Renewal of the Funds' Investment Advisory Agreement (PDF)

The investment advisory agreement between the RS Funds and RS Investments (the "Advisory Agreement") is subject to annual approval by (i) the vote of the trustees or of a majority of the outstanding voting securities (as defined in the Investment Company Act of 1940) of each affected Fund, and (ii) the vote of a majority of the trustees who are not "interested persons" (as defined in the Investment Company Act) of the Trust or RS Investments. The Advisory Agreement is terminable with respect to a Fund by RS Investments, 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.

The Advisory Agreement also provides that RS Investments may, at its own expense, delegate certain of its responsibilities under the Agreement to sub-advisors for the Funds, who would be required to furnish an investment program and make investment decisions for the Funds.

The trustees meet over the course of the year with investment advisory personnel from RS Investments and regularly review detailed information regarding the investment program and performance of each Fund.

2006
The trustees met in early February 2006 to consider the continuation of the Funds' Advisory Agreement for an interim period in order to permit the trustees to complete the full review process in late February and early March 2006. At their meeting in early February 2006, the trustees noted that they had received information regarding the Funds' performance during the quarter ended December 31, 2005, and discussed generally the investment performance of each of the Funds during the past year, developments at RS Investments, the expenses of the Funds, and other related matters. The trustees who are not "interested persons" of the Funds noted that they had had the opportunity to speak with their independent counsel prior to the meeting, and to review with him the matters to be considered at the meeting. After considering the information described above, the trustees unanimously voted to approve the continuation of the Advisory Agreement and the advisory fees proposed in connection with that continuation for the proposed interim period. The trustees noted that, to the extent that the full review process resulted in any changes in those arrangements for the coming year, they would make any such changes effective as of the date of the early February 2006 meeting.

The trustees met again on February 28, 2006, and March 1, 2006, to consider the continuation of the Funds' Advisory Agreement for the following year. At that meeting, the trustees considered a number of factors in determining to approve the continuation of the Advisory Agreement. In all of their deliberations regarding the Advisory Agreement, the trustees who are not interested persons of the Funds were advised by their independent counsel, with whom they had separate discussions on a number of occasions. In addition, the trustees were assisted in their review by the Chief Compliance Officer of the Trust, who reviewed all of the information presented to the trustees and, with the assistance of independent counsel to the disinterested trustees, prepared a written report on the key factors for the trustees. That written report discussed a number of the factors described below and concluded that the information that RS Investments had provided to the trustees provided a reasonable basis for the trustees to conclude that the advisory fees proposed in connection with the continuation of the Advisory Agreement were reasonable with respect to each Fund.

The trustees considered the fees charged by RS Investments to the Funds under the Advisory Agreement. In this connection, representatives of RS Investments noted to the trustees that the fees charged by RS Investments to the Funds reflect a number of factors. For example, RS Investments believes its investment professionals are among the most talented managers in their respective asset classes. A relatively high level of compensation is required to attract and to retain those investment professionals, especially in light of other employment opportunities (for example, within the hedge fund industry) available to those professionals. RS Investments makes the services of those investment professionals available to the Funds for fees that are generally lower than investors would pay for comparable services provided through a hedge fund vehicle. RS Investments noted that it does not attempt to be a low-cost provider of investment services to the Funds; rather it makes available to the Funds what it believes to be a very highly qualified and successful group of investment managers in the small- and mid-cap equity strategies in exchange for fees that provide attractive compensation to the firm's investment management personnel, through salary and bonus and, in many cases, through increases in the value of indirect ownership interests in RS Investments.

RS Investments furnished information to the trustees compiled by the independent Lipper organization showing a comparison of RS Investments' fee rate for each Fund compared to peer mutual funds having similar objectives, strategies, and asset sizes (as selected by Lipper). The trustees also reviewed information from that compilation showing total expenses for the Funds in comparison to the peer funds. The data showed RS Investments' fees to be within the range of comparable mutual funds, with more than half the Funds at or below the median for their respective peer groups, after giving effect to expense limitations currently in effect and expected to be in effect for the coming year. Most of the Funds with advisory fees above the median were not within the top quintile after giving effect to the most recently agreed and scheduled advisory fee reductions, with only one Fund (RS Global Natural Resources Fund) within the top quintile, but still below the top decile. RS Investments stated that the current expense limitations would be renewed through April 30, 2007. The trustees considered that the total expense ratios of all but two of the Funds were higher than their peer medians. Representatives of RS Investments reviewed with the trustees the reasons for the Funds' relatively high expense ratios.

The trustees considered information provided by RS Investments as to the fees charged by RS Investments to clients other than the Funds, including institutional separate accounts and mutual funds for which RS Investments serves as sub-adviser. RS Investments generally charges lower fees to those accounts. In many cases, such an account pays fees at the same rate as the comparable Fund on assets up to a specified level, and then at lower rates on additional assets. In some cases, an account's fee rate will be lower at all levels than that of the comparable Fund. Representatives of RS Investments reviewed with the trustees the reasons for the differences between the fees charged to the Funds and to those accounts. They explained that compliance, reporting, and other legal burdens of providing investment advice to mutual funds exceed those required to provide advisory services to non-mutual fund clients such as retirement or pension plans. In addition, they pointed out that there is substantially greater legal and other risk to RS Investments in managing public mutual funds than in managing private accounts. They also explained that the services and resources required of RS Investments where it sub-advises mutual funds sponsored by others are substantially less than in the case of the Funds, since many of the compliance and regulatory responsibilities related to the management function are retained by the primary adviser.

RS Investments furnished detailed financial information, in the form of a consolidated profit and loss statement, showing the revenues and expenses related to the management of the Funds as a whole and each of RS Investments' other categories of advisory clients, respectively. That information showed the substantial costs of providing services to the Funds. RS Investments also furnished a detailed profitability analysis with respect to each Fund for the year ended December 31, 2005, and an estimate for the year ending December 31, 2006. The trustees noted that the profitability range for the Growth Funds as a whole was lower than the profitability of the separate account advisory business, but the separate account business for the Value Fund strategies had gross margins from five to ten percent points lower than the corresponding Funds. RS Investments' subadvisory business has a lower profit margin due to the reduced fees it receives in respect of that business. The Chief Compliance Officer's report concluded that a higher profit margin relating to RS Investments' services to the Funds is justified by the higher risk and responsibilities associated with that business.

The trustees considered whether economies of scale would likely be realized as the Funds grow and whether a reduction in the advisory fees paid by the Funds by means of breakpoints would be appropriate. RS Investments noted that the increased profit realized by the firm as the Funds grow enables it to devote greater resources to the management of the Funds, as well as to provide financial incentives for the portfolio managers, analysts, and other personnel who in many cases have alternative employment and business opportunities available to them. RS investments noted that investment professionals at RS Investments would likely expect increases in their compensation over time as the Funds grow, and that implementation of breakpoints under current conditions would have the effect of reducing those increases and potentially making management of the Funds a less attractive opportunity to those professionals than managing other types of investment vehicles.

RS Investments also noted that certain investment styles, such as small-cap and some mid-cap strategies, do not necessarily readily benefit from economies of scale at certain asset levels because of the limited ability to increase the size of a Fund's investments in certain portfolio holdings. Instead, larger Funds in those styles must often generate and monitor a greater number of potential and actual investments, requiring RS Investments to increase investment resources dedicated to those Funds.

The trustees reviewed performance information for each Fund for various periods. That review included an examination of comparisons of the performance of the Funds to relevant securities indexes and various peer groups of mutual funds prepared by the independent Lipper and Morningstar organizations with respect to various periods, and relative rankings of the Funds compared to peer Funds during various periods. The trustees noted that the Chief Compliance Officer's report had found that none of the Funds were shown in that data to have substantially lagged all peer mutual funds and indexes for all relevant periods, and many of the Funds enjoyed favorable absolute and comparative performance for various periods. The Chief Compliance Officer's report noted that performance of the Funds overall for 2005 was generally favorable, especially for the Value Funds, and that the performance information presented to the trustees showed that most of the Funds were in the top quartile among their peers for the three- and five-year periods believed to be most relevant.

In the case of RS Diversified Growth Fund, the trustees noted that the Fund had achieved unfavorable investment performance in recent periods and for an extended period of time compared to peer group mutual funds and relevant benchmarks. They discussed with RS Investments a number of steps being implemented by RS Investments in order to enhance performance of that Fund, and RS Investments agreed to provide to the trustees a prompt analysis and plan for improving that Fund's performance.

The trustees considered the nature, extent, and quality of the services provided by RS Investments. In this regard, the trustees took into account the experience of the Funds' portfolio management teams and of RS Investments' senior management, and the time and attention devoted by each to the Funds. The trustees considered the performance of each Fund over the life of the Fund and in recent periods, while also considering its applicable investment objective and strategy and its overall expense ratio.

The trustees also considered the research and other similar services RS Investments receives from many of the broker-dealers with which it places the Funds' (as well as other RS Investments clients') portfolio transactions and from third parties with which these broker-dealers have arrangements. The trustees receive information on those arrangements quarterly throughout the year and have the opportunity to discuss that information with representatives of RS Investments at the meetings. The trustees considered the benefit to RS Investments and its affiliates from such services including that (1) the services are of value to RS Investments and its affiliates in advising RS Investments' clients (including the Funds) and (2) RS Investments might otherwise be required to purchase some of these services for cash. The trustees concluded that these "soft dollar" relationships' benefit to RS Investments was reasonable and that the Funds also benefited from them.

The trustees noted a number of specific recent enhancements to the services provided by RS Investments, including, among others, the following:

• the firm's hiring of two new analysts in 2005 and one in 2006;
• the fact that the firm's legal and compliance department (including the Chief Compliance Officer and the General Counsel) now numbers 10 individuals;
• that one compliance professional is dedicated to the review of the firm's trading activities;
• that the Chief Compliance Officer concluded that RS Investments' trading system is "state-of-the-art"; and
• that the Chief Compliance Officer had completed his first annual compliance review with favorable results.

After considering all of the information described above, including the Chief Compliance Officer's written report, the trustees unanimously voted to approve the continuation of the Advisory Agreement, including the advisory fees proposed in connection with that continuation, for the one year period commencing April 1, 2006.

New Advisory Agreement
The board of trustees of the Trust, including all of the trustees who are not interested persons of the Trust or of RS Investments, met in person on April 30, May 1, and May 24, 2006, to consider approval of a new investment advisory agreement (the "New Advisory Agreement") between the Funds and RS Investment Management Co. LLC ("RSIM Co."), the ultimate parent of RS Investment Management, L.P., the Funds’ investment adviser ("RSIM L.P."). The existing investment advisory agreement between the Funds and RSIM, L.P. (the "Existing Advisory Agreement"), will terminate automatically as a result of its "assignment" (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) upon the consummation of the transaction between RSIM Co. and Guardian Investor Services LLC ("GIS"). (For ease of reference, each of RSIM L.P. and RSIM Co. is referred to as "RS Investments" herein unless the context otherwise requires.) In determining to approve the New Advisory Agreement between the RS Funds and RS Investments, the trustees considered that they had approved the continuation of the Existing Advisory Agreement, the terms of which are substantially similar to the New Advisory Agreement, for a one-year period commencing April 1, 2006, at their meeting on February 28 and March 1, 2006; a summary of the factors considered by the trustees at that time is provided above. In all of their deliberations, the disinterested trustees were advised by independent counsel for the disinterested trustees.

The trustees met with representatives of RS Investments and of GIS, who discussed with the trustees the capabilities of both firms, and what they saw as the complementary capabilities of the two firms in the areas of investment management and distribution/promotion of mutual fund shares. Those representatives also discussed with the trustees their expectations as to the management and operations of RS Investments after the transaction and the continuing roles of the current portfolio management teams in the management of each of the Funds.

The trustees considered that it is not anticipated that there will be any change in the personnel who are engaged in the portfolio management of any Fund as a result of the transaction, and that there will be no increase in the advisory fees or the total expenses for current shareholders of any of the existing Funds as a result of the transaction. The trustees considered the proposed changes in the governance of RSIM Co., but noted that it is not expected that the new Board of Directors will have any substantial role in the day-to-day portfolio management of the Funds. The trustees also considered that the combination of the two advisory firms could benefit shareholders of the Funds because RS Investments will, as a result, likely have a larger and more diverse investment management staff to support the Funds’ portfolio management teams. The trustees also recognized the potential benefits to RS Investments of an additional owner of the firm with greater financial resources than currently are available from its current owners. In addition, they recognized that it is possible the Funds over time could experience reduced expenses both because the combined firms may be in a position to purchase services from third parties for their clients at improved rates and because enhanced distribution capabilities resulting from the combination may result in increases in the size of the Funds and possible reduced expenses through economies of scale.

The trustees discussed with management and certain portfolio management professionals of RS Investments the expected effect of the transaction on the firm, including the extent to which the transaction is supported by portfolio management personnel. The trustees considered the likely effect on RS Investments of potential alternative transactions and of maintaining the current ownership. The trustees believe that the transaction offers the best prospects for continued stability of RS Investments in the face of current and expected transitional and generational changes at the firm.

The trustees also took into consideration the various other arrangements between RSIM Co. and GIS in respect to the transaction, including RSIM Co.’s additional responsibilities relating to the GIS mutual funds, and concluded that it was unlikely that RSIM Co.’s performance of those responsibilities would limit substantially its ability to perform its obligations to the Funds under the New Advisory Agreement.

On the basis of these factors, the trustees concluded that it would be in the best interests of each of the Funds to be advised by RSIM Co., employing the Funds’ current portfolio management teams, and voted unanimously, including the unanimous vote of the trustees who are not interested persons of the Funds or of RS Investments or GIS, to approve the New Advisory Agreement in respect to each of the Funds and to recommend to shareholders of each Fund that they approve the Agreement, as well.

2007
The Trustees met on August 13 - 14, 2007, to consider the continuation of the investment advisory and sub-advisory agreements (collectively, the "Advisory Agreements") for certain of the Funds for the one-year period commencing September 1, 2007, including RS Core Equity Fund, RS Small Cap Core Equity Fund, RS Select Growth Fund, RS Core Equity VIP Series, RS Small Cap Core Equity VIP Series, and RS Partners VIP Series (the "RS-Managed Funds"); and RS Money Market Fund, RS High Yield Bond Fund, RS Investment Quality Bond Fund, RS Low Duration Bond Fund, RS Tax-Exempt Fund, RS Emerging Markets Fund, RS International Growth Fund, RS Large Cap Value Fund, RS S&P 500 Index Fund, RS Asset Allocation Fund, RS Money Market VIP Series, RS High Yield Bond VIP Series, RS Investment Quality Bond VIP Series, RS Low Duration Bond VIP Series, RS Emerging Markets VIP Series, RS International Growth VIP Series, RS Large Cap Value VIP Series, RS S&P 500 Index VIP Series, and RS Asset Allocation VIP Series (the "Sub-Advised Funds" and together with the RS-Managed Funds, the "Funds"). The Advisory Agreements for the other RS Funds have initial terms of two years and were not subject to review by the Trustees at the meeting.

RS Investment Management Co. LLC ("RS Investments") is responsible for the day-to-day investment management of the RS-Managed Funds; various Sub-Advisers (the "Sub-Advisers") overseen by RS Investments are responsible for the day-to-day investment management of the Sub-Advised Funds. Guardian Investor Services LLC ("GIS"), a subsidiary of The Guardian Life Insurance Company of America (the "Guardian"), serves as Sub-Adviser to RS Money Market Fund, RS High Yield Bond Fund, RS Investment Quality Bond Fund, RS Low Duration Bond Fund, RS Tax-Exempt Fund, RS S&P 500 Index Fund, RS Asset Allocation Fund, RS Money Market VIP Series, RS High Yield Bond VIP Series, RS Investment Quality Bond VIP Series, RS Low Duration Bond VIP Series, RS S&P 500 Index VIP Series, and RS Asset Allocation VIP Series; Guardian Baillie Gifford Limited serves as Sub-Adviser, and Baillie Gifford Overseas Limited serves as sub-Sub-Adviser to RS International Growth Fund, RS International Growth VIP Series, RS Emerging Markets Fund, and RS Emerging Markets VIP Series (the sub-advisory and sub-sub-advisory agreements relating to these Funds are also considered "Advisory Agreements" for purposes of this discussion, and the sub-sub-adviser is also considered a Sub-Adviser for purposes of this discussion); UBS Global Asset Management (Americas) Inc. serves as Sub-Adviser to RS Large Cap Value Fund and RS Large Cap Value VIP Series.

At their meeting, the Trustees considered a number of factors in determining to approve the continuation of the Advisory Agreements. In all of their deliberations regarding the Advisory Agreements, the Trustees who are not interested persons of the Funds were advised by their independent counsel, with whom they had separate meetings and discussions on a number of occasions during and preceding the dates of the official Board meeting. In addition, the Trustees were assisted in their review by the Chief Compliance Officer of the Trusts, who reviewed all of the information presented to the Trustees and, with the assistance of independent counsel to the disinterested Trustees, prepared a written report on the key factors for the Trustees. That written report discussed a number of the factors described below and concluded that the information that RS Investments had provided to the Trustees provided a reasonable basis for the Trustees to conclude that the advisory fees proposed in connection with the continuation of the Advisory Agreements were reasonable with respect to each Fund.

The Trustees were also assisted in their review by two independent consultants retained by the Trustees. The consultants provided assistance in a variety of aspects of the Trustees' review, including, among other things, the development of appropriate expense and performance peer groups for the Funds, review of expense and performance data received by the Trustees, consideration of economies of scale, analysis of profitability data from RS Investments and the Sub-Advisers, and evaluation of industry trends. The consultants met with the Trustees on a number of occasions, both by telephone and at the August 2007 in-person meeting.

In their consideration of the Advisory Agreements, the Trustees were mindful generally of the recent changes in the structure and organization of RS Investments, noting specifically the acquisition by GIS, a subsidiary of The Guardian Life Insurance Company of America ("Guardian Life"), of a majority ownership of the firm, and the continuing integration of the investment management capabilities of RS Investments and of GIS. They considered RS Investments' representations that the integration of the two firms had been implemented successfully to date and had resulted in a stronger, deeper, and more diverse portfolio management organization. The Trustees had also discussed the integration with management and observed its effects over the course of the preceding year.

The Trustees considered the fees charged by RS Investments to the Funds under the Advisory Agreements and the fees paid to the various Sub-Advisers. In this connection, representatives of RS Investments noted to the Trustees that the fees charged by RS Investments to the Funds reflect a number of factors. They noted, for example, the generally high quality of the investment management teams at RS Investments, the high levels of compensation that are required to retain the firm's investment professionals, and the alternative employment opportunities available to many of those professionals, including highly remunerative positions at hedge fund managers. They also noted that, as to the Sub-Advised Funds, RS Investments pays the majority, in most cases the large majority, of the fees it receives to the Sub-Advisers.

RS Investments furnished information to the Trustees compiled by the independent Lipper organization showing a comparison of RS Investments' fee rate for each Fund compared to peer mutual funds having similar objectives, strategies, and asset sizes. The Trustees also reviewed information from that compilation showing total expenses for the Funds in comparison to the peer funds. In his report, the Chief Compliance Officer stated that the data showed RS Investments' fees to be within the range of comparable mutual funds, with more than half the Funds at or below the median for their respective peer groups; he noted that the advisory fees for the VIP Funds, particularly the RS Large Cap Value VIP Series, although the same as the retail Funds, are relatively high compared to peer funds; and that the advisory fees for the money market funds were among the highest, though not the highest, in their peer groups, though he noted that the advisory fees for the money market funds' peer groups fell within a relatively narrow band. Because of these relatively higher advisory fees for the money market funds, the disinterested Trustees proposed that the annual advisory fee rate for those funds be reduced by 5 basis points, to an annual rate of 0.45% of the funds' average daily net assets. RS Investments agreed to implement that reduction in the near future. The Trustees considered the total expense ratios of the Funds and noted that a number of them were higher than the median of their peer funds. They noted that in some cases that appeared to be due to the level of the Funds' advisory fees and, in many cases, the Funds' custodial fees were relatively high. They noted in this regard that RS Investments may in the future voluntarily waive fees with respect to certain of the Funds. They also noted in this regard that the Funds' recently renegotiated custodial arrangements were likely to result in substantial savings to the Funds in the coming year. The disinterested Trustees plan to monitor whether those expected savings occur.

The Trustees considered information provided by RS Investments as to the fees charged by RS Investments to clients other than the Funds, including institutional separate accounts and mutual funds for which RS Investments serves as Sub-Adviser. RS Investments generally charges lower fees to those accounts. In a number of cases, such an account pays fees at the same rate as the comparable Fund on assets up to a specified level, and then at lower rates on additional assets. In some cases, an account's fee rate will be lower at all levels than that of the comparable Fund. Representatives of RS Investments explained that compliance, reporting, and other legal burdens of providing investment advice to mutual funds exceed those required to provide advisory services to non-mutual fund clients such as retirement or pension plans. In addition, they pointed out that there is substantially greater legal and other risk to RS Investments in managing public mutual funds than in managing private accounts. They also explained that the services and resources required of RS Investments where it sub-advises mutual funds sponsored by others are substantially less than in the case of the Funds, since many of the compliance and regulatory responsibilities related to the management function are retained by the primary adviser. RS Investments also noted that it provides advisory services in a number of investment disciplines to Guardian Life, at rates generally lower than it charges to other advisory clients.

RS Investments furnished detailed financial information, in the form of a consolidated profit and loss statement, showing the revenues and expenses related to the management of the RS Funds as a whole and each of RS Investments' other categories of advisory clients, respectively. That information showed the substantial costs of providing services to the Funds. RS Investments also furnished a detailed profitability analysis with respect to RS Core Equity Fund, RS Small Cap Core Equity Fund, and RS Partners VIP Series for the three months ended December 31, 2006, and, in the case of RS Select Growth Fund, the year ended December 31, 2006. The Chief Compliance Officer reported that the profitability levels for those Funds, depending on the period considered, ranged between 13% for RS Core Equity Fund to approximately 60% for RS Partners VIP Series. The Trustees noted that RS Investments' profitability on its mutual fund business as a whole was higher than the profitability of the separate account advisory business; the Chief Compliance Officer noted in his report that the higher profit margin appeared justifiable by the higher risk and responsibilities associated with the mutual fund business.

The Trustees considered whether economies of scale would likely be realized as the Funds grow and whether a reduction in the advisory fees paid by the Funds by means of breakpoints would be appropriate. In his report, the Chief Compliance Officer noted that RS Investments had decided some time ago to eliminate its hedge fund business and the related revenue to focus its existing investment management resources on its mutual fund and institutional business. He noted that only one Fund subject to renewal had close to $1 billion in assets. He also noted that the profits from the Funds enable RS Investments to devote greater resources to the management of the Funds, including organizational enhancements and financial incentives for the portfolio managers, analysts, and other personnel who in many cases have lucrative alternative employment and business opportunities available to them. He noted, as well, that the investment management process for certain investment disciplines does not necessarily benefit from economies of scale. He also noted that shareholders of the Funds are likely to benefit to some degree to the extent that the expenses of the Funds are reduced over time simply by virtue of their increased sizes, even in the absence of management fee reductions. The Trustees also considered a report to them provided by their independent consultants as to economies of scale, both generally and as to the Funds specifically, and the consultants' recommendations that the Trustees give careful consideration in the future to the manner in which shareholders might realize some of the benefit of such economies over time, as the Funds grow in size. The Trustees noted that the Funds had already benefited from certain economies resulting from the combination of RS Investments and GIS, including, for example, through the reduced custodial fees the combined firm had been able to negotiate.

The Trustees considered the nature, extent, and quality of the services provided by RS Investments. In this regard, the Trustees took into account the experience of the Funds' portfolio management teams and of RS Investments' senior management, and the time and attention devoted by each to the Funds. The Trustees considered the performance of each Fund (although only for relatively recent periods in most cases), while also considering its applicable investment objective and strategy and its overall expense ratio. The Trustees also received information throughout the year regarding the capabilities of RS Investments in securities trading, and changes in personnel in RS Investments' trading staff. The Trustees also considered RS Investments' significant responsibilities in monitoring the services provided by the Sub-Advisers.

The Trustees reviewed performance information for each Fund for various periods. That review included an examination of comparisons of the performance of the Funds to relevant securities indexes and various peer groups of mutual funds prepared by the independent Lipper and Morningstar organizations with respect to various periods, and relative rankings of the Funds compared to peer funds during various periods. The Trustees noted that, in his report, the Chief Compliance Officer had found that, except as noted below, no Fund appeared to have substantially lagged all peer mutual funds and indexes for all relevant periods. He noted specifically that RS Select Growth Fund (formerly RS Diversified Growth Fund) had previously underperformed in a number of periods, but also noted recent changes in the investment strategy and portfolio management team for the Fund, and that investment performance appeared to have improved in very recent periods. In addition, the Chief Compliance Officer noted specifically that RS Asset Allocation Fund had underperformed its peers' averages for various periods. He recommended, and the Trustees agreed, that further discussion in the coming year would be appropriate in respect of steps RS Investments might take to improve performance of that Fund, and whether that Fund's peers were appropriate.

The Trustees also considered the research and other similar services RS Investments receives from many of the broker-dealers with which it places the Funds' (as well as other RS Investments clients') portfolio transactions and from third parties with which these broker-dealers have arrangements. The Trustees receive information on those arrangements quarterly throughout the year and have the opportunity to discuss that information with representatives of RS Investments at the meetings. The Trustees considered the benefit to RS Investments and its affiliates from such services including that (1) the services are of value to RS Investments and its affiliates in advising RS Investments' clients (including the Funds) and (2) RS Investments might otherwise be required to purchase some of these services for cash. The Trustees considered information provided to them quarterly during the year regarding the benefits to RS Investments of research and brokerage services provided in connection with so-called "bundled brokerage" arrangements. The Trustees concluded that these "soft dollar" relationships' benefit to RS Investments was reasonable and that the Funds also benefited from them.

The Trustees reviewed detailed information regarding the various Sub-Advisers to the Funds, including information as to compliance with federal securities laws, capabilities and experience of portfolio management personnel and any changes in such personnel in the past year, financial information as to the Sub-Advisers, information as to their trading practices, and general information as to the pricing of the Sub-Advisers' services.

The Trustees considered generally the nature and quality of the administrative services provided to the Funds by RS Investments and by GIS, including, among other things, changes in and enhancements to the firms' personnel and capabilities, their performance during the course of the preceding year, and the responsiveness of senior management to the Trustees' requests.

The Trustees noted a number of specific recent enhancements to the services provided by RS Investments, including, among others, the following factors cited by the Chief Compliance Officer:

• RS Investments has seen significant organizational changes after its transaction with GIS, including many changes that have strengthened the organization and its ability to devote greater resources to the services provided to the Funds. Integration work continues, but the Chief Compliance Officer believes RS Investments is a more robust organization as a result of the transaction.
• RS Investments has been responsive to concerns raised by the Trustees in the past year, including as to the RS Select Growth Fund.
• RS Investments has added significant managerial talent in the areas of finance, fund administration, and accounting.
• RS Investments has provided necessary staffing, training, and other compliance resources necessary for the Chief Compliance Officer to perform his responsibilities as the Chief Compliance Officer.