Frequently Asked Questions (F.A.Q.)

1. What is the settlement about?

   On October 6, 2004, RS Investment Management, Inc., RS Management L.P., G. Randall Hecht and Steven M. Cohen (collectively the “Respondents”) reached a settlement with the Securities and Exchange Commission (“SEC”). The allegations concerned issues related to excessive short-term trading of shares of the RS Funds, for which the Respondents provided investment management services.

2. What were the allegations against RS Investments?

   The allegations against RS Investment Management Inc., RS Investment Management, L.P., G. Randall Hecht and Steven M. Cohen involved issues related to excessive short-term trading that took place in the RS mutual funds and were inconsistent with the terms of the funds’ prospectuses. The results were potentially harmful to the funds and to the detriment of long-term investors.

   The specific allegations against RS Investment Management Inc., RS Investment Management, L.P., G. Randall Hecht and Steven M. Cohen, can be found in the SEC Order posted on the SEC website. That website link is: http://www.sec.gov/litigation/admin/ia-2310.htm

3. What is market timing?

   Market timing has various definitions, one of which is the buying and selling of mutual fund shares in order to exploit inefficiencies in mutual fund pricing. Frequent trading, whether driven by market-timing attempts or not, can cause a mutual fund to incur costs borne by other shareholders to accommodate the trader’s frequent buying and selling. In this case, the SEC staff, and the Independent Distribution Consultant, focused on excessive short-term trading generally, regardless of whether it was motivated by a desire to engage in market timing.

4. What were the terms of the settlement agreed upon with the SEC?

   Under the terms of the settlement:
   

   RS Investment Management, Inc., and RS Investment Management, L.P. agreed to pay $11.5 million in disgorgement and $13.5 million in a civil penalty for distribution to affected accountholders.

   Also, G. Randall Hecht and Steven M. Cohen, former officers of RS Investments, each agreed to pay $150,000 in a civil penalty to the United States Treasury.

5. Who is included/eligible for this settlement?

   You are part of the settlement if you held any of the affected RS funds between January 1, 2000, and December 31, 2003, and the Independent Distribution Consultant determined that you were adversely affected by the excessive short-term trading.

6. Who is the Independent Distribution Consultant (IDC)?

   The Independent Distribution Consultant is Dr. Alan C. Shapiro. Dr. Shapiro is a finance professor at the University of Southern California’s Marshall School of Business.

7. What is the role of the Independent Distribution Consultant?

   The role of the Independent Distribution Consultant is to develop a Distribution Plan for the distribution of the $25 million settlement, plus interest and monies from other Fair Fund settlements, provided for in the SEC Order. The Distribution Plan includes:

   • An explanation of the methodology used to calculate the payments to eligible accountholders;
   • The procedures for locating eligible accountholders, and;
   • The procedures for distributing the settlement proceeds and interest to eligible accountholders.
   The Distribution Plan can be viewed online by accessing the SEC website using the Links and Related Documents page of this website.

8. Is this check/payment authentic?

   The check you have received is from the RS Investments Fair Fund Settlement. You received your payment because the Independent Distribution Consultant identified you as an eligible shareholder of one or more of the funds involved in this settlement. On October 6, 2004, RS Investments reached a settlement with The United States Securities and Exchange Commission regarding issues related to market timing. The check you received will require no further action on your part.

9. If I received a distribution check, what happens if I do not cash it?

   The check will expire 90 days from the distribution date. All unclaimed funds will be deposited into the mutual funds covered by the settlement in the same ratio as the harm suffered by investors in those funds.

10. Can I exclude myself from this settlement?

    As this settlement is an SEC settlement and not a class action settlement there is not an option to exclude you.

11. Can I reinvest the payment I have received?

    You may invest the proceeds of the settlement check into your RS account, but you must deposit your settlement check and issue a new check payable to the RS Investment Trust and state the fund (or otherwise transfer money to the fund) in which you are investing, subject to the terms of the funds’ prospectus, including sales loads and any restrictions on new investments. Third-party checks are not acceptable.

12. I received a check made payable to the custodian of my retirement account. What do I do with this check?

    Your course of action depends on whether you want the check deposited into your retirement account or whether you want the check made payable to yourself.
    
    

    1. If you want the check deposited into and you retirement account is still with the custodian listed on the check, forward this check with a letter of instruction to your current custodian and the funds will be deposited into your retirement account. Be sure to include your current account number with the correspondence.
       
       
    2. If you want the check deposited in your retirement account and your retirement account is with another custodian, return the check with the word void written across the front and include a letter of instruction indicating:
       • Your new custodian and
       • Your account number for your current custodian.

       We will return a new check to you so you can forward it to your current custodian with a letter of instruction explaining you want the funds deposited into your IRA retirement account.

       
       
    3. If you wish to have this check made payable to yourself, you will need to do the following:
       • Please return the check with the word void written across the front and a letter of instruction requesting it be made payable to you.
       • Please include in your letter of instruction your date of birth.
       • Complete and return the appropriate reissue form (substitute W-4P/W-9) that can be found on the RS Investments Fair Fund Settlement web site at www.rssettlement.com. If you do not have access to the Internet we will fax or mail the form to you.
       • All applicable federal taxes, state taxes, and penalties will be deducted from your check. The W-4P form is completed and submitted with your request if you wish to forgo tax withholding. A W-9 form is used to certify your Social Security # or Tax ID.
         
       • Send this information to the following address:

         RS Investments Settlement Administration
         C/O Boston Financial Data Services
         PO Box 859233
         Braintree, MA 02185-9233
         

    You should consult with your financial advisor or tax professional prior to cashing this check to determine the potential tax consequences and appropriate tax treatment for your particular situation.

13. I received an IRA check made payable to my deceased wife/husband. How can I have it made payable to myself?

    If you wish to have this check made payable to yourself and you are the beneficiary, you will need to do the following:
    

    1. Please return the check with void written across the front. Include a letter of instruction requesting it be made payable to you. It is important that you include your date of birth to avoid any penalties if you are above the age of 59 ½.
    2. In addition, If you are not the spouse of the deceased, we require “Evidence of Appointment” (documentation that indicates the authorized party to handle the decedent’s estate), such as Letters Testamentary, Court Order, Letter of Administration, Letter of Appointment or Copy of Last Will and Testament appointing beneficiaries or a copy of the designated IRA beneficiary form.
    3. You must also include a copy of the deceased death certificate. (If the check is over $100 it must be a certified copy of the death certificate.)
    4. Complete and return the appropriate reissue forms (“Beneficiary Substitute Reissue IRA W-4P/W-9”) that can be found on the RS Investment Fair Fund Settlement web site at www.rssettlement.com. If you do not have access to the Internet we will fax or mail the form to you.
    5. All applicable federal taxes, state taxes, and penalties will be deducted from your check.
    6. Send this information to the following address:

    RS Investments Settlement Administration
    C/O Boston Financial Data Services
    PO Box 859233
    Braintree, MA 02185-9233
    

    You should consult with your financial advisor or tax professional prior to cashing this check to determine the potential tax consequences and appropriate tax treatment for your particular situation

14. What is a signature or a medallion guarantee and where can I get one?

    A signature guarantee is a stamp that literally bears the phrase "signature guarantee" and it guarantees that the person signing the document is actually who they say they are. Please note that a notary is not the same as a signature guarantee. You can get a signature guarantee at most commercial banks, savings banks, credit unions or broker dealers. It is important that you do not sign your letter or document until the guarantor instructs you to do so.

    A medallion guarantee is a unique signature guarantee for securities that may be obtained through a financial firm like a broker, bank, or credit union that participates in one of the following Medallion Guarantee programs:

    STAMP
    Securities Transfer Agents Medallion Program

    SEMP
    Stock Exchange Medallion Program

    MSP
    New York Stock Exchange, Inc. Medallion Signature Program

15. Who will pay the costs associated with the settlement and restitution?

    All costs associated with the settlement and restitution are borne entirely by RS Investment Management, Inc., RS Investment Management, L.P., or its affiliates and successors, not by the RS Funds or fund shareholders.

16. What are the tax consequences from this settlement?

    The SEC and the Tax Administrator have drafted a notice entitled "RSI Statement to Eligible Investors." It is available in the "Tax Information" page of this website.

    You should consult with your financial advisor or tax professional prior to cashing this check to determine the potential tax consequences and appropriate tax treatment for your particular situation.

17. Will I receive a Form 1099 to use when filing my taxes?

    No. You will not receive a Form 1099 for the distribution as currently registered, as these proceeds are non-reportable to the IRS.

18. My check has a Dilution component as well as an Advisory Fee component. Is either of these considered taxable?

    According to the Statement to Eligible Investors (SEI), which can be accessed via the "Tax Information" page on this website, the "dilution payment" is intended to compensate you for harm to the value of your mutual fund investment caused by market timing in certain RS funds. In your case, the dilution component is a non-reportable event and is considered a "return of capital". The payment is not income to you to the extent of your tax basis in your investment."

    The "advisory fee" component of your payment is intended to compensate you for improper advisory fees paid by the mutual fund and may constitute ordinary income to you. Whether the advisory fee component is income to you depends on several factors including whether the mutual fund(s) made a distribution taxable as ordinary income (as opposed to taxable as capital gain) in a year(s) in which the mutual fund paid improper fees. The Statement to Eligible Investors has this information available.

    You should consult with your financial advisor or tax professional prior to cashing the check to determine the potential tax consequences and appropriate tax treatment for your situation.