promptly to the Trust copies of any such records upon the Trust's request. The Sub-Adviser agrees to maintain and preserve for such periods as are required by applicable law, including without limitation Sections 31 and 32 of the Act and any rule adopted thereunder and Rule 204-2 under the Advisers Act, any and all records relating to the Sub-Adviser's duties hereunder. 6. COMPENSATION The Adviser will pay the Sub-Adviser, and the Sub-Adviser agrees to accept, as full compensation for all services furnished or provided to each Fund hereunder and as full reimbursement for all expenses incurred or borne by the Sub-Adviser, a fee for any period equal to 0.50 (50%) of any fees paid by the Fund in question to the Adviser under the Investment Advisory Agreement in respect of the Designated Assets of that Fund during that period (the "Sub-Advisory Fee"). From time to time the Sub-Adviser may agree to reimburse the Fund additional expenses or waive a portion or all of its fee, in the sole discretion of the Sub-Adviser. 7. COSTS AND EXPENSES During the term of this Agreement, the Sub-Adviser will pay all expenses incurred by it and its staff in connection with the performance of its services under this Agreement, including the payment of salaries of all officers and employees who are employed by it, but not including expenses to be paid by the Fund or the Adviser such as brokerage fees and commissions and custodian charges. The Trust, on behalf of each Fund, shall assume and pay any expenses for services rendered by a custodian for the safekeeping of such Fund's securities or other property on behalf of such Fund, for keeping its books of account, for any other charges of the custodian, and for calculating the net asset values of such Fund as provided in the Prospectus and Statement of Additional Information as in effect from time to time. The Sub-Adviser shall not be required to pay and the Trust (or the Adviser), on behalf of each Fund, shall assume and pay the charges and expenses of the Fund's operations, including compensation of the Trustees, charges and expenses of independent auditors, of legal counsel, of any transfer or dividend disbursing agent, and of any registrar of the Trust, costs of acquiring and disposing of portfolio securities, interest, if any, on obligations incurred by a Fund, costs of share certificates, membership dues in the Investment Company Institute or any similar organization, costs of reports and notices to shareholders, other like miscellaneous expenses, and all taxes and fees payable to federal, state, or other governmental agencies on account of the registration of securities issued by the Fund, filing of trust documents, or otherwise. 8. STANDARD OF CARE Except as may otherwise be provided by the Act or other applicable law, neither the Sub-Adviser nor any of its officers, directors, employees, or agents shall be subject to any liability to the Trust, either Fund, or the Adviser for any error of judgment, any mistake of law, or any loss arising out of any investment or other act or omission in the course of, connected with, or arising out of any service to -4- be rendered under this Agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of the Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of its obligations or duties hereunder. 9. SERVICES TO OTHER COMPANIES OR ACCOUNTS a. Except as may otherwise be agreed between the Adviser and the Sub-Adviser, it is understood that the services of the Sub-Adviser are not exclusive, and nothing in this Agreement shall prevent the Sub-Adviser from providing similar services to other investment companies (whether or not their investment objectives and policies are similar to those of either Fund) or from engaging in other activities. b. When the Sub-Adviser recommends the purchase or sale of a security for other investment companies and other clients, and at the same time the Sub-Adviser recommends the purchase or sale of the same security for a Fund, it is understood that in light of its fiduciary duty to the Fund, such transactions will be executed on a basis that it is fair and equitable to such Fund. 10. DURATION AND TERMINATION a. This Agreement shall become effective on the date hereof and shall continue for two years from that date, and thereafter shall continue in respect of a Fund automatically for successive annual periods, provided such continuance is specifically approved at least annually by (i) the Trust's Board of Trustees or (ii) a vote of a majority of that Fund's outstanding voting securities (as defined in the Act), provided that the continuance is also approved by a majority of the Trustees who are not "interested persons" (as defined in the Act) of the Trust, by vote cast in person at a meeting called for the purpose of voting on such approval. b. Notwithstanding the foregoing, this Agreement may be terminated as to either Fund (i) by the Adviser, at any time without penalty, upon 60 days written notice to the Sub-Adviser and the Trust, (ii) at any time without penalty by the Trust, upon the vote of a majority of the Trust's Trustees or by vote of the majority of the outstanding voting securities of the Fund in question, upon 60 days written notice to the Sub-Adviser and the Adviser, or (iii) by the Sub-Adviser at any time without penalty, upon 60 days written notice to the Adviser and the Trust. c. This Agreement will terminate automatically in the event of its assignment (as defined in the Act and in rules adopted under the Act). 11. AMENDMENTS No provision of this Agreement may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge, or termination is sought, and no amendment of this Agreement shall be effective until approved in accordance with applicable law. 12. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, AND SHAREHOLDERS OF THE TRUST -5- A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Trustees of the Trust as Trustees, and not individually, and that the obligations arising out of this Agreement are not binding upon the Trustees or holders of the Trust's shares individually but are binding only upon the assets and property of the Fund in question. The Sub-Adviser acknowledges that it has received notice of and accepts the limitations of liability as set forth in the Agreement and Declaration of Trust of the Trust. The Sub-Adviser agrees that the Trust's obligations hereunder shall be limited to the Fund in question and to its assets, and that the Sub-Adviser or any affiliated or related party shall not seek satisfaction of any such obligation from any shareholder of either Fund nor from any Trustee, officer, employee, or agent of the Trust. 13. MISCELLANEOUS a. This Agreement shall be governed by the laws of the State of California, provided that nothing herein shall be construed in a manner inconsistent with the Act, the Advisers Act, or rules or orders of the SEC thereunder. b. The captions of this Agreement are included for convenience only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. c. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby and, to this extent, the provisions of this Agreement shall be deemed to be severable. If the terms and conditions described above are in accordance with your understanding, kindly indicate your acceptance of this Agreement by signing and returning to us the enclosed copy of this Agreement. RS INVESTMENT MANAGEMENT, L.P. By RS Investment Management Co. LLC By /s/ George R. Hecht Name: George R. Hecht Title: RS INVESTMENT TRUST By /s/ George R. Hecht Name: George R. Hecht Title: President Accepted: ELIJAH ASSET MANAGEMENT, LLC By /s/ Ronald E. Elijah Name: Ronald E. Elijah Title: -6- EX-99.D(X) 9 EXHIBIT 99.D(X) - SUB-ADVISORY AGREEMENT EXHIBIT d(x) RS INVESTMENT TRUST SUB-ADVISORY AGREEMENT February 26, 1999 Eastbourne Management, L.L.C. 555 California Street San Francisco CA 94104 Dear Sirs: Under an Investment Advisory Agreement (the "Investment Advisory Agreement") between RS Investment Trust, a Massachusetts business trust (the "Trust"), and RS Investment Management, L.P., a California limited partnership (the "Adviser"), the Adviser serves as investment adviser to The Contrarian Fund-TM- ,a series of shares of the Trust (the "Fund"). The Adviser hereby confirms its agreement with Eastbourne Management, L.L.C. (the "Sub-Adviser") and the Trust with respect to the Sub-Adviser's serving as the sub-adviser of the Fund as follows: 1. INVESTMENT DESCRIPTION; APPOINTMENT The Adviser, with the approval of the Trust, hereby appoints the Sub-Adviser to act as investment adviser to the Fund for the periods and on the terms set forth in this Agreement, and with respect to the assets of the Fund designated by the Adviser to the Sub-Adviser from time to time (the "Designated Assets"). The Sub-Adviser accepts such appointment and agrees to furnish the services herein set forth for the compensation herein provided. 2. PORTFOLIO MANAGEMENT DUTIES a. Subject to the supervision of the Adviser and the Trust's Board of Trustees, the Sub-Adviser will (i) manage the Designated Assets in accordance with the Fund's investment objective, policies, and limitations as stated in the Trust's Prospectus and Statement of Additional Information, as in effect from time to time, and with any additional policies or guidelines established from time to time by the Adviser or by the Board of Trustees of the Trust; (ii) make investment decisions for the Fund in respect of the Designated Assets; and (iii) place orders to purchase and sell securities and other investments for the Fund in respect of the Designated Assets. b. The Sub-Adviser will keep the Trust and the Adviser informed of developments materially affecting the Fund and shall, on the Sub-Adviser's own initiative and as reasonably requested by the Adviser or the Trust, furnish to the Trust and the Adviser from time to time whatever information the Adviser or the Board of Trustees reasonably believes appropriate for this purpose. c. The Sub-Adviser agrees that, in the performance of the duties required of it by this Agreement, it will comply with the Investment Company Act of 1940, as amended (the "Act"), and all rules and regulations thereunder, all applicable federal and state laws and regulations, and any applicable procedures adopted by the Trust's Board of Trustees or the Adviser and identified in writing to the Sub-Adviser. 3. BROKERAGE The Sub-Adviser shall determine the securities to be purchased or sold by the Fund in respect of the Designated Assets and will place orders pursuant to its determinations with or through such persons, brokers, or dealers in conformity with such policies with respect to brokerage as are set forth in the Trust's Prospectus and Statement of Additional Information as in effect from time to time or as the Board of Trustees may direct from time to time. 4. INFORMATION PROVIDED TO THE ADVISER AND THE TRUST a. The Sub-Adviser shall furnish to the Adviser and to the Board of Trustees of the Trust monthly, quarterly, and annual reports concerning the portfolio transactions and performance of the Fund in such form as may reasonably be requested by the Adviser or the Board of Trustees. The Sub-Adviser shall permit all books and records with respect to the Fund to be inspected and audited by the Adviser and the Trust at all reasonable times during normal business hours, upon reasonable notice. b. The Sub-Adviser agrees that it will make available to the Adviser and the Trust promptly upon their request copies of all of its records with respect to the Fund to assist the Adviser and the Trust in monitoring compliance with the Act and the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as well as other applicable laws. The Sub-Adviser will furnish the Trust's Board of Trustees with respect to the Fund such periodic and special reports as the Adviser or the Board of Trustees may reasonably request. c. The Sub-Adviser agrees that it will immediately notify the Adviser and the Trust in the event that the Sub-Adviser or any of its affiliates: (i) becomes subject to a statutory disqualification that prevents the Sub-Adviser from serving as investment advisor pursuant to this Agreement; or (ii) is or expects to become the subject of an administrative proceeding or enforcement action by the SEC or other regulatory authority. The Sub-Adviser agrees to notify the Adviser immediately of (x) any material fact known to the Sub-Adviser respecting or relating to the Sub-Adviser that is not contained in the Prospectus or Statement of Additional Information of the Trust, or any amendment or supplement thereto, if the omission of such might make such document misleading, or (y) any statement contained therein relating to the Sub-Adviser that becomes untrue in any material respect. -3- d. The Sub-Adviser represents that it is an investment adviser registered under the Advisers Act and other applicable laws and that the statements contained in the Sub-Adviser's registration under the Advisers Act on Form ADV, as of the date hereof, are true and correct and do not omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The Sub-Adviser agrees to maintain the completeness and accuracy of its registration on Form ADV in accordance with all legal requirements relating to that Form. The Sub-Adviser acknowledges that it is an "investment adviser" to the Fund within the meaning of the Act and the Advisers Act. 5. BOOKS AND RECORDS The Sub-Adviser agrees that all records that it maintains in respect of the Trust are the property of the Trust and further agrees to surrender promptly to the Trust copies of any such records upon the Trust's request. The Sub-Adviser agrees to maintain and preserve for such periods as are required by applicable law, including without limitation Sections 31 and 32 of the Act and any rule adopted thereunder and Rule 204-2 under the Advisers Act, any and all records relating to the Sub-Adviser's duties hereunder. 6. COMPENSATION The Adviser will pay the Sub-Adviser, and the Sub-Adviser agrees to accept, as full compensation for all services furnished or provided to the Fund hereunder and as full reimbursement for all expenses incurred or borne by the Sub-Adviser, a fee for any period equal to 0.40 (40%) of any fees paid by the Fund to the Adviser under the Investment Advisory Agreement in respect of the Designated Assets of the Fund during that period (the "Sub-Advisory Fee"). From time to time the Sub-Adviser may agree to reimburse the Fund additional expenses or waive a portion or all of its fee, in the sole discretion of the Sub-Adviser. 7. COSTS AND EXPENSES During the term of this Agreement, the Sub-Adviser will pay all expenses incurred by it and its staff in connection with the performance of its services under this Agreement, including the payment of salaries of all officers and employees who are employed by it, but not including expenses to be paid by the Fund or the Adviser such as brokerage fees and commissions and custodian charges. The Trust, on behalf of the Fund, shall assume and pay any expenses for services rendered by a custodian for the safekeeping of the Fund's securities or other property on behalf of the Fund, for keeping its books of account, for any other charges of the custodian, and for calculating the net asset values of the Fund as provided in the Prospectus and Statement of Additional Information as in effect from time to time. The Sub-Adviser shall not be required to pay and the Trust (or the Adviser), on behalf of the Fund, shall assume and pay the charges and expenses of the Fund's operations, including compensation of the Trustees, charges and expenses of independent auditors, of legal counsel, of any transfer or dividend disbursing agent, and of any registrar of the Trust, costs of acquiring and disposing of portfolio securities, interest, if any, on obligations incurred by the Fund, costs of share certificates, membership dues in the Investment Company Institute or any similar organization, costs of reports and notices to shareholders, other like miscellaneous expenses, and all taxes and fees payable to federal, state, or other governmental agencies on account of the registration of securities issued by the Fund, filing of trust documents, or otherwise. -4- 8. STANDARD OF CARE Except as may otherwise be provided by the Act or other applicable law, neither the Sub-Adviser nor any of its officers, directors, employees, or agents shall be subject to any liability to the Trust, the Fund, or the Adviser for any error of judgment, any mistake of law, or any loss arising out of any investment or other act or omission in the course of, connected with, or arising out of any service to be rendered under this Agreement, except by reason of willful misfeasance, bad faith, or gross negligence in the performance of the Sub-Adviser's duties or by reason of reckless disregard by the Sub-Adviser of its obligations or duties hereunder. 9. SERVICES TO OTHER COMPANIES OR ACCOUNTS a. Except as may otherwise be agreed between the Adviser and the Sub-Adviser, it is understood that the services of the Sub-Adviser are not exclusive, and nothing in this Agreement shall prevent the Sub-Adviser from providing similar services to other investment companies (whether or not their investment objectives and policies are similar to those of the Fund) or from engaging in other activities. b. When the Sub-Adviser recommends the purchase or sale of a security for other investment companies and other clients, and at the same time the Sub-Adviser recommends the purchase or sale of the same security for the Fund, it is understood that in light of its fiduciary duty to the Fund, such transactions will be executed on a basis that it is fair and equitable to the Fund. 10. DURATION AND TERMINATION a. This Agreement shall become effective on the date hereof and shall continue for two years from that date, and thereafter shall continue automatically for successive annual periods, provided such continuance is specifically approved at least annually by (i) the Trust's Board of Trustees or (ii) a vote of a majority of the Fund's outstanding voting securities (as defined in the Act), provided that the continuance is also approved by a majority of the Trustees who are not "interested persons" (as defined in the Act) of the Trust, by vote cast in person at a meeting called for the purpose of voting on such approval. b. Notwithstanding the foregoing, this Agreement may be terminated as to the Fund (i) by the Adviser, at any time without penalty, upon 60 days written notice to the Sub-Adviser and the Trust, (ii) at any time without penalty by the Trust, upon the vote of a majority of the Trust's Trustees or by vote of the majority of the outstanding voting securities of the Fund, upon 60 days written notice to the Sub-Adviser and the Adviser, or (iii) by the Sub-Adviser at any time without penalty, upon 60 days written notice to the Adviser and the Trust. c. This Agreement will terminate automatically in the event of its assignment (as defined in the Act and in rules adopted under the Act). 11. AMENDMENTS No provision of this Agreement may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of the change, waiver, -5- discharge, or termination is sought, and no amendment of this Agreement shall be effective until approved in accordance with applicable law. 12. LIMITATIONS OF LIABILITY OF TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, AND SHAREHOLDERS OF THE TRUST A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this Agreement is executed on behalf of the Trustees of the Trust as Trustees, and not individually, and that the obligations arising out of this Agreement are not binding upon the Trustees or holders of the Trust's shares individually but are binding only upon the assets and property of the Fund. The Sub-Adviser acknowledges that it has received notice of and accepts the limitations of liability as set forth in the Agreement and Declaration of Trust of the Trust. The Sub-Adviser agrees that the Trust's obligations hereunder shall be limited to the Fund and to its assets, and that the Sub-Adviser or any affiliated or related party shall not seek satisfaction of any such obligation from any shareholder of the Fund nor from any Trustee, officer, employee, or agent of the Trust. 13. MISCELLANEOUS a. This Agreement shall be governed by the laws of the State of California, provided that nothing herein shall be construed in a manner inconsistent with the Act, the Advisers Act, or rules or orders of the SEC thereunder. b. The captions of this Agreement are included for convenience only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect. c. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby and, to this extent, the provisions of this Agreement shall be deemed to be severable. If the terms and conditions described above are in accordance with your understanding, kindly indicate your acceptance of this Agreement by signing and returning to us the enclosed copy of this Agreement. RS INVESTMENT MANAGEMENT, L.P. By RS Investment Management Co. LLC By /s/ George R. Hecht Name: George R. Hecht Title: RS INVESTMENT TRUST By /s/ George R. Hecht Name: George R. Hecht Title: President -6- Accepted: EASTBOURNE MANAGEMENT, L.L.C. By: /s/ Rick Barry Name: Rick Barry Title: -7- EX-99.E 10 EXHIBIT 99.E - DISTRIBUTION AGREEMENT EXHIBIT e ROBERTSON STEPHENS INVESTMENT TRUST DISTRIBUTION AGREEMENT This Distribution Agreement is entered into as of December 31, 1998 by and between ROBERTSON STEPHENS INVESTMENT TRUST, a Massachusetts business trust (the "Trust"), and PROVIDENT DISTRIBUTORS, INC., a Delaware corporation ("PDI"). WHEREAS, the Trust and PDI are desirous of entering into an agreement providing for the distribution by PDI of shares of beneficial interest ("shares") of each of the series (each, a "Fund") of the Trust; NOW, THEREFORE, in consideration of the mutual agreements contained herein, the Trust hereby appoints PDI as a distributor of shares of each of the Funds, and PDI hereby accepts such appointment, all as set forth below: 1. RESERVATION OF RIGHT NOT TO SELL. The Trust reserves the right to refuse at any time or times to sell any of its shares hereunder for any reason. 2. PAYMENTS TO PDI. In connection with the distribution of shares of a Fund, PDI will be entitled to receive: (a) payments pursuant to any Distribution Plan from time to time in effect in respect of such Fund or any particular class of shares of such Fund, as determined by the Board of Trustees of the Trust, (b) any contingent deferred sales charges applicable to the redemption of shares of such Fund or of any particular class of shares of such Fund, determined in the manner set forth in the then current Prospectus and Statement of Additional Information of such Fund, and (c) subject to the provisions of Section 3 below, any front-end sales charges applicable to the sale of shares of such Fund or of any particular class of shares of such Fund, less any applicable dealer discount. 3. SERVICES TO BE PROVIDED BY PDI; SALES OF SHARES TO PDI AND SALES BY PDI. PDI will provide general sales and distribution services in respect of the shares of the Funds, including without limitation reviewing advertising and sales literature and filing such advertising and sales literature with appropriate regulatory authorities, preparing reports to the officers and Trustees of the Trust in respect of the distribution of the Funds' shares, performing internal audit examinations related to the distribution functions performed by PDI (the scope and timing of such examinations to be as determined from time to time by the officers of the Trust and PDI), and providing such other services as are customarily provided by the principal underwriter and distributor for an open-end investment company, subject in each case to such instructions or guidelines as may be specified by the Trustees or officers of the Trust from time to time. PDI will have the right, as principal, to purchase shares from a Fund at their net asset value and to sell such shares to investment dealers or the public against orders therefor (a) at the public offering price (calculated as described below) less a discount determined by PDI, which discount shall not exceed the amount of the maximum sales charge permitted under applicable law, or (b) at net asset value, in each case as provided in the current Prospectus and Statement of Additional Information relating to such shares. Upon receipt of an order to purchase shares from an investment dealer with whom PDI has a sales contract, PDI will promptly fill such order. The public offering price of a class of shares of a Fund shall be the net asset value of such shares then in effect, plus any applicable front-end sales charge determined in the manner set forth in the then current Prospectus and Statement of Additional Information relating to such shares or as permitted by the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder. The net asset value of the shares shall be determined in the manner provided in the Agreement and Declaration of Trust of the Trust as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information relating to such shares. PDI will also have the right, as principal, to sell shares otherwise subject to a front-end sales charge or a contingent deferred sales charge not subject to such a sales charge to such persons as may be approved by the Board of Trustees of the Trust, all such sales to comply with the provisions of the Investment Company Act of 1940, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Upon receipt of registration instructions in proper form and payment for shares, PDI will transmit such instructions to the Trust or its agent for registration of the shares purchased. On every sale the Trust shall receive the applicable net asset value of the shares. The net asset value of the shares of any class shall be determined in the manner provided in the Agreement and Declaration of Trust of the Trust as then amended and when determined shall be applicable to transactions as provided for in the then current Prospectus and Statement of Additional Information relating to such shares. 4. SALES OF SHARES BY THE TRUST. The Trust reserves the right to issue shares at any time directly to its shareholders as a stock dividend or stock split and to sell shares to its shareholders or to other persons at not less than net asset value. 5. REPURCHASE OF SHARES. PDI will act as agent for the Trust in connection with the repurchase of shares of the various Funds by the Trust upon the terms and conditions set forth in a then current Prospectus and Statement of Additional Information relating to such shares. 6. BASIS OF PURCHASES AND SALES OF SHARES. PDI will use its best efforts to place shares sold by it on an investment basis. PDI does not agree to sell any specific number of shares. Shares will be sold by PDI only against orders therefor. PDI will not purchase shares from anyone other than the Trust except in accordance with Section 5, and will not take "long" or "short" positions in shares contrary to the Agreement and Declaration of Trust of the Trust. 7. RULES OF NASD, ETC. PDI will conform to the Rules of the National Association of Securities Dealers, Inc. and the sale of securities laws of any jurisdiction in which it sells, directly or indirectly, any shares. PDI also agrees to furnish to the Trust sufficient copies of any agreements or plans it intends to use in connection with any sales of shares in adequate time for the Trust to file and clear them with the proper authorities before they are put in use, and not to use them until so filed and cleared. 8. PDI INDEPENDENT CONTRACTOR. PDI shall be an independent contractor, and neither PDI nor any of its officers or employees, as such, is or shall be an employee of the Trust. PDI is responsible for its own conduct and the employment, control, and conduct of its agents and employees and for injury to such agents or employees or to others through its agents or employees. PDI assumes full responsibility for its agents and employees under applicable statutes and agrees to pay all employer taxes thereunder. PDI will maintain at its own expense insurance against public liability in such an amount as required by the conduct rules or other rules or requirements of the National Association of Securities Dealers, Inc. or other applicable law, rule or regulation. 9. EXPENSES. PDI will pay all of its own expenses in performing its obligations hereunder. 10. INDEMNIFICATION OF TRUST. PDI agrees to indemnify and hold harmless the Trust and each person who has been, is, or may hereafter be a Trustee, officer, or employee of the Trust against expenses reasonably incurred by any of them in connection with any claim or in connection with any action, suit, or proceeding to which any of them may be a party, which arises out of or is alleged to arise out of any misrepresentation or omission to state a material fact, or out of any alleged misrepresentation or omission to state a material fact, on the part of PDI or any agent or employee of PDI or any other person for whose acts PDI is responsible or is alleged to be responsible unless such misrepresentation or omission was made in reliance upon written information furnished to PDI by the Trust. PDI agrees likewise to indemnify and hold harmless the Trust and each such person in connection with any claim or in connection with any action, suit, or proceeding which arises out of or is alleged to arise out of PDI's breach of this Agreement, gross negligence, or reckless disregard of its duties. The term "expenses" includes amounts paid in satisfaction of judgments or in settlements which are made with PDI's consent. The foregoing rights of indemnification shall be in addition to any other rights to which the Trust or any such person may be entitled as a matter of law. 11. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT. This -3- Agreement shall automatically terminate, without the payment of any penalty, in the event of its assignment. This Agreement may be amended only if such amendment be approved either by action of the Board of Trustees of the Trust or at a meeting of the shareholders of the affected Fund or Funds by the affirmative vote of a majority of the outstanding shares of such Fund or Funds, and by a majority of the Trustees of the Trust who are not interested persons of the Trust or of PDI by vote cast in person at a meeting called for the purpose of voting on such approval. 12. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT. This Agreement shall take effect upon the date first above written and shall remain in full force and effect continuously (unless terminated automatically as set forth in Section 11) until terminated in respect of any Fund or Funds: (a) Either by the Trust or PDI by not more than sixty (60) days nor less than ten (10) days written notice delivered or mailed by registered mail, postage prepaid, to the other party; or (b) If the continuance of the Agreement after December 31, 2001 is not specifically approved at least annually by the Board of Trustees of the Trust or the shareholders of the affected Fund or Funds by the affirmative vote of a majority of the outstanding shares of the affected Fund or Funds, and by a majority of the Trustees of the Trust who are not interested persons of the Trust or of PDI by vote cast in person at a meeting called for the purpose of voting on such approval. Action by the Trust or any Fund under (a) above may be taken either (i) by vote of the Board of Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the Trust or the affected Fund or Funds. The requirement under (b) above that continuance of this Agreement be "specifically approved at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. Termination of this Agreement pursuant to this Section 12 shall be without the payment of any penalty. 13. CERTAIN DEFINITIONS. For purposes of this Agreement, the "affirmative vote of a majority of the outstanding shares" of the Trust or a Fund means the affirmative vote, at a duly called and held meeting of shareholders of the Trust or the Fund, as the case may be, (a) of the holders of 67% or more of the shares of the Trust or the Fund present (in person or by proxy) and entitled to vote at such meeting, if the holders of more than 50% of the outstanding shares of the Trust or the Fund entitled to vote at such meeting are present in person or by proxy, or (b) of the holders of more than 50% of the outstanding shares of the Trust or the Fund entitled to vote at such meeting, whichever is less. For the purposes of the Agreement, the terms "interested person" and "assignment" shall -4- have the meanings defined in the Investment Company Act of 1940, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers, or shareholders individually but are binding only upon the assets and property of the Trust. IN WITNESS WHEREOF, each of ROBERTSON STEPHENS INVESTMENT TRUST and PROVIDENT DISTRIBUTORS, INC. has caused this Distribution Agreement to be signed in duplicate in its behalf, as of the day and year first above written. ROBERTSON STEPHENS INVESTMENT TRUST By /s/ Andrew C. Morrison --------------------------------- PROVIDENT DISTRIBUTORS, INC. By /s/ Monroe Haegele --------------------------------- -5- EX-99.G 11 EXHIBIT 99.G - CUSTODIAN SERVICES AGREEMENT EXHIBIT g CUSTODIAN SERVICES AGREEMENT THIS AGREEMENT is made as of _______________, 1999 by and between PFPC TRUST COMPANY, a limited purpose trust company organized under the laws of Delaware ("PFPC Trust") and RS INVESTMENT TRUST, a Massachusetts business trust (the "Fund"). W I T N E S S E T H: WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund wishes to retain PFPC Trust to provide custodian services, and PFPC Trust wishes to furnish custodian services, either directly or through an affiliate or affiliates, as more fully described herein. NOW, THEREFORE, In consideration of the premises and mutual covenants herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: 1. DEFINITIONS. AS USED IN THIS AGREEMENT: (a) "1933 ACT" means the Securities Act of 1933, as amended. (b) "1934 ACT" means the Securities Exchange Act of 1934, as amended. (c) "AUTHORIZED PERSON" means any officer of the Fund and any other person duly authorized by the Fund's Board of Trustees to give Oral Instructions and Written Instructions on behalf of the Fund and listed on the Authorized Persons Appendix attached hereto and made a part hereof or any amendment thereto as may be received by PFPC Trust. An Authorized Person's scope of authority may be limited by the Fund by setting forth such limitation in the Authorized Persons Appendix. (d) "BOOK-ENTRY SYSTEM" means Federal Reserve Treasury book-entry system for United States and federal agency securities, its successor or successors, and its nominee or nominees and any book-entry system maintained by an exchange registered with the SEC under the 1934 Act. (e) "CEA" means the Commodities Exchange Act, as amended. (f) "CHANGE OF CONTROL" means a change in ownership or control (not including transactions between wholly-owned direct or indirect subsidiaries of a common parent) of 25% or more of the beneficial ownership of the shares of common stock or shares of beneficial interest of an entity or its parent(s). (g) "ORAL INSTRUCTIONS" mean oral instructions received by PFPC Trust from an Authorized Person or from a person reasonably believed by PFPC Trust to be an Authorized Person. (h) "PFPC TRUST" means PFPC Trust or a subsidiary or affiliate of PFPC Trust. (i) "SEC" means the Securities and Exchange Commission. (j) "SECURITIES LAWS" mean the 1933 Act, the 1934 Act, the 1940 Act and the CEA. (k) "SHARES" mean the shares of beneficial interest of any series or class of the Fund. (l) "PROPERTY" means: (i) any and all securities and other investment items which the Fund may from time to time deposit, or cause to be deposited, with PFPC Trust or which PFPC Trust may from time to time hold for the Fund; (ii) all income in respect of any of such securities or other investment items; (iii) all proceeds of the sale of any of such securities or investment items; and 2 (iv) all proceeds of the sale of securities issued by the Fund, which are received by PFPC Trust from time to time, from or on behalf of the Fund. (m) "WRITTEN INSTRUCTIONS" mean written instructions signed by two Authorized Persons and received by PFPC Trust. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. APPOINTMENT. The Fund hereby appoints PFPC Trust to provide custodian services to the Fund, on behalf of each of its investment portfolios (each, a "Portfolio"), and PFPC Trust accepts such appointment and agrees to furnish such services. 3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will provide PFPC Trust with the following: (a) certified or authenticated copies of the resolutions of the Fund's Board of Trustees, approving the appointment of PFPC Trust or its affiliates to provide services; (b) a copy of the Fund's most recent effective registration statement; (c) a copy of each Portfolio's advisory agreements; (d) a copy of the distribution agreement with respect to each class of Shares; (e) a copy of each Portfolio's administration agreement if PFPC Trust is not providing the Portfolio with such services; (f) copies of any shareholder servicing agreements made in respect of the Fund or a Portfolio; and (g) certified or authenticated copies of any and all amendments or supplements to the foregoing. 4. COMPLIANCE WITH LAWS. PFPC Trust undertakes to comply with all applicable requirements of the Securities Laws and any laws, rules and regulations of governmental authorities having jurisdiction with 3 respect to the duties to be performed by PFPC Trust hereunder. Except as specifically set forth herein, PFPC Trust assumes no responsibility for such compliance by the Fund or any Portfolio. 5. INSTRUCTIONS. (a) Unless otherwise provided in this Agreement, PFPC Trust shall act only upon Oral Instructions and Written Instructions. (b) PFPC Trust shall be entitled to rely upon any Oral Instructions and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC Trust to be an Authorized Person) pursuant to this Agreement. PFPC Trust may assume that any Oral Instructions or Written Instructions received hereunder are not in any way inconsistent with the provisions of organizational documents of the Fund or of any vote, resolution or proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless and until PFPC Trust receives Written Instructions to the contrary. (c) The Fund agrees to forward to PFPC Trust Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC Trust or its affiliates) so that PFPC Trust receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC Trust shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. Where Oral Instructions or Written Instructions reasonably appear to have been received from an Authorized Person, PFPC Trust shall incur no liability to the Fund in acting upon such Oral Instructions or Written 4 Instructions provided that PFPC Trust's actions comply with the other provisions of this Agreement. 6. RIGHT TO RECEIVE ADVICE. (a) ADVICE OF THE FUND. If PFPC Trust is in doubt as to any action it should or should not take, PFPC Trust may request directions or advice, including Oral Instructions or Written Instructions, from the Fund. (b) ADVICE OF COUNSEL. If PFPC Trust shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC Trust may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's investment adviser or PFPC Trust, at the option of PFPC Trust). (c) CONFLICTING ADVICE. In the event of a conflict between directions, advice or Oral Instructions or Written Instructions PFPC Trust receives from the Fund, and the advice it receives from counsel, PFPC Trust shall be entitled to rely upon and follow the advice of counsel, provided that it takes reasonable steps to notify the Fund of its intention to follow such advice. In the event PFPC Trust so relies on the advice of counsel, PFPC Trust remains liable for any action or omission on the part of PFPC Trust which constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC Trust of any duties, obligations or responsibilities set forth in this Agreement. (d) PROTECTION OF PFPC TRUST. PFPC Trust shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral Instructions or Written Instructions it receives from the Fund or from counsel and which PFPC Trust 5 believes, in good faith, to be consistent with those directions, advice or Oral Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC Trust to seek such directions, advice or Oral Instructions or Written Instructions. Nothing in this subsection shall excuse PFPC Trust when an action or omission on the part of PFPC Trust constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC Trust of any duties, obligations or responsibilities set forth in this Agreement. 7. RECORDS; VISITS. The books and records pertaining to the Fund and any Portfolio, which are in the possession or under the control of PFPC Trust, shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC Trust's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC Trust to the Fund or to an authorized representative of the Fund, at the Fund's expense. 8. CONFIDENTIALITY. PFPC Trust agrees to keep confidential all records of the Fund and information relating to the Fund and its shareholders, unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld and may not be withheld where PFPC Trust may be exposed to civil or criminal contempt proceedings or when required to divulge such information or records to duly constituted authorities. 9. COOPERATION WITH ACCOUNTANTS. PFPC Trust shall cooperate with the Fund's independent public accountants and shall take all reasonable action in the performance of 6 its obligations under this Agreement to ensure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. 10. DISASTER RECOVERY. PFPC Trust shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC Trust shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC Trust shall have no liability with respect to the loss of data or service interruptions caused by equipment failure provided such loss or interruption is not covered by PFPC Trust's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties or obligations under this Agreement. 11. YEAR 2000 READINESS DISCLOSURE. PFPC Trust (a) has reviewed its business and operations as they relate to the services provided hereunder, (b) has developed or is developing a program to remediate or replace computer applications and systems, and (c) has developed a testing plan to test the remediation or replacement of computer applications/systems, in each case, to address on a timely basis the risk that certain computer applications/systems used by PFPC Trust may be unable to recognize and perform properly date sensitive functions involving dates prior to, including and after December 31, 1999, including dates such as February 29, 2000 (the "Year 2000 Challenge"). To the best of PFPC Trust's knowledge and belief, the reasonably foreseeable consequences of the Year 2000 Challenge will not adversely effect PFPC Trust's ability to perform its duties and obligations under this Agreement. 12. COMPENSATION. As compensation for custody services rendered by PFPC Trust during 7 the term of this Agreement, the Fund, on behalf of each of the Portfolios, will pay to PFPC Trust a fee or fees as may be agreed to in writing from time to time by the Fund and PFPC Trust. 13. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to indemnify and hold harmless PFPC Trust and its affiliates from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the Securities Laws and any state and foreign securities and blue sky laws, and amendments thereto, and reasonable expenses, including (without limitation) reasonable attorneys' fees and disbursements, arising directly or indirectly from any action or omission to act which PFPC Trust takes (i) at the request or on the direction of or in reliance on the advice of the Fund or (ii) upon Oral Instructions or Written Instructions. Neither PFPC Trust, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) arising out of PFPC Trust's or its affiliates' own willful misfeasance, bad faith, negligence or reckless disregard of its duties under this Agreement. 14. RESPONSIBILITY OF PFPC TRUST. (a) PFPC Trust shall be under no duty to take any action on behalf of the Fund or any Portfolio except as specifically set forth herein or as may be specifically agreed to by PFPC Trust in writing. PFPC Trust shall be obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PFPC Trust shall be liable for any damages arising out of PFPC Trust's failure to perform its duties under this agreement to the extent such damages arise out of PFPC Trust's willful misfeasance, bad faith, gross negligence 8 or reckless disregard of its duties under this Agreement. (b) Without limiting the generality of the foregoing or of any other provision of this Agreement, (i) PFPC Trust shall not be under any duty or obligation to inquire into and shall not be liable for (A) the validity or invalidity or authority or lack thereof of any Oral Instruction or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC Trust reasonably believes to be genuine; or (B) subject to section 10, delays or errors or loss of data occurring by reason of circumstances beyond PFPC Trust's control, including acts of civil or military authority, national emergencies, fire, flood, catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. (c) Notwithstanding anything in this Agreement to the contrary, neither PFPC Trust nor its affiliates shall be liable to the Fund or to any Portfolio for any consequential, special or indirect losses or damages which the Fund may incur or suffer by or as a consequence of PFPC Trust's or its affiliates' performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PFPC Trust or its affiliates. 15. DESCRIPTION OF SERVICES. (a) DELIVERY OF THE PROPERTY. The Fund will deliver or arrange for delivery to PFPC Trust, all the Property owned by the Portfolios, including cash received as a result of the distribution of Shares, during the period that is set forth in this Agreement. PFPC Trust will not be responsible for such property until actual receipt. (b) RECEIPT AND DISBURSEMENT OF MONEY. PFPC Trust, acting upon Written 9 Instructions, shall open and maintain on its books separate accounts in the Fund's name using all cash received from or for the account of the Fund, subject to the terms of this Agreement. In addition, upon Written Instructions, PFPC Trust shall open and maintain on its books separate custodial accounts for each separate series or Portfolio of the Fund (collectively, the "Accounts") and shall hold in the Accounts all cash received from or for the Accounts of the Fund specifically designated to each separate series or Portfolio. PFPC Trust shall make cash payments from or for the Accounts of a Portfolio only for: (i) purchases of securities in the name of a Portfolio or in the nominee name of PFPC Trust or any sub-custodian as provided in sub-section (j) and for which PFPC Trust has received a copy of the broker's or dealer's confirmation or payee's invoice, as appropriate; (ii) purchase or redemption of Shares of the Fund delivered to PFPC Trust; (iii) payment of, subject to Written Instructions, interest, taxes, administration, accounting, distribution, advisory, management fees or similar expenses which are to be borne by a Portfolio; (iv) payment to, subject to receipt of Written Instructions, the Fund's transfer agent, as agent for the shareholders, an amount equal to the amount of dividends and distributions stated in the Written Instructions to be distributed in cash by the transfer agent to shareholders, or, in lieu of paying the Fund's transfer agent, PFPC Trust may arrange for the direct payment of cash dividends and distributions to shareholders in accordance with procedures mutually agreed upon from time to time by and among the Fund, PFPC Trust and the Fund's transfer agent. (v) payments, upon receipt of Written Instructions, in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Fund and held by or delivered to PFPC Trust; (vi) payments of the amounts of dividends received with respect to securities sold short; (vii) payments made to a sub-custodian pursuant to provisions in sub-section 10 (c) of this Section; and (viii) payments, upon Written Instructions, made for other proper Fund purposes. PFPC Trust is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received as custodian for the Accounts. (c) RECEIPT OF SECURITIES; SUBCUSTODIANS. (i) PFPC Trust shall hold all securities received by it for the Accounts in a separate account that physically segregates such securities from those of any other persons, firms or corporations, except for securities held in a Book-Entry System. The ownership of Property in the Account, whether securities or otherwise, and whether any Property is held directly by PFPC Trust or through a sub-custodian or Book-Entry System, shall be clearly recorded on PFPC Trust's books as belonging to the Fund. All such securities shall be held or disposed of only upon Written Instructions of the Fund pursuant to the terms of this Agreement. Except as otherwise provided herein, no Property is, nor shall any Property be, subject to any right, charge, security interest, lien or claim of any kind in favor of PFPC Trust, any sub-custodian, any Book-Entry System or any creditors of them. PFPC Trust shall have no power or authority to loan, encumber, assign, hypothecate, pledge or otherwise dispose of any such securities or investment, except upon the express terms of this Agreement and upon Written Instructions, accompanied by a certified resolution of the Fund's Board of Trustees, authorizing the transaction. In no case may any member of the Fund's Board of Trustees, or any officer, employee or agent of the Fund withdraw any securities. Beneficial ownership of the Property shall be freely transferable without the payment of money or value other than for safe custody or administration. (ii) At PFPC Trust's own expense and for its own convenience, PFPC Trust may enter into sub-custodian agreements with other United States banks or trust companies to perform duties described in this sub-section (c). Such bank or trust company shall have an aggregate capital, surplus and undivided profits, according to its last published report, of at least one million dollars ($1,000,000), if it is a subsidiary or affiliate of PFPC Trust, or at least twenty million dollars ($20,000,000) if such bank or trust company is not a subsidiary or affiliate of PFPC Trust. In addition, such bank or trust company must be qualified to act as custodian under and agree to comply with the relevant provisions of the 1940 Act and other applicable rules and regulations. Any such arrangement will not be entered into without prior written notice to the Fund. 11 PFPC Trust shall remain responsible for the performance of all of its duties as described in this Agreement and shall hold the Fund and each Portfolio harmless from its own acts or omissions, under the standards of care provided for herein, or the acts and omissions of any sub-custodian chosen by PFPC Trust under the terms of this sub-section (c). (d) TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral Instructions or Written Instructions and not otherwise, PFPC Trust, directly or through the use of the Book-Entry System, shall: (i) deliver any securities held for a Portfolio against the receipt of payment for the sale of such securities; (ii) execute and deliver to such persons as may be designated in such Oral Instructions or Written Instructions, proxies, consents, authorizations, and any other instruments whereby the authority of a Portfolio as owner of any securities may be exercised; (iii) deliver any securities to the issuer thereof, or its agent, when such securities are called, redeemed, retired or otherwise become payable; provided that, in any such case, the cash or other consideration is to be delivered to PFPC Trust; (iv) deliver any securities held for a Portfolio against receipt of other securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, tender offer, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege; (v) deliver any securities held for a Portfolio to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, and receive and hold under the terms of this Agreement such certificates of deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery; (vi) make such transfer or exchanges of the assets of the Portfolios and take such other steps as shall be stated in said Oral Instructions or Written Instructions to be for the purpose of effectuating a duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Fund; 12 (vii) release securities belonging to a Portfolio to any bank or trust company for the purpose of a pledge or hypothecation to secure any loan incurred by the Fund on behalf of that Portfolio; provided, however, that securities shall be released only upon payment to PFPC Trust of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made subject to proper prior authorization, further securities may be released for that purpose; and repay such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing the loan; (viii) release and deliver securities owned by a Portfolio in connection with any repurchase agreement entered into on behalf of the Fund, but only on receipt of payment therefor; and pay out moneys of the Fund in connection with such repurchase agreements, but only upon the delivery of the securities; (ix) release and deliver or exchange securities owned by the Fund in connection with any conversion of such securities, pursuant to their terms, into other securities; (x) release and deliver securities owned by the Fund for the purpose of redeeming in kind shares of the Fund upon delivery thereof to PFPC Trust; and (xi) release and deliver or exchange securities owned by the Fund for other corporate purposes. PFPC Trust must also receive a certified resolution describing the nature of the corporate purpose and the name and address of the person(s) to whom delivery shall be made when such action is pursuant to sub-paragraph (d)(xi). (e) USE OF BOOK-ENTRY SYSTEM. The Fund shall deliver to PFPC Trust certified resolutions of the Fund's Board of Trustees approving, authorizing and instructing PFPC Trust on a continuous basis, to deposit in the Book-Entry System all securities belonging to the Portfolios eligible for deposit therein and to utilize the Book-Entry System to the extent possible in connection with settlements of purchases and sales of securities by the Portfolios, and deliveries and returns of 13 securities loaned, subject to repurchase agreements or used as collateral in connection with borrowings. PFPC Trust shall continue to perform such duties until it receives Written Instructions or Oral Instructions authorizing contrary actions. PFPC Trust shall administer the Book-Entry System as follows: (i) With respect to securities of each Portfolio which are maintained in the Book-Entry System, the records of PFPC Trust shall identify by Book-Entry or otherwise those securities belonging to each Portfolio. PFPC Trust shall furnish to the Fund a detailed statement of the Property held for each Portfolio under this Agreement at least monthly and from time to time and upon written request. (ii) Securities and any cash of each Portfolio deposited in the Book-Entry System will at all times be segregated from any assets and cash controlled by PFPC Trust in other than a fiduciary or custodian capacity but may be commingled with other assets held in such capacities. PFPC Trust and its sub-custodian, if any, will pay out money only upon receipt of securities and will deliver securities only upon the receipt of money. (iii) All books and records maintained by PFPC Trust which relate to the Fund's participation in the Book-Entry System will at all times during PFPC Trust's regular business hours be open to the inspection of Authorized Persons, and PFPC Trust will furnish to the Fund all information in respect of the services rendered as it may require. PFPC Trust will also provide the Fund with such reports on its own system of internal control as the Fund may reasonably request from time to time. (f) REGISTRATION OF SECURITIES. All Securities held for a Portfolio which are issued or issuable only in bearer form, except such securities held in the Book-Entry System, shall be held by PFPC Trust in bearer form; all other securities held for a Portfolio may be registered in the name of the Fund on behalf of that Portfolio, PFPC Trust, the Book-Entry System, a sub-custodian, or any duly appointed nominees of the Fund, PFPC Trust, Book-Entry System or sub-custodian. With 14 respect to securities held in the nominee name of PFPC Trust or any sub-custodian, such name shall be assigned exclusively to be used for the Property of the Fund or to be used in common for the Property of the Fund together with the property of other clients of PFPC Trust or sub-custodian (which nominee name shall not in any event be used for assets of PFPC Trust or sub-custodian other than as a fiduciary, custodian, or otherwise for customers and in which assets neither PFPC Trust nor the sub-custodian has any beneficial interest). PFPC Trust shall inform the appropriate Portfolio of the name in which any Property held hereunder are initially registered and of any changes in registration (other than those changes instructed by the Fund). The specific Property held by PFPC Trust or on its behalf hereunder shall be at all times identifiable in its records. The Fund reserves the right to instruct PFPC Trust as to the method of registration and safekeeping of the securities of the Fund. The Fund agrees to furnish to PFPC Trust appropriate instruments to enable PFPC Trust to hold or deliver in proper form for transfer, or to register in the name of its nominee or in the name of the Book-Entry System, any securities which it may hold for the Accounts and which may from time to time be registered in the name of the Fund on behalf of a Portfolio. (g) VOTING AND OTHER ACTION. Neither PFPC Trust nor its nominee shall vote any of the securities held pursuant to this Agreement by or for the account of a Portfolio, except in accordance with Written Instructions. PFPC Trust, directly or through the use of the Book-Entry System, shall execute in blank and promptly deliver all notices, proxies and proxy soliciting materials to the registered holder of such 15 securities. If the registered holder is not the Fund on behalf of a Portfolio, then Written Instructions or Oral Instructions must designate the person who owns such securities. (h) TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary Written Instructions, PFPC Trust is authorized to take the following actions: (i) COLLECTION OF INCOME AND OTHER PAYMENTS. (A) collect and receive for the account of each Portfolio, all income, dividends, distributions, coupons, option premiums, other payments and similar items, included or to be included in the Property, and, in addition, promptly advise each Portfolio of such receipt and credit such income, as collected, to each Portfolio's custodian account; (B) endorse and deposit for collection, in the name of the Fund, checks, drafts, or other orders for the payment of money; (C) receive and hold for the account of each Portfolio all securities received as a distribution on the Portfolio's securities as a result of a stock dividend, share split-up or reorganization, recapitalization, readjustment or other rearrangement or distribution of rights or similar securities issued with respect to any securities belonging to a Portfolio and held by PFPC Trust hereunder; (D) present for payment and collect the amount payable upon all securities which may mature or be called, redeemed, or retired, or otherwise become payable on the date such securities become payable; and (E) take any action which may be necessary and proper in connection with the collection and receipt of such income and other payments and the endorsement for collection of checks, drafts, and other negotiable instruments. (ii) MISCELLANEOUS TRANSACTIONS. (A) deliver or cause to be delivered Property against payment or other consideration or written receipt therefor in the following cases: (1) for examination by a broker or dealer selling for the 16 account of a Portfolio in accordance with street delivery custom; (2) for the exchange of interim receipts or temporary securities for definitive securities; and (3) for transfer of securities into the name of the Fund on behalf of a Portfolio or PFPC Trust or nominee of either, or for exchange of securities for a different number of bonds, certificates, or other evidence, representing the same aggregate face amount or number of units bearing the same interest rate, maturity date and call provisions, if any; provided that, in any such case, the new securities are to be delivered to PFPC Trust. (B) Unless and until PFPC Trust receives Oral Instructions or Written Instructions to the contrary, PFPC Trust shall: (1) pay all income items held by it which call for payment upon presentation and hold the cash received by it upon such payment for the account of each Portfolio; (2) collect interest and cash dividends received, with notice to the Fund, to the account of each Portfolio; (3) hold for the account of each Portfolio all stock dividends, rights and similar securities issued with respect to any securities held by PFPC Trust; and (4) execute as agent on behalf of the Fund all necessary ownership certificates required by the Internal Revenue Code or the Income Tax Regulations of the United States Treasury Department or under the laws of any state now or hereafter in effect, inserting the Fund's name, on behalf of a Portfolio, on such certificate as the owner of the securities covered thereby, to the extent it may lawfully do so. (i) SEGREGATED ACCOUNTS. (i) PFPC Trust shall upon receipt of Written Instructions or Oral Instructions establish and maintain a segregated accounts on its records for and on behalf of each Portfolio. Such accounts may be used to transfer cash and securities, including securities in the Book-Entry System: (A) for the purposes of compliance by the Fund with the procedures 17 required by a securities or option exchange, providing such procedures comply with the 1940 Act and any releases of the SEC relating to the maintenance of segregated accounts by registered investment companies; and (B) Upon receipt of Written Instructions, for other proper corporate purposes. (ii) PFPC Trust shall arrange for the establishment of IRA custodian accounts for such shareholders holding Shares through IRA accounts, in accordance with the Fund's prospectuses, the Internal Revenue Code of 1986, as amended (including regulations promulgated thereunder), and with such other procedures as are mutually agreed upon from time to time by and among the Fund, PFPC Trust and the Fund's transfer agent. (j) PURCHASES OF SECURITIES. PFPC Trust shall settle purchased securities upon receipt of Oral Instructions or Written Instructions from the Fund or its investment advisers that specify: (i) the name of the issuer and the title of the securities, including CUSIP number if applicable; (ii) the number of shares or the principal amount purchased and accrued interest, if any; (iii) the date of purchase and settlement; (iv) the purchase price per unit; (v) the total amount payable upon such purchase; (vi) the Portfolio involved; and (vii) the name of the person from whom or the broker through whom the purchase was made. PFPC Trust shall upon receipt of securities purchased by or for a Portfolio pay out of the moneys held for the account of the Portfolio the total amount payable to the person from whom or the broker through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Oral Instructions or Written Instructions. (k) SALES OF SECURITIES. PFPC Trust shall settle sold securities upon receipt of Oral Instructions or Written Instructions from the Fund that specify: 18 (i) the name of the issuer and the title of the security, including CUSIP number if applicable; (ii) the number of shares or principal amount sold, and accrued interest, if any; (iii) the date of trade and settlement; (iv) the sale price per unit; (v) the total amount payable to the Fund upon such sale; (vi) the name of the broker through whom or the person to whom the sale was made; (vii) the location to which the security must be delivered and delivery deadline, if any; and (viii) the Portfolio involved. PFPC Trust shall deliver the securities upon receipt of the total amount payable to the Portfolio upon such sale, provided that the total amount payable is the same as was set forth in the Oral Instructions or Written Instructions. In addition to the other provisions hereof, provided PFPC Trust has previously informed the Fund in writing of its intention to do so (which notification may be by means of a standing notification and need not be repeated with respect to each particular transaction), PFPC Trust may also accept payment in such form as shall be satisfactory to it and deliver securities and arrange for payment in accordance with the customs prevailing among dealers in securities. (l) REPORTS; PROXY MATERIALS. (i) PFPC Trust shall furnish to the Fund the following reports: (A) such periodic and special reports as the Fund may reasonably request; (B) a monthly statement summarizing all transactions and entries for the account of each Portfolio, listing each portfolio securities 19 belonging to each Portfolio with the adjusted average cost of each issue and the market value at the end of such month and stating the cash account of each Portfolio including disbursements; (C) the reports required to be furnished to the Fund pursuant to Rule 17f-4; and (D) such other information as may be agreed upon from time to time between the Fund and PFPC Trust. (ii) PFPC Trust shall transmit promptly to the Fund any proxy statement, proxy material, notice of a call or conversion or similar communication received by it as custodian of the Property. PFPC Trust shall be under no other obligation to inform the Fund as to such actions or events. (m) COLLECTIONS. All collections of monies or other property in respect, or which are to become part, of the Property (but not the safekeeping thereof upon receipt by PFPC Trust) shall be at the sole risk of the Fund. If payment is not received by PFPC Trust within a reasonable time after proper demands have been made, PFPC Trust shall notify the Fund in writing, including copies of all demand letters, any written responses, memoranda of all oral responses and shall await instructions from the Fund. PFPC Trust shall not be obliged to take legal action for collection unless and until reasonably indemnified to its satisfaction. PFPC Trust shall also notify the Fund as soon as reasonably practicable whenever income due on securities is not collected in due course and shall provide the Fund with periodic status reports of such income collected after a reasonable time. 16. DURATION AND TERMINATION. This Agreement shall continue until terminated by the Fund or PFPC Trust on sixty (60) days' prior written notice to the other party. In the event this Agreement is terminated (pending appointment of a successor to PFPC Trust or 20 vote of the shareholders of the Fund to dissolve or to function without a custodian of its cash, securities or other property), PFPC Trust shall not deliver cash, securities or other property of the Portfolios to the Fund. It may deliver them to a bank or trust company of PFPC Trust's choice, having an aggregate capital, surplus and undivided profits, as shown by its last published report, of not less than twenty million dollars ($20,000,000), as a custodian for the Fund to be held under terms similar to those of this Agreement. PFPC Trust shall not be required to make any such delivery or payment until full payment shall have been made to PFPC Trust of all of its fees, compensation, and reasonable costs and expenses. PFPC Trust shall have a security interest in and shall have a right of setoff against the Property as security for the payment of such fees, compensation, and reasonable costs and expenses. 17. CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement, in the event of an agreement to enter into a transaction that would result in a Change of Control of the Fund's adviser or sponsor, the Fund's ability to terminate the Agreement will be suspended from the time of such agreement until the later of (i) two years from the date of this Agreement or (ii) six months after the Change of Control. 18. NOTICES. All notices and other communications, including Written Instructions, shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notice shall be effective upon receipt. Notice shall be addressed (a) if to PFPC Trust at Airport Business Center, International Court 2, 200 Stevens Drive, Lester, Pennsylvania 19113, marked for the attention of the Custodian Services Department (or its successor) (b) if to the Fund, at RS Investment Trust, 555 California Street, Suite 2500, San Francisco, CA 94104, Attn: Andrew C. Morrison, Secretary or (c) if to neither of the foregoing, at such other 21 address as shall have been given by like notice to the sender of any such notice or other communication by the other party. 19. AMENDMENTS. This Agreement, or any term hereof, may be changed or waived only by a written amendment, signed by the party against whom enforcement of such change or waiver is sought. 20. DELEGATION; ASSIGNMENT. PFPC Trust may assign its rights and delegate its duties hereunder to any majority-owned direct or indirect subsidiary of PFPC Trust or PFPC Trust Corp., provided that (i) PFPC Trust gives the Fund 30 days' prior written notice of such assignment or delegation; (ii) the assignee or delegate agrees to comply with the relevant provision of the 1940 Act; and (iii) PFPC Trust and such assignee or delegate promptly provide such information as the Fund may reasonably request, and respond to such questions as the Fund may reasonably ask, relative to the assignment or delegation, (including, without limitation, the capabilities of the assignee or delegate). 21. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 22. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 23. MISCELLANEOUS. (a) ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect 22 to delegated duties and Oral Instructions. (b) The parties agree that the Fund is executing this Agreement on behalf of each of the Portfolios separately; that each of the Portfolios is acting solely on its own behalf separately from each of the other Portfolios and not jointly or jointly and severally with any of the other Portfolios; that this Agreement shall constitute, and shall for all purposes be construed to give effect to the intention of the parties that it constitute, a separate Agreement between PFPC Trust and the Fund on behalf of each such Portfolio separately, as if the Fund had executed this Agreement separately on behalf of such Portfolio; and that no Portfolio shall be liable for the obligations of any other Portfolio arising hereunder. (c) A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the trustees of the Fund as trustees and not individually and that the obligations of this instrument are not binding upon any of the trustees, officers, or shareholders of the Fund individually but are binding only upon the assets and property of the Fund. (d) CAPTIONS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. (e) GOVERNING LAW. This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law. (f) PARTIAL INVALIDITY. If any provision of this Agreement shall be held or made 23 invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. (g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. (h) FACSIMILE SIGNATURES. The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. PFPC TRUST COMPANY By: ----------------------------------------------- Name: --------------------------------------------- Title: -------------------------------------------- RS INVESTMENT TRUST, on behalf of its several constituent Portfolios By: ----------------------------------------------- Name: --------------------------------------------- Title: -------------------------------------------- 24 AUTHORIZED PERSONS APPENDIX NAME (TYPE) SIGNATURE - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- 25 EX-99.H(I) 12 EXHIBIT 99.H(I) - ADMINISTRATIVE SERVICE AGREEMENT EXHIBIT h(i) RS INVESTMENT TRUST 555 California Street San Francisco, California 94104 February 26, 1999 RS Investment Management, L.P. 555 California Street San Francisco, California 94104 Re: ADMINISTRATIVE SERVICES AGREEMENT Dear Sirs: RS Investment Trust, a Massachusetts business trust (the "Trust"), is engaged in the business of an investment company. The Trust desires that you act as administrator of the various series of shares of the Trust (each, a "Fund") set out on Schedule A hereto, and you are willing to act as such administrator and to perform such services under the terms and conditions hereinafter set forth. Accordingly, the Trust, on behalf of each Fund, agrees with you as follows: 1. DELIVERY OF FUND DOCUMENTS. The Trust has furnished you with copies properly certified or authenticated of each of the following: (a) the Agreement and Declaration of Trust of the Trust (the "Declaration of Trust"). (b) the By-Laws of the Trust as in effect on the date hereof. (c) Resolutions of the Board of Trustees of the Trust selecting you as administrator and approving the form of this Agreement. The Trust will furnish you from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing, if any. 2. ADMINISTRATIVE SERVICES. You will continuously provide business management services to each Fund and will generally, subject to the general oversight of the Trustees and except as provided in the next following paragraph, manage all of the business and affairs of each Fund, subject always to the provisions of the Trust's Declaration of Trust and By-Laws and of the Investment Company Act of 1940, as amended (the "1940 Act"), and subject, further, to such policies and instructions as the Board of Trustees may from time to time establish. You shall, except as provided in the next following paragraph, advise and assist the officers of the Trust in taking such steps as are necessary or appropriate to carry out the decisions of the Board of Trustees regarding the conduct of the business of each Fund. No provision of this Agreement shall be deemed to require you at any time to provide to any Fund or to any person with respect to any Fund investment research, advice, or supervision, or in any way to advise any Fund or any person acting on behalf of any Fund as to the value of securities or other investments or as to the advisability of investing in, purchasing, or selling securities or other investments. 3. ALLOCATION OF CHARGES AND EXPENSES. You will make available, without expense to the Funds, the services of such of your directors, officers, and employees as may duly be elected Trustees or officers of the Trust, subject to their individual consent to serve and to any limitations imposed by law. You will pay the compensation of such of your directors, officers, and employees as may duly be elected Trustees or officers of the Trust. You will not be required to pay any expenses of the Trust other than those specifically allocated to you in this paragraph 3. In particular, but without limiting the generality of the foregoing, you will not be required to pay: clerical salaries not relating to the services described in paragraph 2 above; fees and expenses incurred by the Trust in connection with membership in investment company organizations; brokers' commissions; payment for portfolio pricing services to a pricing agent, if any; legal, auditing, or accounting expenses; taxes or governmental fees; the fees and expenses of the transfer agent of the Funds; the cost of preparing share certificates or any other expenses, including clerical expenses, incurred in connection with the issue, sale, underwriting, redemption, or repurchase of shares of the Funds; the expenses of and fees for registering or qualifying securities for sale; the fees and expenses of Trustees of the Trust who are not affiliated with you; the cost of preparing and distributing reports and notices to shareholders; public and investor relations expenses; or the fees or disbursements of custodians of the Funds' assets, including expenses incurred in the performance of any obligations enumerated by the Declaration of Trust or By-Laws of the Trust insofar as they govern agreements with any such custodian. 4. COMPENSATION. No fee or compensation is payable to you by the Funds under this Agreement for the services performed or the facilities furnished or expenses assumed by you. 5. LIMITATION OF LIABILITY. You shall not be liable for any error of judgement or mistake of law or for any loss suffered by a Fund in connection with the matters to which this Agreement relates except a loss resulting from willful misfeasance, bad faith, or gross negligence on your part in the performance of your duties, or from reckless disregard by you of your obligations and duties under this Agreement. Any person, even though also employed by you, who may be or become an employee of and paid by the Trust shall be deemed, when -2- acting within the scope of his or her employment by the Trust, to be acting in such employment solely for the Trust and not as your employee or agent. 6. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain in force until February 26, 2001 and continue from year to year thereafter in respect of each Fund, but only so long as such continuance is specifically approved in respect of such Fund at least annually by the vote of a majority of the Trustees who are not interested persons of you or of the Trust, cast in person at a meeting called for the purpose of voting on such approval and by a vote of the Board of Trustees. This Agreement may, on 30 days notice, be terminated as to any Fund at any time without the payment of any penalty by you, and, as to any Fund, immediately upon notice, by the Board of Trustees or by vote of a majority of the outstanding voting securities of that Fund. In interpreting the provisions of this Agreement, the definitions contained in Section 2(a) of the 1940 Act, as modified by rule 18f-2 under the Act (particularly the definitions of "interested person" and "majority of the outstanding voting securities"), as from time to time amended, shall be applied, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission by any rule, regulation, or order. 7. AMENDMENT OF THIS AGREEMENT. No provisions of this Agreement may be changed, waived, discharged, or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge, or termination is sought, and no amendment of this Agreement shall be effective as to any Fund until approved by the Board of Trustees, including a majority of the Trustees who are not interested persons of you or of the Trust, cast in person at a meeting called for the purpose of voting on such approval. 8. MISCELLANEOUS. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. A copy of the Agreement and Declaration of Trust of the Trust is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the Trustees of the Trust as Trustees and not individually, and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers, or shareholders individually but are binding only upon the assets and property of the Trust. If you are in agreement with the foregoing, please sign the form of acceptance on the accompanying counterpart of this letter and return such counterpart to the Trust, whereupon this letter shall become a binding contract. -3- Yours very truly, RS INVESTMENT TRUST By: /s/ George R. Hecht --------------------------- The foregoing Agreement is hereby accepted as of the date thereof. RS INVESTMENT MANAGEMENT, L.P. By RS Investment Management Co. LLC By: /s/ George R. Hecht ----------------------------- -4- SCHEDULE A February 26, 1999 RS Diversified Growth RS Growth & Income Fund The Information Age Fund-TM- RS MicroCap Growth Fund RS Global Natural Resources Fund -5- EX-99.H(II) 13 EXHIBIT 99.H(II) - SUB-ADMIN & ACCTG SER AGREEMENT EXHIBIT h(ii) SUB-ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT THIS AGREEMENT is made as of _________________, 1999 by and between RS INVESTMENT TRUST, a Massachusetts business trust (the "Fund"), and PFPC INC., a Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank Corp. W I T N E S S E T H : WHEREAS, the Fund is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund wishes to retain PFPC to provide sub-administration and accounting services to its investment portfolios listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"), and PFPC wishes to furnish such services. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and intending to be legally bound hereby the parties hereto agree as follows: 1. DEFINITIONS. AS USED IN THIS AGREEMENT: (a) "1933 Act" means the Securities Act of 1933, as amended. (b) "1934 Act" means the Securities Exchange Act of 1934, as amended. (c) "Authorized Person" means any officer of the Fund and any other person duly authorized by the Fund's Board of Trustees to give Oral Instructions and Written Instructions on behalf of the Fund and listed on the Authorized Persons Appendix attached hereto and made a part hereof or any amendment thereto as may be received by PFPC. An Authorized Person's scope of authority may be limited by the Fund by setting forth such limitation in the Authorized Persons Appendix. (d) "CEA" means the Commodities Exchange Act, as amended. (e) "Change of Control" means a change in ownership or control (not including transactions between wholly-owned direct or indirect subsidiaries of a common parent) of 25% or more of the beneficial ownership of the shares of common stock or shares of beneficial interest of an entity or its parent(s). (f) "Oral Instructions" mean oral instructions received by PFPC from an Authorized Person or from a person reasonably believed by PFPC to be an Authorized Person. (g) "SEC" means the Securities and Exchange Commission. (h) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act and the CEA. (i) "Shares" means the shares of beneficial interest of any series or class of the Fund. (j) "Written Instructions" mean written instructions signed by an Authorized Person and received by PFPC. The instructions may be delivered by hand, mail, tested telegram, cable, telex or facsimile sending device. 2. APPOINTMENT. The Fund hereby appoints PFPC to provide sub-administration and accounting services to each of the Portfolios, in accordance with the terms set forth in this Agreement. PFPC accepts such appointment and agrees to furnish such services. 3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will provide PFPC with the following: (a) certified or authenticated copies of the resolutions of the Fund's Board of Trustees, approving the appointment of PFPC or its affiliates to provide services to each Portfolio and approving this Agreement; (b) a copy of Fund's most recent effective registration statement; 2 (c) a copy of each Portfolio's advisory agreement or agreements; (d) a copy of the distribution agreement with respect to each class of Shares representing an interest in a Portfolio; (e) a copy of any additional administration agreement with respect to a Portfolio; (f) a copy of any shareholder servicing agreement made in respect of the Fund or a Portfolio; and (g) copies (certified or authenticated, where applicable) of any and all amendments or supplements to the foregoing. 4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with all applicable requirements of the Securities Laws, and any laws, rules and regulations of governmental authorities having jurisdiction with respect to the duties to be performed by PFPC hereunder. Except as specifically set forth herein, PFPC assumes no responsibility for such compliance by the Fund or any Portfolio. 5. INSTRUCTIONS. (a) Unless otherwise provided in this Agreement, PFPC shall act only upon Oral Instructions and Written Instructions. (b) PFPC shall be entitled to rely upon any Oral Instructions and Written Instructions it receives from an Authorized Person (or from a person reasonably believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume that any Oral Instruction or Written Instruction received hereunder is not in any way inconsistent with the provisions of organizational documents or this Agreement or of any vote, resolution or proceeding of the Fund's Board of Trustees or of the Fund's shareholders, unless and until PFPC receives Written 3 Instructions to the contrary. (c) The Fund agrees to forward to PFPC Written Instructions confirming Oral Instructions (except where such Oral Instructions are given by PFPC or its affiliates) so that PFPC receives the Written Instructions by the close of business on the same day that such Oral Instructions are received. The fact that such confirming Written Instructions are not received by PFPC shall in no way invalidate the transactions or enforceability of the transactions authorized by the Oral Instructions. Where Oral Instructions or Written Instructions reasonably appear to have been received from an Authorized Person, PFPC shall incur no liability to the Fund in acting upon such Oral Instructions or Written Instructions provided that PFPC's actions comply with the other provisions of this Agreement. 6. RIGHT TO RECEIVE ADVICE. (a) ADVICE OF THE FUND. If PFPC is in doubt as to any action it should or should not take, PFPC may request directions or advice, including Oral Instructions or Written Instructions, from the Fund. (b) ADVICE OF COUNSEL. If PFPC shall be in doubt as to any question of law pertaining to any action it should or should not take, PFPC may request advice at its own cost from such counsel of its own choosing (who may be counsel for the Fund, the Fund's investment adviser or PFPC, at the option of PFPC). (c) CONFLICTING ADVICE. In the event of a conflict between directions, advice or Oral Instructions or Written Instructions PFPC receives from the Fund and the advice PFPC receives from counsel, PFPC may rely upon and follow the advice of counsel, provided that it takes reasonable steps to notify the Fund of its intention 4 to follow such advice. In the event PFPC so relies on the advice of counsel, PFPC remains liable for any action or omission on the part of PFPC which constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC of any duties, obligations or responsibilities set forth in this Agreement. (d) PROTECTION OF PFPC. PFPC shall be protected in any action it takes or does not take in reliance upon directions, advice or Oral Instructions or Written Instructions it receives from the Fund or from counsel and which PFPC believes, in good faith, to be consistent with those directions, advice and Oral Instructions or Written Instructions. Nothing in this section shall be construed so as to impose an obligation upon PFPC to seek such directions, advice or Oral Instructions or Written Instructions. Nothing in this subsection shall excuse PFPC when an action or omission on the part of PFPC constitutes willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC of any duties, obligations or responsibilities set forth in this Agreement. 7. RECORDS; VISITS. (a) The books and records pertaining to the Fund and the Portfolios which are in the possession or under the control of PFPC shall be the property of the Fund. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The Fund and Authorized Persons shall have access to such books and records at all times during PFPC's normal business hours. Upon the reasonable request of the Fund, copies of any such books and records shall be provided by PFPC to the Fund or to an Authorized Person, at the Fund's expense. 5 (b) PFPC shall keep the following records: (i) all books and records with respect to each Portfolio's books of account; (ii) records of each Portfolio's securities transactions; and (iii) all other books and records as PFPC is required to maintain pursuant to Rule 31a-1 of the 1940 Act in connection with the services provided hereunder. 8. CONFIDENTIALITY. PFPC agrees to keep confidential all records of the Fund and information relating to the Fund and its shareholders, unless the release of such records or information is otherwise consented to, in writing, by the Fund. The Fund agrees that such consent shall not be unreasonably withheld and may not be withheld where PFPC may be exposed to civil or criminal contempt proceedings or when required to divulge such information or records to duly constituted authorities. 9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's independent public accountants and shall provide account analyses, fiscal year summaries, and other audit-related schedules with respect to each Portfolio. PFPC shall take all reasonable action in the performance of its duties under this Agreement to assure that the necessary information is made available to such accountants for the expression of their opinion, as required by the Fund. 10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect with appropriate parties one or more agreements making reasonable provisions for emergency use of electronic data processing equipment to the extent appropriate equipment is available. In the event of equipment failures, PFPC shall, at no additional expense to the Fund, take reasonable steps to minimize service interruptions. PFPC shall have no liability with respect to the loss of data or service interruptions caused by equipment failure, provided 6 such loss or interruption is not caused by PFPC's own willful misfeasance, bad faith, gross negligence or reckless disregard of its duties or obligations under this Agreement. 11. YEAR 2000 READINESS DISCLOSURE. PFPC (a) has reviewed its business and operations as they relate to the services provided hereunder, (b) has developed or is developing a program to remediate or replace computer applications and systems, and (c) has developed a testing plan to test the remediation or replacement of computer applications/systems, in each case, to address on a timely basis the risk that certain computer applications/systems used by PFPC may be unable to recognize and perform properly date sensitive functions involving dates prior to, including and after December 31, 1999, including dates such as February 29, 2000 (the "Year 2000 Challenge"). To the best of PFPC's knowledge and belief, the reasonably foreseeable consequences of the Year 2000 Challenge will not adversely effect PFPC's ability to perform its duties and obligations under this Agreement. 12. COMPENSATION. As compensation for services rendered by PFPC during the term of this Agreement, the Fund, on behalf of each Portfolio, will pay to PFPC a fee or fees as may be agreed to in writing by the Fund and PFPC. 13. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to indemnify and hold harmless PFPC and its affiliates from all taxes, charges, expenses, assessments, claims and liabilities (including, without limitation, liabilities arising under the Securities Laws and any state or foreign securities and blue sky laws, and amendments thereto), and reasonable expenses, including (without limitation) reasonable attorneys' fees and disbursements arising directly or indirectly from any action or omission to act which PFPC takes (i) at the request or on the direction of or in reliance on the advice of the 7 Fund or (ii) upon Oral Instructions or Written Instructions. Neither PFPC, nor any of its affiliates, shall be indemnified against any liability (or any expenses incident to such liability) arising out of PFPC's or its affiliates' own willful misfeasance, bad faith, negligence or reckless disregard of its duties and obligations under this Agreement. Any amounts payable by the Fund hereunder shall be satisfied only against the relevant Portfolio's assets and not against the assets of any other investment portfolio of the Fund. 14. RESPONSIBILITY OF PFPC. (a) PFPC shall be under no duty to take any action on behalf of the Fund or any Portfolio except as specifically set forth herein or as may be specifically agreed to by PFPC in writing. PFPC shall be obligated to exercise care and diligence in the performance of its duties hereunder, to act in good faith and to use its best efforts, within reasonable limits, in performing services provided for under this Agreement. PFPC shall be liable for any damages arising out of PFPC's failure to perform its duties under this Agreement to the extent such damages arise out of PFPC's willful misfeasance, bad faith, gross negligence or reckless disregard of such duties. (b) Without limiting the generality of the foregoing or of any other provision of this Agreement, (i) PFPC shall not be liable for losses beyond its control, provided that PFPC has acted in accordance with the standard of care set forth above; and (ii) PFPC shall not be liable for (A) the validity or invalidity or authority or lack thereof of any Oral Instruction or Written Instruction, notice or other instrument which conforms to the applicable requirements of this Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to Section 10, delays or 8 errors or loss of data occurring by reason of circumstances beyond PFPC's control, including acts of civil or military authority, national emergencies, labor difficulties, fire, flood, catastrophe, acts of God, insurrection, war, riots or failure of the mails, transportation, communication or power supply. (c) Notwithstanding anything in this Agreement to the contrary, neither PFPC nor its affiliates shall be liable to the Fund or to any Portfolio for any consequential, special or indirect losses or damages which the Fund or any Portfolio may incur or suffer by or as a consequence of PFPC's or any affiliates' performance of the services provided hereunder, whether or not the likelihood of such losses or damages was known by PFPC or its affiliates. 15. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS. PFPC will perform the following accounting services with respect to each Portfolio: (i) Journalize investment, capital share and income and expense activities; (ii) Verify investment buy/sell trade tickets when received from the investment adviser for a Portfolio (the "Adviser") and transmit trades to the Fund's custodian (the "Custodian") for proper settlement; (iii) Maintain individual ledgers for investment securities; (iv) Maintain historical tax lots for each security; (v) Reconcile cash and investment balances of the Fund with the Custodian, and provide the Adviser with the beginning cash balance available for investment purposes; (vi) Update the cash availability throughout the day as required by the Adviser; (vii) Post to and prepare the Statement of Assets and Liabilities and the Statement of Operations; (viii) Calculate various contractual expenses (E.G., advisory and custody fees); 9 (ix) Monitor the expense accruals and notify an officer of the Fund of any proposed adjustments; (x) Control all disbursements and authorize such disbursements upon Written Instructions; (xi) Calculate capital gains and losses; (xii) Determine net income; (xiii) Obtain security market quotes from independent pricing sources approved by the Adviser, or if such quotes are unavailable, then obtain such prices from the Adviser, and in either case calculate the market value of each Portfolio's Investments; (xiv) Transmit or mail a copy of the daily portfolio valuation to the Adviser; (xv) Compute net asset value; (xvi) As appropriate, compute yields, total return, expense ratios, portfolio turnover rate, and, if required, portfolio average dollar-weighted maturity; and (xvii) Prepare a monthly financial statement, which will include the following items: Schedule of Investments Statement of Assets and Liabilities Statement of Operations Statement of Changes in Net Assets Cash Statement Schedule of Capital Gains and Losses. 16. DESCRIPTION OF SUB-ADMINISTRATION SERVICES ON A CONTINUOUS BASIS. PFPC will perform the following sub-administration services with respect to each Portfolio: (i) Prepare quarterly broker security transactions summaries; (ii) Prepare monthly security transaction listings; (iii) Supply various normal and customary Portfolio and Fund statistical data as requested on an ongoing basis; (iv) Prepare for execution and file the Fund's Federal and state tax returns; 10 (v) Prepare and file with the SEC the Fund's annual, semi-annual, and quarterly shareholder reports; (vi) Monitor each Portfolio's status as a regulated investment company under Sub-chapter M of the Internal Revenue Code of 1986, as amended; (vii) Coordinate contractual relationships and communications between the Fund and its contractual service providers; (viii) Monitor the Fund's compliance with the amounts and conditions of each state qualification. (ix) Prepare, coordinate with Fund Counsel and file with the SEC Post-Effective Amendments to the Fund's Registration Statement, prepare reports to the Fund's shareholders of records and the SEC including the preparation and filing of (i) semi-annual reports on Form N-SAR and (ii) Notices pursuant to Rule 24f-2 and assist in preparation of notices of Annual or Special Meetings of Shareholders and Proxy materials relating to such meetings; (x) Provide individuals reasonably acceptable to the Fund's Board of Trustees to serve as "non-policy making" officers of the Fund, who will be responsible for the administration of certain of the Fund's affairs as determined by the Fund's Board of Trustees; and (xi) Obtain and maintain fidelity bonds and directors and officers/errors and omissions insurance policies for the Fund in accordance with the requirements of Rules 17g-1 and 17d-1(d)(7) under the 1940 Act as such bonds and policies are approved by the Fund's Board of Trustees. 17. DURATION AND TERMINATION. This Agreement shall continue initially for two years unless terminated for cause by the Fund. The Fund may terminate this Agreement for cause only if the following have occurred: (i) the Fund gives PFPC notice that for the preceding thirty (30) days PFPC has been in material breach of the Agreement (and PFPC has in fact been in such material breach) and that PFPC has thirty (30) days from receipt of such notice to cure such material breach; (ii) PFPC fails to cure such material breach within such thirty (30) day period; and (iii) at the conclusion of such thirty (30) day period the Fund gives PFPC notice that it is terminating the Agreement. In addition, the 11 Fund may terminate the Agreement immediately for cause upon the insolvency or bankruptcy of PFPC, the commencement by PFPC of a voluntary proceeding in respect thereof, the commencement of an involuntary proceeding in respect thereof if not discharged within 30 days, or the appointment of any receiver or trustee in respect of PFPC or any of its assets. After the initial two year term, either party may terminate this Agreement on 60 days prior written notice to the other party. 18. CHANGE OF CONTROL. Notwithstanding any other provision of this Agreement, in the event of an agreement to enter into a transaction that would result in a Change of Control of the Fund's adviser or sponsor, the Fund's ability to terminate the Agreement will be suspended from the time of such agreement until six months after the Change of Control; provided that this provision will not limit the initial 2 year term set forth in Section 17 hereof (i.e., the Fund will not be permitted to terminate the Agreement until the later of the conclusion of the initial 2 year term or the conclusion of the 6 month period referenced above). 19. NOTICES. All notices and other communications, including Written Instructions, shall be in writing or by confirming telegram, cable, telex or facsimile sending device. Notice shall be effective upon receipt. Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at RS Investment Trust, 555 California Street, Suite 2500, San Francisco, CA 94104, Attn: Andrew C. Morrison, Secretary; or (c) if to neither of the foregoing, at such other address as shall have been provided by like notice to the sender of any such notice or other communication by the other party. 20. AMENDMENTS. This Agreement, or any term thereof, may be changed or waived only by written amendment, signed by the party against whom enforcement of such change or 12 waiver is sought. 21. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its duties hereunder to any majority-owned direct or indirect subsidiary of PFPC or PNC Bank Corp., provided that (i) PFPC gives the Fund 30 days prior written notice of such assignment or delegation, (ii) the assignee or delegate agrees to comply with the relevant provision of the 1940 Act, and (iii) PFPC and such assignee or delegate promptly provide such information as the Fund may reasonably request, and respond to such questions as the Fund may reasonably ask, relative to the assignment or delegation (including, without limitation, the capabilities of the assignee or delegate). 22. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 23. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as are necessary to effectuate the purposes hereof. 24. MISCELLANEOUS. (a) This Agreement embodies the entire agreement and understanding between the parties and supersedes all prior agreements and understandings relating to the subject matter hereof, provided that the parties may embody in one or more separate documents their agreement, if any, with respect to delegated duties and Oral Instructions. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. Notwithstanding any provision hereof, the services of PFPC are not, nor shall they be, construed as constituting 13 legal advice or the provision of legal services for or on behalf of the Fund or any other person. (b) The parties agree that the Fund is executing this Agreement on behalf of each of the Portfolios separately; that each of the Portfolios is acting solely on its own behalf separately from each of the other Portfolios and not jointly or jointly and severally with any of the other Portfolios; that this Agreement shall constitute, and shall for all purposes be construed to give effect to the intention of the parties that it constitute, a separate Agreement between PFPC and the Fund on behalf of each such Portfolio separately, as if the Fund had executed this Agreement separately on behalf of such Portfolio; and that no Portfolio shall be liable for the obligations of any other Portfolio arising hereunder. (c) A copy of the Agreement and Declaration of Trust of the Fund is on file with the Secretary of State of The Commonwealth of Massachusetts, and notice is hereby given that this instrument is executed on behalf of the trustees of the Fund as trustees and not individually and that the obligations of this instrument are not binding upon any of the trustees, officers, or shareholders of the Fund individually but are binding only upon the assets and property of the Fund. (d) This Agreement shall be deemed to be a contract made in Delaware and governed by Delaware law, without regard to principles of conflicts of law. (e) If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 14 (f) The facsimile signature of any party to this Agreement shall constitute the valid and binding execution hereof by such party. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. PFPC INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- RS INVESTMENT TRUST, on behalf of its several constituent Portfolios By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 15 EXHIBIT A THIS EXHIBIT A, dated as of __________, 1999, is Exhibit A to that certain Sub-Administration and Accounting Services Agreement dated as of _________, 1999 between PFPC Inc. and RS Investment Trust. PORTFOLIOS The Contrarian Fund-TM- RS Diversified Growth Fund RS Emerging Growth Fund RS Global Natural Resources Fund RS Global Value Fund RS Growth & Income Fund The Information Age Fund-TM- RS MicroCap Growth Fund RS Partners Fund RS Value + Growth Fund 16 AUTHORIZED PERSONS APPENDIX NAME (TYPE) SIGNATURE - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- - ------------------------------------- -------------------------------------- 17 EX-99.P 14 EXHIBIT 99.P - POWER OF ATTORNEY EXHIBIT p POWER OF ATTORNEY We, the undersigned Trustees and/or Officers of RS INVESTMENT TRUST (the "Trust"), hereby severally constitute and appoint Andrew C. Morrison, G. Randall Hecht, and Andrew P. Pilara, Jr., and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our name and in the capacities indicated below, the Registration Statement on Form N-1A of the Trust and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, with the securities commissioner of any state, or with other regulatory authorities, granting unto them, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof. WITNESS my hand on the date set forth below.
SIGNATURE TITLE DATE /S/ GEORGE R. HECHT President, Principal Executive Officer February 26, 1999 - ----------------------------------- George R. Hecht /S/ ANDREW C. MORRISON Treasurer and Secretary February 26, 1999 - ----------------------------------- Andrew C. Morrison /S/ LEONARD B. AUERBACH Trustee February 26, 1999 - ----------------------------------- Leonard B. Auerbach /S/ JOHN W. GLYNN, JR. Trustee February 26, 1999 - ----------------------------------- John W. Glynn, Jr. /S/ JAMES K. PETERSON Trustee February 26, 1999 - ----------------------------------- James K. Peterson
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